From centralbanking.com:
“Swiss Party Puts Gold Repatriation, Protection on Ballot
May 9, 2013

The Swiss People’s Party, a nationalist political party in Switzerland, has succeeded in getting the required number of signatures to put a gold referendum on the national ballot. The “Save Our Swiss Gold” initiative, if passed by voters, would require the Swiss central bank to double its gold reserves from 10% to 20% and repatriate all gold reserves held abroad. The measure would also forbid the sale of any gold reserves.

This would make the gold reserves worthless to the bank, according to Thomas Jordan, chairman of the governing board of the Swiss National Bank. He explained that if the gold was unsellable, it could not be counted as an asset at all, while still tying up 20% of the central bank’s reserves. He warned that the bank would have to issue treasury bills and pay interest on them in order to manage the money supply, and would lead to printing more money.

Jordan also revealed for the first time where Switzerland’s gold reserves are held – another demand by the Swiss People’s Party. Switzerland has a total of 1,040 tonnes of gold, with 70% in Switzerland, 20% in the Bank of England, and 10% in the Bank of Canada. Jordan said that keeping a portion of the nation’s gold reserves abroad was necessary for “adequate regional diversification and good market access.” Central banks will keep reserves in foreign central banks for use as collateral when buying foreign currencies.”

regarding completely inane commentary concerning the end of QE– especially when no one wants to reform the financial system and defuse the time bomb that is over 1 QUADRILLION IN DERIVATIVES.

“Yes, let’s stop the QE and watch the largest black hole in space replace the Western world financial system.” — Jim Sinclair

As much as I love my fellow academic- central planners, when they tell you that QE will always and everywhere only be good for the stock market and won’t impact currency markets or inflation– and that this policy can levitate asset values irrespective of a real global economy that not only never recovered but looks posed to role over again- it reminds me of this exchange (Turd Ferguson had this at his site first):

Rodney Dangerfield versus the Academics

With mining stocks crashing through the floor, with ore grades (meaning the percent of extractable metal from rock) also crashing, and with recent closures or production problems at several well known mines (google Pascua Lama and see what comes up, for example) the realities of at least temporary declines in gold and silver can no longer be ignored. Unlike the 1970s, then, anyone looking for higher prices to lead to ever increasing mine production during times of fiscal and monetary unease may be in for a bit of a surprise. Here is the link to a talk by Barrick’s CEO:

Barrick CEO Talks Peak Gold

Turd Ferguson posted thirty reasons why gold should be higher, even in the face of a supposedly improving economy (don’t tell the bottom 90% or those who have left the workforce in record numbers) and a stock market that is racing to new all time highs (though still not in inflation adjusted terms.) Be very careful out there if you ever forget that stock market bubbles take a while to inflate but they pop almost instantaneously (anyone who lived through 2008 should have learned this lesson.) Don’t forget to insure your gains! You can use stocks to generate wealth, but you have to pick the right names and have an exit strategy. Globally, remember, stocks went nowhere- even after dividends- from roughly 1920 to 1960. Yes, America was different and Americans (myself included) are spoiled rotten, but history as a way of sneaking up on people and humbling them. I am concerned about the lack of investment realism in some quarters. At the same time I realize that bubbles can go on for a while, that markets can stay irrational longer than you or I can remain solvent.
Here is the link to turd’s 30 reasons for higher gold prices:
And Gold is Down 500?

The idea that money can be conjured out of thin air, the notion that the paper traders and those who control the Anglo-American banking system can always and forever “price” assets like gold and silver with instruments trading hundreds of times the underlying physical metal, will die a slow death.
Along these lines, Dave in Denver over at truthingold.blogspot.com has some useful insider information for you about the realities of the tightness in the physical gold and silver markets worth reading:

“First, I received this comment from John Brimelow’s “Gold Jottings” report, which comes from Gerhard Schubert, head of Precious Metals at Emirates NBD, the largest banking group in the Middle East. Keep in mind that Middle Eastern buyers demand physical delivery of their gold. Here’s the quote from his latest weekly report:

I have not seen in my 35 years in precious metals such a determined and strong global physical demand for gold. The UAE physical markets have been cleared out by buyers from all walks of life. The premiums, which have been asked for and which have been paid have been the cornerstone of the gold price recovery. It is very rare that physical markets can have a serious impact on market prices, which are normally driven solely by derivatives and futures contracts…

I did speak during the week with several refineries in the world, of course including the UAE refineries, and the waiting period for 995 kilo bars is easily 2-3 weeks and goes into June in some cases. A large portion of the 995 kilo bars in the UAE goes normally into the Indian market, but a lot of the available 995 kilo bars are destined for Turkey, at this time. We heard that premiums paid in Turkey have reached anything between US $ 20 and US $ 35 per ounce.” Read more at truthingold.blogspot.com

from nearly two years ago:

Is There a COMEX Silver Shortage?

Technically speaking the COMEX exchange cannot default or run out of physical gold, but it can be made irrelevant by the real price of real physical metal. At some point, with continued news of shortages or bottlenecks in metal production (not paper contracts), the exchange may have a credibility problem and need to significantly raise margins on the shorts (sort of the opposite of what happened in 2011 as well as 1980.) This would be in an effort to maintain the integrity (whats left of it) of the paper pricing system for gold and silver bullion. Don’t go wobbly here if you have made a decent sized investment in gold and silver, even as the summer could provide more of the same. It is hard to tell when the physical market will finally have its day with the price of these metals.

Here is a quote from Jim Sinclair recently on this point, from jsmineset.com:

“The vicious and blatant manipulation of the gold price (lower) via paper, on Friday and on Monday, may very well be the biggest mistake that the manipulators ever conceived of. I firmly believe it revealed that the price of gold has nothing to do with gold itself.

But I would add that if in fact the physical demand remains at these levels or even increases as the price of gold rises, I believe that the warehouses for the exchanges will be so significantly drawn down that it will force cash settlement.

