Jim Rogers & Marc Faber Agree, Bombs Away

By Dominique de Kevelioc de Bailleul

Investors waiting for an official announcement of another round of Fed balance sheet expansion may be losing ground in the next leg up in precious metals prices—and in oil and other commodities prices.

Don’t wait for the shot to be heard.  Place your favorite dollar-destruction trade now before the mom-and-pop investor as well as the institutional money manager catches on to the next stage of deceptive practices of the Fed.

There’s no alternative to more money ‘printing’, according to Jim Rogers of Rogers Holdings and Marc Faber of Marc Faber Limited.

In the case of Rogers, he says the Fed desperately wants to avoid more “egg on their face” after two QE mistakes, while both men lead the publicly stated  comparison between Bernanke and his lead neo-Keynesian cheerleader Paul Krugman with France’s 18th century John Law.

“I do not know whether they will announce it [QE3] or not. They are a little bit embarrassed because they announced QE1 and QE2, and it did not work. So they may try to discuss it,” Rogers told the Economic Times.

“They may just continue to do it without getting egg on their face again, but they are going to print money, they are all going to print money,” he adds.  “It is the wrong thing to do, but that is all they know to do.”

Once a complimentary Fed policy tool for orchestrating global money flows, the coordinated actions to manipulate interest rates and issue communiques have now become a huge liability for Bernanke.

It’s now become apparent that $2.1 trillion of officially-disclosed money creation since the onset of QE1 in Dec. 2008 has not delivered that reliable Keynesian magic as hoped.  Instead, much of that fiat merely spilled over into the commodities and precious metals markets, in addition to propping up insolvent banks and U.S. stock markets.

As the monetary base expands while real GDP contracts, the Fed must now downplay the evidence of monetization from the layman the best it can.  Otherwise, the Fed becomes completely irrelevant to harnessing the market from the superhighway of hyperinflation.

“If you look at their balance sheets, you will see that something is happening, assets are building on their balance sheets and they are not coming from the tooth fairy,” says Rogers.

Early last week, Rogers told The Daily Telegraph that Bernanke & Company “probably have learned how to do things off balance sheet.  I have nothing to confirm this, but everyone else has learned how, so they probably have, too. This is just a comment on human nature.”

The Swiss money manager Marc Faber agrees with Rogers’ on the outlook for the Fed’s money printing activities in the wake of $1.5 trillion U.S. budget deficits—along with no plan in sight to drastically cut military and ‘entitlement’ programs.

With more wars on the horizon and an American political class comprised of two parties rolled into one oligarchy in bed with bankers, Washington’s will to alter the course of runaway consumer prices through the destruction of the U.S. dollar’s purchasing power is clear—and was made most clear to those paying attention to a failed Ron Paul presidential campaign and a Simpson-Bowles impasse.

“In my opinion, as far as the eye can see, the Federal Reserve will never again implement tight monetary policies,” say Faber to a gathering at the Mises Institute.  They will print and print and print.”

Faber goes on to say that the neo-Keynesians don’t acknowledge that excessive leverage and levels of debt in the financial system are the root cause of the four-year-long global recession, pointing out an eight-page dissertation by economist Paul Krugman published by the NYTimes.

In Krugman’s article, not one mention of the problem of an over-leveraged banking system and excessively indebted economy was made,  lead Faber to believe that the implication is: more of the same monetary drug is recommended.

“They cannot afford to have a debt deflation in a credit addicted economy,” Faber continues.

Thousands of years of monetary history show that the road to hyperinflation is political driven, with no politician or central banker (in the case of today’s monetary system) desiring to be in the driver’s seat when the system crashes from its own weight.  Each elected and appointed policymaker knows that the ramifications of hyperinflation include civil unrest, violence and revolution—either peaceful, or not.  The targets will be on their backs.

“I tell you, sovereign credit in the Western world, they’re all bankrupt,” states Faber.  “But before they officially go bankrupt and can’t pay, they’re going to print money and massively so.  That should be very clear.  That’s the easiest way politically to postpone the hour of truth.”

Americans may fear the truth, but they haven’t experience the pain that goes with that truth—a la Greece, Spain and Italy, to mention a few.  As the market for Spanish and Italian sovereign debt now soars along with precious metals, the markets agree with Rogers and Faber: there’s virtually no turning back for the Fed and its complicit partners in monetary crimes, the ECB, BOJ, BOE and SNB.

BIG NUKE Imminent in Precious Metals

By Dominique de Kevelioc de Bailleul

Something very big is most likely about to be dropped in the global financial markets within a few weeks—like a nuke exploding—and those holding precious metals stand to be the big winners—especially silver investors, who could make a small fortune in a very short period of time.