The bottom line here is the paper market for gold may have just lit itself on fire, and served to burn the manipulators’ houses to the ground. You’ve heard of the phrase, ‘The emperor has no clothes.’ Well, this is infinitely worse because it is finally being revealed that the paper market for gold, in fact, has no gold.”

Ed Steer, who writes the gold/silver daily for Casey Research had this to say both about the metals and about his own bullion selling business over the weekend. To read more, go to http://www.caseyresearch.com/gsd

“I’m not sure what, if anything, should be read into yesterday’s price action in all the precious metals, but I have to agree totally with what David Baker over at Sprott had to say in the above quote…and that there is a major disconnect between the price of the physical precious metals and the paper precious metals. It’s a situation that remains unresolved, but I doubt very much that it will remain that way for long.

Like David, I was somewhat taken aback by the mind set of the buyers that have been showing up at the bullion store all week. Things really are different this time…and if the buyers are out in force on a $200 price decline, one can only imagine what the buying frenzy will be like as the precious metals being their inevitable rallies back to new highs…especially in silver.

I’m sure that “the powers that be” are just as surprised, as they certainly would have been caught even more off-guard than we were…and how this resolves itself in the days and weeks ahead will be interesting to watch. This is not just a North American phenomenon…it’s world-wide…and amazing to read about in the stories posted in today’s column.

It’s still my opinion that somewhere in the not-too-distant future, we’ll see a shockingly high price for all the precious metals…but whether it’s by edict, or market action, is still unknown.”

From Jim Sinclair at jsmineset.com this morning, regarding what gold means at the margins for people sick and tired of the arrogance of central planning:

“The recent absolutely transparent take down in the gold market by virtual paper financial gold operators will go down in their history as their swan song as it brought massive attention to, and caused the transformation between virtual paper financial gold and real savings medium gold demonstrated in a free market of premiums on physical. The free market for the premiums on physical gold is the golden bridge to free gold, breaking the ties that bind to the evil of debtor central banks.

As this trend grows amongst those that now see no in the system retirement account or in the system bank balance safe from the central planner’s application of “bail in,” gold’s real nature will emerge. Gold is a symbol and mechanism of physical and spiritual freedom. It is only natural that its evolution is towards free gold.”

starting at around the 14:30 mark, you will hear Jim Puplava get about as animated on any subject as I have heard him in a long while. In one day, almost 80% of all the gold produced by every single mine in the world traded in one day (last Monday), and this is just one point that gets under his skin. It is a good reminder of how nonsensical is all the bearish talk surrounding the precious metals. And, I should add, at a time of very strong physical demand globally. Please remember that one day the COMEX will not be able to tolerate or maintain this stuff from the paper traders. Can we say short squeeze??

Puplava Sounds Off On Paper Gold Fake Collapse

Without Comment…..

Farage on EuroZone

Yes, gold and silver are very near their cost of production as numerous reports come in of heavy physical precious metal buying around the world. Even as some, like Blackrock recognize how cheap the metals are (of course I’m not saying they can’t get even cheaper), there is this persistent need to claim that what happened Friday and Monday was not manipulation. Hey, people, if they can manipulate LIBOR for the sake of windowdressing the ugly neighborhood that is the global monetary system, they sure as heck can do it with the precious metals markets, which are a fraction of LIBOR’s size.
Don’t expect the CFTC or SEC to do anything about it. No need to worry, though, because the incompetence of the regulators is also matched by that of our central planners, who won’t see the next crisis coming, or be able to prevent it:

From zerohedge.com:

“The $20 billion gold futures sale and concentrated selling of gold futures on the COMEX on Friday and Monday is far more likely to be “nefarious” than the gold fixings in London. The CFTC’s track record to date has not been great and regulatory capture remains a real risk with the CFTC seeming to be reluctant to hold Wall Street banks who may be involved in price manipulation in the futures market to account. After the Libor revelations, it is surprising that there is not more scrutiny and hard questions asked of banks and regulators in this regard. Separately, large institutional fund manager Blackrock said that there was “no visible central bank activity” as the gold price plunged. They said that gold’s fundamentals remain strong and that the fall in price was driven by an outflow of “hot money” and that gold prices are now near the marginal cost of new supply which should provide strong support at these levels and lead to higher prices again.”

A favorite quote of mine from abolitionist William Lloyd Garrison, for all those who try to speak truth to power:

“I am aware, that many object to the severity of my language; but is there not cause for severity? I will be as harsh as truth, and as uncompromising as justice. On this subject, I do not wish to think, or speak, or write, with moderation. No! no! Tell a man whose house is on fire, to give a moderate alarm; tell him to moderately rescue his wife from the hand of the ravisher; tell the mother to gradually extricate her babe from the fire into which it has fallen; — but urge me not to use moderation in a cause like the present. I am in earnest — I will not equivocate — I will not excuse — I will not retreat a single inch — AND I WILL BE HEARD. The apathy of the people is enough to make every statue leap from its pedestal, and to hasten the resurrection of the dead…..”

After one of the worst two days for gold and silver in nearly 30 years, I would like for the shorts to remember who all of these crazy people are who actually own real, physical metal (unlike many of the traders responsible for the carnage of the past few days.) As opposed to other mere commodities, much gold and silver will go into hiding never to be seen again, on price dips like today’s. This is because the social mood or mass psychology of a world of increasing youth unemployment, increased foodstamp usage, currency debasement, concern over the future of the Euro and the consistent, lingering spectre of asset deflation and bank runs has created, at the margins, people who understand the limits of those who think they run the world. This post-2008 world has created what I call the religion of precious metals investing.
The religion of gold and silver investing has many followers, followers who don’t speculate on margin and who don’t intend to trade or otherwise monkey around with their physical monetary insurance. If they sell, it will be multiples higher from here (if ever.)
The gold or silverbug religion preaches skepticism towards authority, reminds people how they cannot have something for nothing, and openly challenges many of the downright fraudulent aspects of our current financial and political system. It may not mean that everyone is rushing out to convert every asset they have into metal, but I sense that more and more people are coming to understand why skepticism (some might even say pessimism) has not been bred out of the human gene pool. In other words, being willing to accept and deal with the truth– no matter how painful or hard to confront—isn’t such a bad idea after all. In this current world, I would call it smart and prudent, if not highly profitable.
People like me, who invest meaningful percentages of their savings in gold and silver, are not going away. In fact, our numbers are growing. As a protest against banks who treat savers like garbage with zero percent interest rates, I would not underestimate what I call the moral imperative of owning the precious metals, an imperative not arising from a need to make a fortune, but out of a desire to stand up for certain ideals. I believe the little statements, the little actions you take can have an effect and can produce results in others that are sometimes surprising. We often underestimate how important small actions are in terms of changing the habits and mindsets of others. Our behavior can make people think about their relationship to a debt-based financial system which leaves a lot to be desired.
In the final analysis, then, silver or gold investing is more than a speculation with a piece of metal. It is about all of the ways that people can prepare to live in what has been euphemistically called “the new normal.” Unfortunately, I do not believe we have seen the end of the financial and political turmoil of the past decade. This is not meant to scare anyone, and it does not mean that the end of the world is at hand. It is just the way it is.
As with many who write in this space, all I have is my honesty and integrity. I can’t claim to be a great trader, and I don’t give stock picking advice, but I have tried to give voice to truths that are not often taken seriously by many. I have tried to be of use for some people (who knows exactly how many) as they navigate strange, volatile, and irrational markets. Fortunately there is a community of mind and spirit out there who understand the need for caution, skepticism, and realism, even as the message is not always an easy one to hear.
If in fact gold and silver can really drop to below 1000 and 20 respectively, it might be a signal that a meaningful recovery is finally underway, that interest rates can finally be raised and that quantitative easing and currency debasement can end. It would not all be bad news. But unfortunately, I do not believe those things are in the cards. Even as the world is not going to end, I believe this future will be for the realists among us.

If that wasn’t a bottom in gold and silver today, I’m not sure what was–except that I remember the bottoming process from November to March 2008-2009. Oversold markets can get more so and when there really are no bulls left and when everyone is finally convinced that an asset is not worth owning anymore, that is precisely the time when the market finally begins to climb the wall of worry and rockets back. I am not so naive as to think it won’t all take some time, though. As early as December 2011 I was writing about 1400 gold and 24 dollar silver and, if the trend continues we could get there next week. (Of course if the trend continues we will be at precisely zero before too long.)

It would be my hope that the paper players, leverage gamers and others would get flushed out of this market. Probably isn’t going to happen completely. But the larger fundamentals, the larger desire especially among central banks to own gold coupled with the zillion other fundamentals constantly outlined by myself and others mean that this bull market is far from over. Will it be a long summer for precious metals investors? Likely (barring a black swan, of course.)
Bottoming is a process.

I can think of at least a few disheartened souls who made meaningful investments in the precious metals sector who are wondering what the next catalyst might be for higher metals prices (and something that might even resurrect the dead mining stocks.)

Here’s one possibility: people hedging some of their equity winnings with real assets. Especially if a move that seems to only go in one direction leads value investors searching for a place to diversify from stocks.

It doesn’t sound so far-fetched to me, because even with hedge funds reportedly heavily short metals like gold and silver (and with more than one investment house calling for lower prices) it looks like someone is supporting gold and silver prices. Put differently, people (including central banks) may have learned some lessons from 2008 and do understand (maybe just maybe) the role of real assets in their portfolios.

Over the last 8 months, news abounds that supports gold prices nearly 6 times where they were a mere decade ago. News ranging from unlimited quantitative easing whether here or in Japan, to requests from foreign central banks to have their physical gold in their own hands, to confiscations of bank accounts in places like Cyprus, to continued uncertainty regarding an unprecedented SIXTH year of ZERO percent interest rates. These developments– along with the continuing currency wars– would all seem to underpin investments like gold, silver or the PGMs.

And I even think I am not alone in holding fast to certain passe ideas about money and investing (even if our rulers don’t want us to believe them). Ideas such as:

1) you cannot borrow your way to prosperity
2) debt does matter
3) currency debasement is not in the long-term interest of a nation’s economy
4) central planners will fail to control where capital sloshes around the globe
5) and real assets, not equities, are the best way to manage wealth during times when our Lords of the Universe believe these last four points of mine aren’t true.

I guess I am prepared to “go down with the ship” with my pesky doubts about global fiscal policies. But then I also remember who these people are who are now trying to blow a bubble in the equities market so as to encourage consumption, or the wealth effect.

They are, in many cases, the exact same people who didn’t see or who could not prevent the 2008 financial crisis. People like those in our own Federal Reserve who had at least some responsibility for the housing bubble. Remember that? When we were told that housing prices were hitting a permanent plateau and that it did not matter that people received mortgages with little to no income?

I recently even heard someone (forget where) claim that equities were the best inflation hedge for the years to come. I am going to bet that this person did not read about or live through the 1970s.

Not even 5 years after the collapse of Lehman and I am sensing that old habits in the financial world die hard. On the other hand, I still have faith in people’s common sense, and that they may have learned a couple of lessons from a few years back. I think they might consider hedging with gold and silver.

No matter what certain unnamed investment houses say about the future of precious metals, I am confident that current precious metals prices represent real value, having done nothing for roughly two years (at least for gold and silver.)

For those trying to benefit from higher prices– you have to take the view from 30,000 feet. I happen to look at the gold and silver charts and see a bull market, even if it is one that is tired. The mind game that is the market continues. Try not to be a casualty of it. At a moment when I am told most newsletter writers in the space are more bearish than ever, I still believe that future gains with precious metals will be one for the record books.

From Pater Tenebrarum at the acting-man.com:

“There would be little need to write this update if not for a rather remarkable new sentiment record. After having been stuck for a while at minus 12.5, the Hulbert Gold Newsletter Sentiment Index (HGNSI), which measures the average recommendation of gold market timing advisers, has reached a level that hasn’t been seen in a very long time, if ever (it definitely has never occurred since the beginning of the bull market in 1999/2000).