Here’s the overwhelming evidence of something very big coming soon to the financial markets:

“. . . evidence points to an upside break for both gold and silver, which is not dissimilar to our Silver – The Coming Bullet – August 2010 ‘Trend Ready’ state,” Hinde Capital CEO Ben Davies told King World News on Aug. 9.

Davies’ report turned out to be a prescient piece of work, as the silver price went truly ‘bananas’—as GATA’s Bill Murphy likes to refer to big PM moves—making its bullet move from the $17.50 mark of August 2010, ending at nearly the $50 print at the end of April 2011, for a 185 percent move within nine months!

Davies’ observations echo trader Dan Norcini’s.  Norcini tells readers of JSMineset that a big Asian buyer has ratcheted up the floor in the gold mark in $20 increments.  Davies sees the very same buyer incrementally scooping up gold in a signature consistent with a very large buyer of the past, a buyer who appears to know beforehand of the Fed’s every move—a point suggested in a previous BE article, titled, Rigged Gold Market, a Secret Payoff to China.

“We want to state there has been a strong buyer in the gold market these past few months,” stated Davies.  “Also we want to reiterate the buyer in the room is Asian and has been stepping up their buy order, 1545, 1575 now 1600?”

More evidence.

The signature of that big Asian buyer has demonstrated in the past that, he is either a brilliant tea-leaf reader or he’s ‘connected’ to the Fed, with the latter more likely during an atmosphere of blatant, draconian, widespread and sanctioned fraud in all markets.

“It is reminiscent to me of the very same buyer(s) who soaked up U.S. 10 year bonds at 4.85% in June 2004 when the Fed didn’t cut rates from 1% to 0.75% as was widely expected,” Davies explained.  “By end of 2004 rates were at 4.25% but 10 year yields had rallied back to 4.00%.”

There’s more.

Either signals from media and the inner banking cartel of the past two weeks have been deliberately staged to dupe even the most savvy precious metals investors (outside the criminal cartel, such as a Jim Sinclair) into a crushing disappointment of no additional QE from the Fed will be forethcoming, or the recent series of smoke rings indeed signals an imminent and massive rally to new highs in gold and silver prices.

In a previous BE article titled, Imminent Silver Price Explosion, the piece noted two banking cartel media mouthpieces have been running interference for Ben Bernanke for a launching of a bazooka QE.

From the BE article:

Jon Hilsenrath of the Wall Street Journal, the man who the straight-shooting Stephen Roach of Morgan Stanley calls the real chairman of the Fed, wrote . . .

This [Hilsenrath's list of economic and inflation metrics] is ammunition for Fed officials who want to act right away to spur growth. Not only is growth subpar, and the job market stuck in the mud, inflation is also running below the Fed’s long-run goals.

Moreover, as mentioned in the same article, the second media mouthpiece of the gold cartel, Greg Ip of Economist—the very same publication that, James Turk had clearly demonstrated in his article of several years ago, was behind a disinformation campaign for the gold cartel throughout nearly two decades—wrote in his piece for Economist (written from the point of view of hindsight) that the ECB will need to debase the euro by following the Fed’s program of debasing the U.S. dollar.  In the opinion of the European banking masters, debasing is the right thing to do—and do it fast.

Side note: From the content of the two articles, it appears that Jim Sinclair’s thesis of “QE to Infinity” may include, not one, but two currencies, the dollar and euro, which, together, comprise 89 percent of global reserves.  That gives institutional money nowhere to hide, adding a big boost in octane to the gold market.

As the evidence mounts, regular guest of KWN, Egon von Greyerz of Switzerland-based Matterhorn Asset Management suggests that the cocktail for something big in the precious metals market awaits the Bernanke match lighter.   The 40-year veteran, von Greyerz, predicts a double or triple in the gold price by the close of 2013, leading the list of KWN’s brightest and most experienced prognosticators of the PM market.

“ . . . my target on gold of $3,500 to $5,000 over the next 12 to 18 months, and then over $10,000 in 3 years.” von Greyerz told KWN late last month.  Though James Turk of Goldmoney agrees with von Greyerz that a big rally is afoot, Turk hasn’t announced a target for this next move in the gold price—not yet, anyway.

And, just in.

Another mouthpiece for the gold cartel, Financial Times, published to subscribers its latest disinformation article.  Many FT readers, presumably, have never heard of James Turk, Ben Davies or Jim Sinclair—or 40-year veteran of the metals markets, Bill Haynes, who told KWN Thursday:

“One of the writers started trashing gold in the Financial Times [Wednesday].  He said it’s time to sell your gold and send the kids to college, buy an automobile or take a vacation because this bubble is over.”

Echoing sentiments of James Turk and Eric Sprott as well as zerohedge’s repeated reference to FT’s blatant and disgraceful disinformation campaign against its upper-middle class subscribers, added, “Eric, this is the type of nonsense we see in the mainstream media when a bottom is being put in, and the Financial Times has been one of the greatest contrarian indicators for the gold market.