The average recommendation is now to be 31% net short. Given that this is an average and considering that there are probably a handful of permabulls in the newsletter business, this is pretty extreme – especially as neither gold nor silver have broken the major lateral support levels that have been in force since the beginning of the consolidation period in 2011. Of course they still may break said supports. The point is that this has not happened yet, while sentiment is at levels that would normally suggest otherwise. That is quite astonishing.”

Oversold, bottoming bull markets can take months, possibly up to a year to finally wash everybody out and resume the longer term, secular uptrend. For all the true believers out there, of course, this is the longer term, bigger picture that should not be forgotten as stock markets race to new highs while gold and silver languish.

From Kyle Bass this morning:

Bass On Gold

From the South China Morning Post:

Q: What is your view on gold?

A: That’s a complicated question. It has disappointed the public, because it is meant to be the ultimate safe haven. But when the euro was close to collapsing in the last year, actually gold went down, because if people needed to sell something, they could sell gold. Therefore they sold gold. So gold went down together with everything else.

Gold was destroyed as a safe haven, proved to be unsafe. Because of the disappointment, most people are reducing their holdings of gold. But the central banks will continue to buy them, so I don’t expect gold to go down. If you have the prospect of a crisis, you will have occasional flurries or jumps. So gold is very volatile on a day-to-day basis, no trend on a longer-term basis.

and probably dropping fast. Always remember that the economy is a force of nature, ultimately impervious to the ideas (fantasies?) of central planners.

News last night that the Japanese central bank will double its bond purchases is sending stocks higher– for now. It also amazes me how gold and silver are still being manhandled, but that is a different story.
And then comes the news that Mario Draghi essentially told reporters that there is no plan B when/if countries exit from a currency Union (the Euro) that is looking more draconian by the day.
When people casually say to me that the Euro can be broken up without a cataclysmic shot to the markets, in addition to pointing to the cluelessness above, I am also reminded of what people said about impaired bank balance sheets resulting from mortgage fraud circa 2007. Yes, things were stable for a while, but when they weren’t, they “weren’t” in a very, very big way.
Couple this with the idea that you can borrow and print without any negative consequences for fiat currencies, stock markets, or bond markets, and I think we are definitely in bubble territory.
The problem, of course, is when the party will stop. Everyone thinks they have an exit strategy, everyone thinks they know when to get off the merry go round…..

Here is the material from the Draghi press conference taken from zerohedge.com:

Scott Solano, DPA: Mr Draghi, I’ve got a couple of question from the viewers at Zero Hedge, and one of them goes like this: say the situation in Greece or Spain deteriorates even further, and they want to or are forced to step out of the Eurozone, is there a plan in place so that the markets don’t basically collapse? Is there some kind of structural system, structural safety net, especially in the area of derivatives? And the second questions is: you spoke earlier about the Emergency Liquidity Assistance, and what would have happened to the ELA in Cyprus, the approximately €10 billion, if the country had decided to leave the Eurozone?

Mario Draghi, ECB: Well you really are asking questions that are so hypothetical that I don’t have an answer to them. Well, I may have a partial answer. These questions are formulated by people who vastly underestimate what the Euro means for the Europeans, for the Euro area. They vastly underestimate the amount of political capital that has been invested in the Euro. And so they keep on asking questions like: “If the Euro breaks down, and if a country leaves the Euro, it’s not like a sliding door. It’s a very important thing. It’s a project in the European Union. That’s why you have a very hard time asking people like me “what would happened if.” No Plan B.

Informative. We do have three follow up questions:

With Capital Controls in place in Cyprus indefinitely, do local ATMs dispense “political capital” instead of actual capital?
If the Euro is not like a “sliding door”, is there a more apt analogy of what the Euro is?
What are the “precise rules” of the OMT? Earlier, Mr. Draghi replied to the FT’s Michael Steen, who asked for the second time month in a row, if there will ever be a legal term-sheet for the OMT, that “he hopes so” – it appears to us that based on this answer there are not only no precise rules for the OMT, but there are no rules period.

I think the following interview from Bill Fleckenstein on kingworldnews sums up well the argument that markets go along swimmingly for quite some time before they all of a sudden fall apart.
Fleckenstein on Cyprus and Confidence

As the BRIC summit to discuss non-dollar trade relationships in Durban, South Africa gets underway, people should not be lulled to sleep regarding efforts by emerging economies to bypass the dollar in some form or other. Numerous conferences and other meetings of interested parties continue to talk about moving to a basket of new currencies, such as the Global Sustainable Currency Summit, scheduled for this coming September in X’ian, China. All of the talk about Euro chaos putting a bid near-term under the value of the dollar should not obscure the long term trends in place from among American creditors. I’m not predicting a dollar crash, necessarily, but the larger trends need to be respected by speculators and investors alike. In short, it should be remembered that reserve currencies do not last forever.

My first assumption when I wake up in the morning and read any story relating to finance is that I am only being told part of the truth. In other words, that I am basically reading propaganda. Propaganda also extends to asset values, particularly equities, which are pawns in the hands of central bankers trying to brain wash the populace into believing that there is some kind of meaningful recovery for anyone outside the 1%. Objective reality can be painful for the sheeple and I understand the desire to believe that someone is in charge and that prosperity and goodtimes are just around the corner.
But the truth is quite a bit different, and anyone perusing even the biased media this morning on Cyprus has to understand how undercapitalized banks will immediately become if high net worth depositors are scared by confiscations and lower net worth depositors are scared by bank holidays. This is a system that is still highly overlevered and it does not take much for even a small country like Cyprus to further shake confidence. The news this morning about ministers making statements about the need for further haircuts, and then having to retract those comments because they sense that they may create the very thing they are trying to avoid (a liquidity event) is just one more reminder that this isn’t over. By this I mean the basic solvency issues at the heart of the 2008 crisis. Papering over things, ignoring them, or pretending they will go away will not work forever.
And if you think that equities are the way to play the years ahead, please stop reading the various financial versions of Pravda out there, new all time highs, or not.

News this morning from a Dutch EU minister whose name has too many consonants should once again remind people of the end-game: outright confiscation. Of course so many people don’t care that I do start to wonder if actions have consequences. But I’m too much of a realist to doubt where this eventually takes us.
From trader Dan Norcini: [traderdannorcini.blogspot.com]:

“Reuters is reporting this morning comments from the Dutch Finance Minister, Jeroen Dijsselbloem, who by the way heads up the group of European Finance Ministers, to the effect that the “solution” in Cypress is a “new template” to address future banking problems in the Euro area.

I want you readers, particularly those of you in the Eurozone, to wrap your heads around this and consider the brazen audacity displayed by these people. What he is saying is that bank savings deposits no longer effectively belong to you the savers. They belong to the state and the state will confiscate them whenever it is deemed to be in that state’s best interests.

If this does not send shock waves throughout the system and instill fear in individuals throughout the Eurozone, then there is no hope for any such people. Normal, rational, sane, thinking individuals will immediately recognize this for what it is; a complete reversal of the traditional role of banking in which banks makes loans to depositors and other individuals. Now, depositors are in effect making loans to banks. Yet even that is not an apt comparison for in the case of a loan, one usually expects to receive back the amount loaned plus interest. In this case, the depositors are having their money forcibly extracted from them with no hope of ever seeing it again and having that money used to bail out the banks instead! I never believed I would EVER witness this in my life and yet here it is. What is even worse is the blasé attitude displayed by the monetary authorities. Just who in the hell do these people think that they are?”

After the apparent deal tonight concerning Cypriot banking, it appears that high net worth depositors could be in for a very large hit to their savings. If this is true, why would anyone keep large sums of money in other troubled banks in other Southern European countries? I understand that sometimes you have to go with the flow and not fight the authorities, but at what point do people say enough is enough?
Or, put differently and as has been said, when you try people’s confidence enough times, you remind them that the root of that word is “con.”
We’ll see, though, who gets the last laugh.

Two individuals who I generally agree with and whose intelligence, experience, and– most important– realism I greatly appreciate. In particular, Rickards’ book, “Currency Wars” is a must-read regarding the risks to our financial system post 2008.

Whalen and Rickards on Cyprus

There are several different takes on the Cyprus banking issue. Some, like Ben Bernanke (consider the source) want us to think that this is just some insignificant country whose deposits clearly don’t matter– or, that people should gladly hand over 10% of their deposits for the greater good. You know, because we are all on this together, right? All in this together with the other kleptocrats out there who can always jump off the burning platform with their golden parachutes courtesy of central banks and global tax payers.. Yeah well, on second thought, maybe not so much.
But I digress.
In terms of geo-politics, the other issue that is sometimes buried in the Cyprus story is the Russian angle. It is their money afterall– perhaps ill gotten, but hey– Anglo-American banks are not nearly as pure as some claim. The Russians may have to take a “haircut,” but then what happens to the Cypriot banking system when they pull their money out and, I don’t know, start buying gold? I know, I’m getting ahead of myself here. But I think this story has legs, and I just can’t trust the same old voices (like for example on CNBC) who want me to believe that there is nothing to see here….
I don’t recommend or buy precious metals to try to scare people (I know it may be hard to believe some times.) Still, there are those moments when I am reminded that the people who think they run the world really have no clue and they seem to underestimate the consequences of their actions. Or, they are trying to float a trial balloon for even larger confiscations in the years ahead.
After all, since so few people are savers anyway, shouldn’t they feel lucky that they have any capital at all? And shouldn’t they be glad to chip in for the greater good of the global economy?
Because, in the end, we’re all in this together….. right??

For those following gold and silver in the paper markets (which unfortunately set the price for now), hedge fund shorting had been at levels not seen in over a decade. This is the main reason for the price-sluggishness, even as QE4EVA was announced last year. Jim Sinclair, of jsmineset.com, has this to say this morning as to why the Cyprus bank deposit issue may very well have the shorts covering, and in a big way. For those who don’t follow Sinclair, he recently said that gold will not trade below 1600 dollars again– a gutsy call, but with so many reasons for gold to be at 5000 and silver at 200, it makes sense to yours truly:

“The most important take away from the Cyprus situation is the following sentence from my interview with King World News; ‘Because of that, any attempt to shift the weight of bank solvency to depositors has failed. This was the grand experiment which was to be the defining event where the financial shift from the onus of insolvency was to be placed on the shoulders of depositors rather than on quantitative easing.’ This now wrong cause was the reason why gold had three major blocks thrown at it by the hedge funds at $1775 to $1800 as it was about to break into new high ground.

Information was given to this financial clique that QE would be reduced as bailouts turned to bail-ins, shifting the pressure of holding the Western world financial system together to the depositors and away from central banks. The enormous short by hedge funds was based on the now impossible-to-continue retreat of the central banks to make the depositors the source of bailout funds.

Therefore the reason why gold has been so heavily shorted in the paper market is NOT valid, and shorts in the paper market must cover. Bravely, these short are taking a gutsy position by trying to make gold’s move above $1600 look weak, but it is not.

The shorts major position of all time was based on what is NOT TRUE. They were totally convinced that they had us and certain gold writers supported their view. Now they do not have us, but on the contrary QE to infinity has its foundation solidly set in cement.

Respectfully,
Jim”

Presented with little commentary (again, you were warned both about the banking system and the salty language in this video):

Cabbie Angry at Banksters

News this weekend that the EU is going to charge bank depositors in Cyprus up to 10% for their holdings should cause a massive inflow into the precious metals, but the way they have been trading recently makes me doubt it. Still the news out of Cyprus should be one more warning to people that technocrats, bureaucrats, et al may not have your interests at heart. And if most of your net worth consists of what I call the state sanctioned investments (bank deposits, bonds, stocks, or home equity), you need to rethink the definition of the word safety. In many ways, and especially in Europe, little has been solved in terms of the shadow banking system, deleveraging, or fiscal sanity in the western world. In fact, we are now being told that debt doesn’t matter. This sounds suspiciously like the argument that people with no income and no downpayment could somehow miraculously qualify for a 500,000 dollar house. It worked for a while, but when it didn’t, things failed spectacularly.