“I also find it interesting that this is the week the big buyers are making a statement with their physical gold and silver purchases,” Haynes added.  “They are doing their buying right into the face of this ridiculous nonsense coming out of the Financial Times.”

Precisely.  Investors who read King World News most likely don’t subscribe to the Financial Times for its commentary of the precious metals market.  And those who do subscribe to FT are those the Fed are most frightened of.  Mr. and Mrs. Bourgeoisie Money Bags are the next in line to threaten the Fed’s “inflation expectations” powder keg—a fatal moment it wishes to forestall as long as possible.

During the past few weeks, there’s been too much anti-gold propaganda waged at one time, while a known big Asian and heavily suspected Fed insider has been quietly (to the general investor public) accumulating gold at marginally higher and higher price levels.  Something big is afoot.

And to top this litany of wink-winks and nod-nods, the ultimate political hack of Wall Street, U.S. Senator Charles “Chuck” Schumer (D-NY), chastised (or signaled?) Fed Chairman Bernanke during a hearing of mid-July, “The Fed is the only game in town… You have to take whatever actions are necessary to ensure a strong recovery . . . Get to work, Mr. Chairman,” Schumer said forcefully.

To remind investors of Schumer’s well-know connection to the banking industry, Zerohedge posted an article from OpenSecrets.org that showed Schumer receiving $4.8 million in total from 20 Wall Street firms.

In conclusion, we see the establishment media mouthpieces very active, a super-key politician mouthing publicly at the Fed, and a suspected Fed insider from Asia scooping all the metal it can get, all deployed to enrich those who are either privy to, or can read the tealeaves, for a front-running a monstrous move in gold and silver—at the expense, of course, of the American public.

As Trends Research Institute Founder Gerald Celente has repeatedly said, “The rot is at the top”; “We’re being financially raped”; and “It’s a gangster government” between the Gambinos and Genoveses.”

Events of the past week have become obvious—too obvious, maybe?  Or is Celente correct when he says the banking cartel acts if it doesn’t care what people may think about it and who it hurts?  It appears that the big money is betting the Fed drops the nuke.

Peter Schiff: A Much Bigger Collapse is Coming

By Dominique de Kevelioc de Bailleul

Euro Pacific Capital CEO Peter Schiff received top headline on Yahoo Finance News Tuesday, encouraging investors to loading up on gold and silver before the rush from global investors into precious metals becomes the only game in town.

The global financial crisis will inevitably move to the other side of the Atlantic to the U.S., as the focus on the dollar’s terrible fundamentals once again puts pressure on the Treasury market.  And when that day comes, the selling of US debt and market turmoil it will ignite will dwarf Europe’s sovereign debt catastrophe, according to him.

“We’ve [U.S.] got a much bigger collapse coming, and not just of the markets but of the economy” Schiff tells Yahoo’s Breakout host Jeff Mack. “It’s like what you’re seeing in Europe right now, only worse.”

In agreement with Swiss economist Marc Faber and commodities trader Jim Rogers, Schiff predicts the Depression of the U.S. economy will deepen some time in 2013.

As the Fed responds with more aggressive QE to prop up banks, in addition to maintaining historically record low debt carrying costs to Treasury, investors will most likely come to realize that the Fed has become powerless to affect any positive outcome to the crisis.  More jobs will be lost, tax revenue to the Treasury will fall, and deficits will soar even higher than the $1.5 trillion deficit expected for fiscal 2013.

“That’s when it really is going to get interesting, because that’s when we hit our real fiscal cliff, when we’re going to have to slash — and I mean slash — government spending,” says Schiff.

“Alternatively, we can bail everybody out, pretend we can print our way out of a crisis, and, instead, we have runaway inflation, or hyper-inflation, which is going to be far worse than the collapse we would have if we did the right thing and just let everything implode,” Schiff continues.

But Bernanke will most likely make good on his promise to economist Milton Friedman (1912-2006) during a speech the Fed Chairman made at Friedman’s 90thbirthday celebration.  In his speech, Bernanke relived the Fed’s monetary policy responses to the financial crisis of the 1930s, and praised Friedman for pointing out that the Fed’s restriction of money supply to stem the flow of gold out of the United States was a mistake.  The Fed, instead, should have increased money supply to save the banking system and move off the gold standard (as Britain did earlier in the crisis).

“This action [raising of interest rates] stemmed the outflow of gold but contributed to what Friedman and Schwartz called a ‘spectacular’ increase in bank failures and bank runs, with 522 commercial banks closing their doors in October alone,” Bernanke said At the Conference to Honor Milton Friedman, University of Chicago, Chicago, Illinois .

“The policy tightening and the ongoing collapse of the banking system caused the money supply to fall precipitously, and the declines in output and prices became even more virulent.  Again, the logic is that a monetary policy change related to objectives other than the domestic economy–in this case, defense of the dollar against external attack–were followed by changes in domestic output and prices in the predicted direction [down].”