[From Forbes and Kitco] : A New York-based consultancy says the outcome of Turkey’s move 1 ½ years ago to allow commercial banks to count gold deposits toward their reserve requirements potentially could be emulated by other central banks, and if so, would mean a further “renaissance” or “rehabilitation” of gold as a monetary asset.

The end result of the Turkish rules has been to free up lending to support the economy at a time when many other countries are struggling to get banks to provide funds to borrowers, the consultancy said.

The privately owned gold held in Turkish commercial banks has shown up on the balance sheet for the central bank, resulting in news reports of inflated official-sector reserves in the country, the consultancy said.

“But on the monetary side, this is pure genius,” said Jeffrey Christian, managing director of CPM Group. “We think that it will be emulated by other governments and other central banks.”

And if so, this would be a “major move forward toward what a lot of major central banks would like to see,” which CPM Group said is monetary and private-sector financial reserves dispersed across currencies and including gold, rather than the heavy global reliance upon the U.S. dollar as the world’s reserve currency.

This ultimately would provide an underpinning for the price of gold, even if it doesn’t directly mean higher prices from increased buying, Christian said.

“This is potentially a really big step forward in the rehabilitation of gold as a monetary-reserve asset,” he said.

In September 2011, neighboring Greece was in the throes of a massive debt crisis, or “Athens was burning,” as Christian put it. European leaders were struggling to deal with the situation. Around the same time, U.S. lawmakers were in a stalemate over how to deal with their deficits and the country’s credit rating was downgraded. Gold prices hit a record high on safe-haven buying. Money and gold were moving into Turkey out of Europe, Christian said.

The country’s central bank acted by creating the Reserve Operation Mechanism.

Turkey provided its commercial banks the option of meeting a portion of their Turkish lira reserve requirements with alternatives, said Erica Rannestad, commodity analyst with CPM Group. Initially, banks could meet 10% of this with other currencies such as the dollar or euro, plus another 10% with gold held on deposit at their banks. This was unprecedented in modern times for a central bank, the consultancy said. The percentage for gold was increased to 20% in March 2012, then 25% in June and finally 30% by August.

So far, the measures have been successful for Turkey’s central bank, Rannestad said. They have meant more liquidity for the financial system and lower borrowing costs.

“You could see other central banks become more interested in adopting similar policies,” Rannestad said. In particular, she cited potential for India to take such steps. The country historically has been the world’s largest gold-buying nation and its denizens collectively have what Rannestad described as a large amount of “under-the-mattress” gold. Should India follow Turkey’s example, this could mean increased funding for the economy at a time of slower economic growth.

Ironically, despite the affinity for gold in India, the government also has been taking steps to limit gold imports – such as higher duties – to control a high current-account deficit that has undermined the Indian rupee in recent years.

“The Indian government and Reserve Bank of India have been trying to figure out ways to reduce gold imports and mobilize the gold in their country,” Rannestad said. She later added, “This could be an alternative solution to their issues.”

Such policies by themselves might not necessarily increase the overall demand for gold, she said. Turkish banks are not actually increasing their purchases. Instead, they are better able to utilize existing holdings of clients to free up liquidity in the banking system.

Still, “this could be a renaissance for gold in its role in the monetary system,” Rannestad said.

[in case you are wondering, Rufus T. Firefly was a Groucho Marx character who was the leader of a bankrupt banana republic, Freedonia]

“Is there a single doubt left in your mind?

Are you still a believer in Rufus T. Firefly Jamie Dimon as the world’s smartest banker?

Is there a scintilla of wonder left in your mind that the giant banks are legitimate?

Have you come around to understanding — finally — what some of us have long understood about banks?

Are you willing to accept the truth about these corporate behemoths — that they are a horrific combination of economically dangerous, criminally inept, led by pathologically lying CEOs?

Do you harbor any doubts that the giant banks are anything less than ruthlessly efficient criminal enterprises?

Can you — finally — admit that our bank-created financial crisis of 2008-09 has led us to where we are today?

Do you understand the only options presented as a result of that — either corporate bankruptcy and nationalization or a completely artificial Fed driven recovery? (The third option was a Japan-like multi decade recession). Do you realize that the feeble recovery, the slow, deleveraging-driven process of gradual economic healing was the result of how our policy makers chose?

Do you recognize that the world of banking is divided into two camps?

On one side, there are those who understand that the giant banks must be broken up. They are dismayed at the large banks under-capitalization, over-leverage and opacity. These folks have figured out that these banks are not only too big to fail, but are so large that they are too big to succeed, and that the best route is to let insolvent banks fail. They are unhappy that our finance sector is a trillion dollar black box. They know that the majority of giant banks’ profits come from bailouts, and subsidies. This group is dismayed at the corruption of our political system by financiers. They understands huge banks are anti-competitive, a blaspheme against capitalism. They are shocked about corruption of even the most fundamental measures of interest rates such as LIBOR. They are stunned that bankers have overturned a bedrock, fundamental principle of our society — the rule of law rule — with the threat of disrupting the world’s economy if prosecuted for their crimes.

On the other side lay the bank apologists, corrupted politicians, and crony capitalists. They advocate the Big Lie of the financial crisis. They choose to ignore the facts and data that disprove their narrative. They continue to push the lies that the bailouts were a good investment. (They weren’t). They work against the Bipartisan consensus that the giant banks should be broken up. They ignore the many former bank CEOs who call for the break up of “Too Big to Fail” banks. They mandated that GSEs were banned from Lobbying, but they made sure that the big banks retained their influence peddling and hold on Washington DC.

They no longer represent the voters of their districts, but instead are the elected representatives of Bankistan.

And unless we do something — and soon — they will vanquish America.”

Caught this at marketwatch (not always known as a gold-friendly website), but the article makes an important point: in one very important world currency (in addition to one not-so important currency whose country is a cautionary tale for all others addicted to money printing and lying about inflation)– gold is breaking out.
It may take a while, but when the bull market in gold (and especially) silver resumes, those who are still on the sidelines, would have wished they hadn’t listened to the bears:

Gold in Yen and Argentine Pesos

I’m not sure what it means when Jim Cramer says gold and silver are going higher, but I also liked this interview, because you rarely see Silver Wheaton’s CEO, Randy Smallwood on TV– and, most importantly, he makes a great case for silver investing, both in the metal and in strong streaming companies like his:

Smallwood on Silver

As the price of silver searches for a bottom, and as many wonder if the precious metals’ bull is over, it is worth re-examining the other source of demand for silver: namely, from industry. This is also important if in fact the world is moving toward some kind of recovery, where you would think the price of silver would catch a bid from industrial users.

In recent years, the rise of the silver price has come almost exclusively from investment, or monetary demand (an important reminder for anyone who claims silver isn’t money, by the way.) But there have been periods of time when silver’s industrial demand drove the price of the white metal higher. In the period between roughly 1900 and 1970, industrial demand for silver increased over 4 times- from 100 million to 400 million ounces. The industrial revolution in silver was due largely to the urbanization and technological revolutions taking place in twentieth century life. Whether we are talking about indoor plumbing, electricity, cars, or aerospace technology, silver proved to be an indispensable metal. One of the largest industrial uses for silver came from photography, invented by Frenchmen Nicephore Niecpe in 1822, and made more popular by Daguerre in the 1840s. By the twentieth century millions of ounces of silver were needed just for photography. But in terms of silver demand, this was just the tip of the iceberg.

Still, at some point around 1970, the industrial demand for silver stopped increasing (for a time it actually decreased.) Over the next several decades, industrial demand increases have been far smaller, after having reached the 400 million ounce level in 1970. During the last four years, industrial demand (including photography) has been around 550 million ounces annually. So you can see that the growth in industrial demand has slowed significantly over the last 40 years. But many in the silver industry think this could change, and that industrial silver demand could begin to move toward 800 million ounces a year, or even higher.

The reasons for this growth should not be hard to understand: silver is in many ways a more versatile industrial metal than copper. James Blanchard was fond of pointing out how the average American used several items with silver in it even before he or she left for work in the morning: silver is in your alarm clock, wall switch, wristwatch, bathroom mirror, the plumbing in your bathroom or kitchen, your microwave, water purifier, dishwasher, and, especially if you wear polyester, it is used to make many forms of clothing.

Silver is used in computers and cell phones. Batteries need silver for their cathode or negative side. Silver oxide cells are used in cameras, toys, hearing aids, calculators, and even though they are expensive, silver oxide cells are seen as a more environmentally friendly version of the lithium-ion batteries used in everything from consumer electronics to electric cars. Silver electroplated steel ball bearings are used in jet engines, because the silver provides superior performance and lubrication in the event of an engine shutdown. Membrane switches, which require only a light touch, use silver, and these switches are now part of televisions, telephones, microwave ovens, and computer keyboards. Silver is used to coat CDs and DVDs because the white metal is resistant to pitting and tarnish. Silver is also useful in brazing and soldering- meaning in the joining together of materials, producing leak tight and corrosion resistant joints. Silver tin solders are used to bond copper pipes and faucets. Refrigerators also rely upon silver soldering and government regulations are mandating greater use of silver soldering, due to concerns regarding the toxicity of customary tin/lead solders.

Although the vast majority of wiring uses copper, this is only because copper is so much cheaper than silver per ounce. Silver is an amazing conductor of electricity at practically any temperature, and it is possible that silver wiring may gain attention in the future. In the United States, HTS wiring carries over 140 times as much current as copper, and it is believed that this wiring is far better at preventing power surges or other inefficiencies which can lead to transmission losses within our power grid. HTS transformers are more environmentally friendly and don’t use as much oil as their counterparts. Understand that HTS wiring is by no means prevalent, and may not be for a long time. But it is also important to note that as science and technology evolve, and as more and more countries move toward green technology, silver can play an even more important industrial role than at present.

Silver is also a useful catalyst, especially in the creation of ethylene oxide and formaldehyde, both of which are essential chemicals for plastics, polyester clothing, adhesives, resins, scratch resistant coatings, and antifreeze coolant for automobiles and other vehicles. Because silver interrupts a bacteria cells ability to form chemical bonds needed to survive, silver is an excellent anti-bacterial agent. For this reason, silver is useful in hospitals trying to find equipment that can kill the MRSA (Methicillin-resistant Staphylococcus aureus) “superbug.” Silver is also used in burn ointments.

Increased demand for silver as a medical-metal, or as a sanitizer can come from very high end uses. For example, it is now possible to embed silver in countertops, and possible to put it in clothing, even underwear (in addition to silver’s uses in the production of other fibers). For a long time, the Indian sari contained some silver in it- this attests to the age-old desire for the white metal as a defense against disease. In addition to jewelry and silverware, silver can be used in horse saddles, or other equestrian equipment, and is also present in many musical instruments, ranging from bells to flutes.

But even in a severe recession, silver demand can move higher because there are so many non-luxury goods and gadgets that need silver now, or will need it in the future. For example, David Morgan has simply looked at applications for silver relating to food, water, and energy. These are the three things people need the most, and they are three areas that will likely need a lot more silver regardless of prevailing economic conditions. These three areas will also contribute to increased silver demand in ways that cannot be easily recovered (at least for now.) Most people understand that many governments are pushing solar energy as an alternative to present energy sources. But solar energy uses silver, especially because silver paste is used in 90 percent of all crystalline silicon photovoltaic cells. If you live in the American Southwest, you have seen the growth in solar technology in order to help get homes and businesses off the power grid. Silver coated mirrors are also used to create scalding hot water, which then becomes steam and is used to run electric generators.
From these kinds of uses for silver, experts predict the possibility of an additional 80 to 100 million ounces of silver demand per year. As of this writing, much of this silver is unrecoverable, meaning that it will likely be consumed. Another area of strong demand will come from newer water purification systems that are employing silver instead of more toxic chemicals such as chlorine and bromine. In pools and spas silver ion canisters can spread a biocide blanket easily to ward off disease. Silver is also used in personal water purification tubes. David Morgan is also impressed with the possible uses of silver in food processing- particularly in packaging. With nanotechnology, you can impregnate silver into plastic sheets as a way of keeping bacteria out. Silver for RFID tags (a scanning device used to replace bar codes) will be needed to put these tags in cars, bank debit cards, or casino chips, and could also push industrial demand dramatically higher.