In 1931, the gold price was fixed at $20.67, making it a bargain to holders of U.S. dollars if the Fed had acted by debasing the dollar.  But instead, the Fed decided to protect the dollar from “attack” by domestic and foreign holders, a policy move that Schiff believes is in the best interest of the U.S. economy, today.

That’s not likely to happen, however.  It’s clear from the passage, above, of Bernanke’s entire speech that Bernanke will sacrifice the U.S. dollar in the hopes of saving the banking system; he believes it’s a small price to pay to prevent the decimation of the banking sector—the very point of Friedman’s lifetime of work.

“Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve,” Bernanke ended his speech.  “I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry.  But thanks to you, we won’t do it again.”

And Schiff takes Bernanke at his word, and recommends that investors buy gold and silver before “Helicopter” Ben makes good on his promise to Milton Friedman of 10 years ago.

Gold: Brace for Bizarre QE3 Hail Mary and Hyperinflation

By Dominique de Kevelioc de Bailleul

If a 1.53 percent yield on 10-year U.S. Treasuries isn’t enough to spook investors of a global economy on the verge of implosion, Michael Pento of Pento Portfolio Strategies expects the Fed to aggressively respond by ceasing to pay interest on excess reserves held at the U.S. central bank—and removing all reserve requirements on purchases of sovereign debt.  Fed Chairman Bernanke has his sites on negative rates.  The gold bugs will surely like that.

The one-two punch of a bazooka QE3 of that size, the potential onslaught of capital fleeing into hard assets as a result of a no-reserve global banking system, could be more than the Fed bargained for, and clearly indicates how desperate central bankers have become to prevent the largest Ponzi scheme of history from collapsing, according to Pento.

“So let me put it together for your listeners,” Pento told King World News (KWN), Sunday.  “We have $1.42 trillion of excess reserves.  We are now going to be told that there will be no capital reserve requirements on owning sovereign debt. You will have commercial banks flooding the market with the purchase of sovereign debt.  Not just U.S. debt, Portuguese debt, Spanish debt, Greek debt, all of that debt will have zero capital requirements.”

In other words, the Fed intends to lower the rate of the riskiest of all sovereign debt while punishing cash hoarders of the least risky sovereign debt, because, surely, rates on the shorter end of the Treasury curve will turn negative and it’s hoped will move the 10-year Treasury that much closer to zero, as well.  Ditto for sovereign and commercial debt across the entire spectrum of the global credit markets.

That’s the plan, according to Pento, but the market reaction to such a desperate, high-risk policy move is expected to soar commodities and the precious metals, as the last step beyond a no-reserve requirement banking system is ‘helicopter money’ directly into the hands of consumers.

“Let me be clear on this, I’m not saying it could increase M2 money supply to $15 trillion, this could increase it by $15 trillion,” Pento continued.  “So we’re talking perhaps about $24 trillion.   It has the potential to increase to rapidly increase the global money supply, and it would be a tremendous boost to commodities, oil and precious metals.”

Pento’s expectations for such a move is consistent with earlier policy suggestions made by the Treasury Borrowing Advisory Committee in January 2012 (reported by zerohedge, Feb. 1, 2012), which stated in its report to the Secretary of the U.S. Treasury, “There was a lengthy discussion regarding the bid-to-cover ratios at recent Treasury bill auctions. It was broadly agreed that flooring interest rates at zero, or capping issuance proceeds at par, was prohibiting proper market function.

“The Committee unanimously recommended that the Treasury Department allow for negative yield auction results as soon as logistically practical.”

And it would make no sense for the Fed to impede the plan by requiring reserves on top of the U.S. Treasury actually charging bill and note holders of U.S. debt for lending the U.S. government money.  In this perverse environment of targeting negative interest rates, it’s become clear that the Fed has given up on the U.S. economy, and more broadly, hopes of the global economy pulling the U.S. out of its nosedive; Bernanke and Company are merely playing out a losing hand—a hand that ShadowStats economist John Williams has said will lead to hyperinflation by the close of 2014.  Lowering borrowing costs to offset lower tax receipts to service $15.8 trillion of U.S. debt in addition to the fiscal 2013 budget is the only option left open to the Fed.

“Outside timing on the hyperinflation remains 2014, but events of the last year have accelerated the movement towards this ultimate dollar catastrophe,” Williams said in an interview with KWN, Jan. 26, 2012.  “Following Mr. Bernanke‘s extraordinary efforts to debase the U.S. currency in late-2010, the dollar had lost its traditional safe-haven status by early-2011.  Whatever global confidence had remained behind the U.S dollar was lost in July and August [2011].”

Pento agrees, understating the Fed’s goal of negative interest rates—on top of zero reserve requirements—as “not a good idea.”

Pento said in his July 8 interview with KWN, “What he [Bernanke] needs to do is let the free market work, and I can tell you that unleashing $1.5 trillion into the American economy, and having that money roll-over and multiply (to $15 trillion), through the money-multiplier-effect, is not a very good idea.”

Indeed, it is not a good idea, but there is no other idea left for the Fed to execute.

Spot gold: $1,569 per Troy ounce.

Hey Silver Bugs, “Act Like a Man!”

By Dominique de Kevelioc de Bailleul

Right now silver bugs need to view the following scene from The Godfather (1972) when Johnny (Frank Sinatra?) goes to see the Godfather for help breaking into the entertainment business.

Johnny: Oh godfather, I don’t know what to do.  I don’t know what to do.

Godfather: You can act like a man!  <slaps Johnny in the face>  What’s the matter with you?  Is this how you turn out?  A Hollywood finocchio that cries like a woman? <imitating Johnny> What can I do?  What can I do?

So “toughen up” as Jim Sinclair of JSMineset.com said to wimpy precious metals investors who were calling him and crying about the precious metals market earlier this year.

Act like a man!  Need a slap to the face, too?!

At the time of the making of the movie, silver had dropped to $1.37 per ounce in November 1971, after falling from a high of $2.57 per ounce in 1968, a drop of nearly 50 percent in more than two years.  But by December of 1972, the silver price cracked $2.00 once again, on its way to $50 eight years later in Jan. 1980.

Today, after only half the time of the 1968 to 1971 fall in the price of silver, silver bugs are crying like women—like a finocchio (gay).   After 13 months, the silver price has dropped from nearly $50 in late April to $26.20.  Big deal.  That’s typical silver market action.

Look at the chart, above, and see the 40-times move in the price of silver through the next eight years.  The 1968-71 price decline looks tame within the overall picture in the year 1980.

Today’s chart, below, shows the silver price forming a head and shoulders pattern, with the Slow STO looking as oversold as the price of silver was back in October 2008.  So far, nothing looks out of the ordinary for the silver price as it works off excess speculators money.  For the long-term holder, the silver price trades at a nearly 50 percent discount from late April 2011 runaway move.

Be patient.  The fireworks have yet to begin.

Peter Schiff’s Latest Advice to Investors

Dominique de Kevelioc de Bailleul

Gold and silver investors watching metals prices move back down near to the Dec. 29 lows of $1,523.90 and $26.15, respectively, should seriously consider accumulating the metals now.   The ‘Big Reset’ of the global financial, slated for no later than 2014, will reward precious metals holders as the big winners among investors, according to Peter Schiff.

Speaking with Cambridge House International, the CEO of Euro Pacific Capital said, “The United States is in a lot of trouble.”   After the Fed presumably embarks on QE3, and that stimulus wears off, “I think we’re going to have a crisis.  I don’t think we’re going to have time for QE4 or QE5.  I mean, ultimately, that’s where we’re headed, because that’s all QE does.  Each QE sows the seeds of the next QE.”

And global money looking for a safe haven won’t stand for another repeated currency debasements through debt monetization by the U.S. central bank.  Because Europe’s woes have forced politicians to make tough choices there, the spotlight has been taken off, temporarily, the even-more dire circumstances of debt loads and deficits of the U.S., according to Schiff.

Schiff’s time line for the Armageddon scenario of a U.S. dollar crisis matches predictions made by commodities legend Jim Rogers and ShadowStat’s economist John Williams, with each man projecting 2014 as the year the U.S. dollar no longer maintains its former role as the world’s premiere reserve currency—implying a severe decline of its global purchasing power and much higher metals prices.

In 2014, that’s the year the U.S. economy is expected to reach fresh new lows and the year politicians will finally be forced to face the tough choices regarding proposed cuts to federal, state and local government budgets, according to the three men.  It will also be the year that ushers in severe social unrest, similar to what is happening in Greece, in the case of Jim Rogers’ prediction for 2014.

Ironically, Schiff believes that if the U.S. economy miraculously digs its way into real economic growth, the bond market will sell off due to concerns of inflation from two massive QE programs from the Fed, driving interest rates much higher, along with U.S. borrowing costs—costs that will explode the federal budget deficit beyond the already red-line levels of 10-plus percent of GDP.  The dollar cannot survive under that scenario, according to Schiff.

“We don’t want to allow a real recovery, because that means real bitter-tasting medicine needs to be swallowed,” he said.  And added, no later than the year 2014, we’ll see “higher interest rates.  There’s going to be lower real estate prices, stock prices, some banks are going to fail, and the government is going to have to seriously cut spending dramatically to everybody.”