Because of all of these new industrial uses for silver, some experts believe that silver will be moving back into a deficit situation, meaning that more above ground stockpiles will have to be consumed to meet demand and the above ground stock of silver will once again decline. Put another way, there are several possible reasons- in addition to investment demand- that could allow for silver prices to explode. It is true that jewelry scrapping could increase to fill the deficit, and that jewelry demand could decline. It is also possible that recycling could eventually increase. But these factors may not yield any more than 100-200 million ounces of silver in a given year- or 5 or 10 billion dollars at 2011 prices. And investors may very well stand in to make up the difference, since silver is still so much cheaper than gold, therefore eliminating the benefits to supply from declining jewelry production and increased recycling.

Silver bulls like Morgan, as well as Izzy Friedman and Ted Butler wonder if there might not be a moment when silver industrial users hit the panic button and drive silver dramatically higher, as they try to get their hands on an asset that is also sought after as an investment hedge by millions of retail investors. This industrial panic could far exceed the one for palladium in 2000. In that year, Ford Motor Company feared a shortage and bought large amounts of palladium in response to disruptions coming out of Russia, one of the world’s largest palladium producers. The price of palladium skyrocketed to nearly 1100 dollars an ounce, or over 3 times the price of just 18 months earlier. And this occurred to a metal that had limited investor interest: it was all about the industrial users getting scared and scrambling to buy whatever they could. Silver, which is more versatile and cheaper than palladium– and which has a history of being a monetary metal– could see a much larger price spike due to its industrial and monetary or investment uses.

Here’s A Small List of Items Using Silver:

Air-conditioners
Adhesives
Anti-freeze
Automobiles
Batteries (especially silver oxide zinc batteries)
Bearings in jet engines
Cameras
Cell Phones
Clothing
Compact Disks (some, though not all)
Computers
Dental Fillings
Dishwashers
Eyeglasses
Hearing Aids
Jewelry
Microwaves
Mirrors
Packaging Materials
Photographs
Plastics
RFID Tags (and other scanners)
Sanitary Clothing
Sanitary Wraps for food or other perishable items
Scratch-resistance coatings
Solar Panels
Switches
Termite treatments
Thermostats
Toasters
Utensils
Watches
Water pipes
Water purifiers
Weapons systems
Wiring

All of the great bull markets in the past half century have experienced corrections– some serious, and oftentimes ones that leave the market going sideways for several years. But the longterm bull reasserts itself and comes back to actually outdo its earlier performance.
This clip from David Morgan explains how in many bull markets, 90% of the gains come in roughly 10% of the time, toward the end of the bull move:

Nothing Like a Silver Bull Market

Just to review for anyone wondering if the bull market in all things precious metal is over, allow me to review the factors that are staring people in the face, and that, with time, will lead to higher- much higher in fact– precious metals prices:

1) Central Bank buying of gold combined with open questions about the future of the dollar as a reserve currency
2) Other currency wars, or attempts at devaluation of major currencies (look at what Japan is trying to do to the Yen as we speak, for example.)
3) Increasing use of gold as collateral by banks
4) A New Normal where growth in the western world is stymied–and where there is concern that simply papering over it not only won’t work, but may set of an inflationary accident somewhere
5) On a related note, the continued frustration and anger at banking, political or other elites who appear to be either corrupt or incompetent or both.
6) Out of control paper trading in the metal that is completely disconnected from the realities of the physical market (can we say paper short squeeze on the commodity markets?)
7) We are seeing peak gold, meaning no growth in gold production– and many look at the dismal performance of mining stocks and wonder if silver is in fact not far away from a peak in production growth. This is not a good thing if you are an industrial user looking to put silver into all sorts of electronics, from computers, to solar panels, to cell phones.

Working together, these reasons, along with others that I can’t think of, will help to move gold and silver prices to new highs.The trick is to not be fooled into believing the hype from the metals bears that this bull move is anywhere near over.

I wrote last year that there was precedent for silver to be in a consolidation mode (meaning time between new highs) for roughly five years. I was referring to the 1968-1973 time period. The action recently especially in silver but also in gold is trying many of the traders, leveraged players, or those with positions that are too large to sleep at night. Corrections and consolidations happen with bull markets, but they are psychologically painful. They blow through technical indicators, they look like they are going to break down to ever lower lows, and then all of a sudden they begin turning higher again without warning (and much to the disbelief of those who underestimated the volatility of the bull.)
But the fundamentals remain. As Jim Sinclar likes to say, “gold is moving to towards the monetary system, not away from it.” This is the longterm picture, notwithstanding the ability of paper traders to knock things down in the short term.
Here is a recent article out of a website out of Hong Kong, gcbullion.hk on the powerful central bank trend underpinning the gold and silver market:

“FRANKFURT (MarketWatch) — The world s central banks last year bought 534.6 tons of gold in 2012, the most since 1964, as global gold demand hit a record value level, the World Gold Council said Thursday in a quarterly report. Purchases by central banks for the full year rose 17% compared with 2011, while fourth-quarter purchases of 145 tons marked a 29% rise from the same period a year earlier. “Central banks move from net sellers of gold to net buyers that we have seen in recent years has continued apace,” with official sector purchases across the world now at their highest level for almost half a century, said Marcus Grubb, managing director for investment at the World Gold Council. In value terms, total gold demand in 2012 was $236.4 billion, an all-time high, the council said.”