Under a Schiff scenario of deeper economic recession/depression, dramatic cuts to all levels of U.S. government spending will create a similar and immediate economic and financial death spiral, now faced by Greece, with reduced GDP coming from total U.S. government spending—presently 40.3 percent of GDP—further limiting the U.S. economy to pay on its local, state and federal debt, thereby initiating a feedback loop of further cuts and GDP declines, and so on—an unraveling of the Ponzi-like scheme warned of by Russian economist Nikolai Kondratiev in 1925, and later, by Austrian economist Ludwig von Mises, among others.

By the year 2014, like Jim Rogers’ longstanding ‘heads-you-win-tails-you-win’ investment theme as a result of continued stimulus (currency debasements) to fight the Kondratiev Winter (depression) or the immediate inflation unleashed from years of Fed balance sheet expansion, Schiff recommends holding real money—gold (and silver)—the only money that will survive the loss of confidence in all fiat currencies and the ability of the U.S. to make good on debt obligations.

“There is no short-term fix anymore, because we’ve been doing these short-term fixes for a along time,” Schiff concluded.  “We got a little extra rope from this European crisis . . . Something is going to happen in Europe, because this cannot go on indefinitely.  And the numbers are just so big for the U.S.  Interest rates have got to rise, or the Fed is going to have to print so much money to keep them from rising that inflation is going to flare up in a way that government numbers can’t hide it anymore.”

Therefore, Schiff’s advice: Avoid dollars and euros.  Buy gold, real “money”.

Gold Alert: “This has happened only 5 times in the last 100 years”

Investors seeking an entry point to add to gold (and silver) positions or to initiate positions—as a strategy to balance portfolios to the risks of the coming turbulent re-balancing of the global monetary system—should consider a macro indicator that has served money managers and gold investors well for the past century.  And right now that indicator tells us gold is cheap.

In an interview with Goldmoney Chairman James Turk, money manager Adam Fleming of Fleming Family & Partners suggested that, when gold shares stray too far in price from the price of bullion, gold becomes remarkably cheap on a relative basis—or, a buy—a buying opportunity that emerges once per generation, on average.

“I think it’s very likely that we have [reached a bottom in the gold price],” Fleming told Turk.  He believes the experiment in fiat currencies not connected with precious metals of the past 30 years is becoming “unwound.”

“The reason why I believe gold is bottoming here, is because the gold shares are trading at two standard deviations to the gold price, and this has happened only five times in the last hundred years,” Fleming continued.

“In the crash of 2008, in 2000, 1980, in . . . way back in 1950s and in the 30s, he added.  “So I think we’re at an extraordinary inflection point with both gold and gold shares, providing really unusual opportunities.”

Leonard Melman of the Melman Report agrees with Fleming and provides a context in which investors can measure the magnitude of the extreme disconnect between the prices of gold and the gold shares at this time.

“In mid-2008, gold was about $900/oz and the Philadelphia Gold and Silver Stock Index (XAU) was 205,” Melman told The Gold Report. “Now with gold just under $1,600/oz, the XAU is 147. So, while gold has almost doubled, the major mining shares have dropped by an average of about 40%, and many of the junior shares have fallen by more.”

Fleming’s observation of this recent phenomenon comes off the heels of comments made within a week by three other market pros, Euro Pacific Capital President Peter Schiff, Founder and Managing Partner of Matterhorn Asset Management AG & GoldSwitzerland Egon von Greyerz and Hinde Capital CEO Ben Davies—all of whom believe the selling in the precious metals market is overdone and opportunities to enter the market have materialized dramatically during the nine-month price consolidation of the bullion price.

“Gold is oversold,” Euro Pacific’s Schiff told King World News (KWN) on May 17.  “ . . . as the market digests the weakening economy and the lower market, then you start to get the optimism for the release, the fix, which is QE3. So I think QE3 puts a floor (somewhere) beneath the market.”

The next day, Hinde’s Davies reported a “big seller” had dumped a lot of gold, overwhelming strong demand.  But the big seller has stopped liquidating, according to Davies in his interview with KWN on May 18, and he expects a rally in the gold price from the lows of last week, as well.

“The sell-off in gold is reminiscent of the 2008 deleveraging process, but it is more similar in dynamics to 2012 when a notable fund manager had to sell his gold/ ETF holdings,” said Davies.  “There were buyers of course, seller and buyer volumes must match.  But the need to sell overwhelmed the need to buy.

“Gold buyers picked up some bargains then, and they will now. . . I particularly would like to be long gold now.”

On May 22, Matterhorn’s von Greyerz told KWN the physical market is extremely tight—so tight, in fact, that one of his clients discovered that the Swiss bank, with whom he entrusted his ‘allocated’ gold account, scrambled to find bullion in a manner reminiscent of the MF Global scandal to satisfy the client’s request for shipment of his gold to another location.  “It’s absolutely amazing” what has happened, said von Greyerz.

And von Greyerz, too, sees gold soaring from the oversold lows of last week.

“I think we did make a low last week [in the gold price], and I think we are now going to see the rebound,” von Greyerz told KWN.  “And once we get started—and that may take a few days—but I think we can see fast moves here.  I feel pretty confident that we have seen the end of the correction and the next move up will be a big move. There’s no question about it. . . All the dominoes are down ready for gold to take off.”

Eric Sprott: Record Silver & Gold Prices this Year

Speaking with GoldSeek Radio, billionaire investor Eric Sprott of Sprott Asset Management argued that gold and silver bullion will reach record highs this year.

“I think that gold was the investment of the last decade, and I suggested that silver will be the investment of this decade,” Sprott told GoldSeek’s host Chris Waltzek.  Sign-up for my 100% FREE Alerts

After bottoming near the $280 level in 2000, gold soared to as high as $1,200 before closing 2010 at approximately $1,100, for a 294 percent gain for the 10-year period.  On the other hand, silver began the year 2000 at $5 and ended 2010 at $16.25, for a 225 percent gain for the same period.

Sprott believes the precious metals will make new highs this year, a prediction not supported by Jim Rogers of Rogers Holdings and Marc Faber of Marc Faber Limited and publisher of the Gloom Boom Doom Report.  Though Rogers and Faber are bullish on gold and silver in the long term, both gentleman have said 2012 will be the year of further consolidation and a possible test of the 40-month moving average near the $1,200 level.

“I think both gold and silver will trade before the end of the year at new highs,”  Sprott told SilverSeek.com.

On gold stocks, Sprott said ETFs and trusts, such as the gold and silver trusts he offers, have diverted a lot of money out of the gold and silver mining shares and into the metals.

“I think it’s undoubtedly true that the amount of money going into gold-like products, such as ETF’s and our trust, have definitely taken away from the stocks,” he said, and added that it’s now silver’s turn to shine brighter than gold.

“And the reasons I come that conclusion is by watching what people do with their money,” Sprott continued.  “So for example, when we analyze, for example, the U.S. Mint sales.  They sold as many dollars of silver as they sold dollars of gold last year in terms of gold coins.  That means that essentially, with silver trading at a 50 to one ratio, people bought 50 times the amount of silver as did they gold.”

In addition to demand statistics, Sprott noted the available supply coming to market each year will put a lot more upward pressure on silver when compared with gold.

“The amount of silver that’s available for investment each year is 450 million ounces and the amount of gold that’s available for purchase is about 70 million ounces, which means you have a ratio of about six-and-a-half to one is amount of silver you can buy versus gold,” he explained.

“For the life of me, I can’t see why silver would massively outperform gold over the next few years.”  Sign-up for my 100% FREE Alerts

Attention Silver Bugs: Get Back into the Pool—NOW!

Insiders to Fed Chairman Ben Bernanke’s speech, delivered at a gathering of the National Association of Business Economics, popped silver futures higher by more than 60 cents within minutes of the NY open on Monday.  In his speech, Bernanke has finally admitted that more QE is needed, and his needed excuse is: fight stubbornly high unemployment.

The recent alleged decline (see ShadowStats.com) in the unemployment rate reflects a “a reversal of the unusually large layoffs that occurred during late 2008 and over 2009,” he said to attendees in Arlington Virginia. “To the extent that this reversal has been completed, further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.”  Sign-up for my 100% FREE Alerts

“Continued accommodative policies!”  Translation: Attention silver bugs!  Get back into the pool—NOW!

While the FOMC is now stacked with nine doves to Bernanke’s 10-person committee, with Richmond Governor Jeffrey Lacker playing the sole bad cop in his role of providing the occasional head fake for those traders who don’t quite grasp the Fed’s communique con game, yet, there’s nothing stopping the Fed from its mission to monetize crushing levels of U.S. Treasury debt (save a long-shot Ron Paul win in November, of course).

To that point, on Friday, Gabelli & Company’s Caesar Bryan warned precious metals investors of the Fed’s ability (and a complicit media) to sway sentiment among the uninformed momentum traders who routinely push the silver market to massive extremes on the way up and on the way down.

“What we’ve seen is some optimism surrounding the U.S. economy,” Bryan told King World News. “This has led to people now thinking that the Federal Reserve can stop expanding their balance sheet and indeed begin to withdrawal some of their stimulus.

“So there’s been a pretty big change [due to Fed and media propaganda] in the last six weeks.  However, I think it’s important for investors to understand these mood swings can be pretty quick and violent.”

Bryan goes on to tell KWN that, though the Fed talks a tough game, it cannot stop expanding its balance sheet without imploding the entire global financial system—a point still not grasped by the majority of investors holding sovereign and corporate debt as well as money market accounts.

“There is real pressure for the central bank to continue to buy at the long end of the bond market to prevent long-term interest rates from rising,” Bryan said.  “So don’t be surprised in the next couple of months when psychology shifts back to people thinking the Fed will remain active.”

In retrospect, those “next couple of months,” according to Bryan, turned out to be only a couple of days.

But if investors can take to heart 50-year veteran Jim Sinclair’s macro outlook for gold (by extension, silver), long and drawn-out declines in the silver price provide excellent entry points for newcomers and accumulators, or ‘stackers’.

According to Sinclair, the Fed had already set course to monetize debt and devalue the US dollar following the collapse of Lehman Brothers in 2009, no matter what Bernanke may say about unemployment, the economy or anything else.

Moreover, geopolitical considerations regarding Iran and the White House’s decision to cut Iran from SWIFT only serves to hasten the dollar’s decline.

On Saturday, Sinclair posted on his Web site JSMineset.com:

The major financial weakness in the U.S. is the level of the U.S. dollar due to sundering use in international contract settlement [accelerated by cutting Iran from SWIFT], the clear and present trend of substituting both the Yuan and Euro as international settlement currencies, and the lack of true economic buyers in the U.S. long bond market.

History will record this decision at this time as a major factor in the final move to financial unwind in the West.

The letdown of the housing report today does not support the majority view that the U.S. is gaining take off speed economically. It is not. It will not and QE will go to infinity, about that there is no question. [Emphasis added]

Of course there’s no question about QE-to-infinity, as Sinclair has suggested all along; the question really is, who will be blamed for the roaring consumer price hikes to come?  The Fed or Iran and speculators?  Sign-up for my 100% FREE Alerts

What Happened to the Anonymous London Trader’s Intel?

As the silver price breaks below $32, precious metals investors will soon see whether KWN’s mysterious London trader is correct, or not, about the Chinese exercising “massive accumulation” orders “on dips” below $33.

“The Chinese are doing the exact same thing in the silver market that they are doing in the gold market, massive accumulation on dips,” Anonymous told KWN’s Eric King in a Mar. 8 interview. Sign-up for my 100% FREE Alerts

Whether the paper market holds somewhere near $33 isn’t relevant to the long-term holders of silver, it’s timing the purchases along with the elephant buyer in Beijing that has traders wondering about Anonymous.  It would, however, be nice to know that someone with access to the same internal data as JP Morgan could be indeed a blessing to the ‘good guys’ in the war to free the public from the tyranny of the banking cartel.

“The physical silver orders that were just filled have been waiting since February 16th,” Anonymous continued.  “Those orders near the $33 level were filled in huge size on Tuesday.  These long-term accumulators are buying every dip.  There were some fills at $34, but some very large orders were filled near $33.”

Below, is a chart of silver, using monthly data and Richard Russell’s favorite moving average parameters for the precious metals of 20 and 40 months.

According to the chart, silver’s 20-month MA stands at $32.71, a price consistent with expected levels of buy orders.  So, Anonymous’ intelligence appears to square with the charts.

Anonymous also pointed out in his Mar. 8 interview, as well as in previous interviews that, the Chinese have embarked on a substantial buying spree in both precious metals, gold and silver.  That, too, jibes with Leeb Capital Management’s Stephen Leeb’s contention.

Leeb, the author of Red Alert: How China’s Growing Prosperity Threatens the American Way of Life, has passionately advised silver investors to accumulate the white metal along with the Chinese, who view silver as vital to Beijing’s plans for transforming the People’s Republic into a heavy user of alternative energy in the post-Peak Oil era.

According to Leeb, the Chinese are “frantic” about stockpiling silver, as alternative energy products such as windmills and solar panels cannot be manufactured without it.  Silver is a “vital” commodity to the Chinese (and others seeking to wean off fossil fuels), according to Leeb.

There is no economically viable substitute for silver in applications that require the most efficient electrical conductivity and heat transfer properties.

Back to Anonymous, who said in the KWN Mar. 8 interview, “The Chinese are doing the exact same thing in the silver market that they are doing in the gold market, massive accumulation on dips.”

Whether the Chinese have suddenly pulled their buy orders below the $33 level (presumably to seek successful buy orders at lower prices), or not, Anonymous puts the silver trade into prospective for the long-term investor.

“As long as we stay under $34, there is going to be constant accumulation,”  Anonymous continued.  “What does it matter if you buy silver at $32 or $38, when it is going to go multiples higher from these levels?  The Chinese know this and that is why they are accumulating in size.”

Leeb agreed, and stated in a Jan. 31 interview on KWN, “I think the outlook for silver, both as an industrial metal and certainly as a monetary metal, is as bright as it can possibly be.  I’m sticking with my target of at least $100.  But I tell you, Eric, it will happen this year.  We are definitely headed for triple-digit silver in the not-too-distant future.”

Both Anonymous and Leeb recommend buying silver, monthly, weekly, or anytime cash becomes available.  But the point is: keep buying on significant pullbacks. Sign-up for my 100% FREE Alerts