No Time Left, Gold & Silver to Go Sky High

By Dominique de Kevelioc de Bailleul

Either something huge is coming to the financial markets, or something huger, or even huger yet lurks.

Consider the following, though not close to being all inclusive of the warning signs riddled throughout the global geopolitical-financial landscape.

  • George Soros dumps stocks and loads the boat with gold
  • John Paulson has nearly half his portfolio invested in gold
  • PIMCO recommends gold
  • Chinese importing record-high shipments of gold
  • U.S. Mint sold 191 times silver ounces to gold ounces for 1st week of Aug.
  • Spanish bonds drop nearly 200 basis points within two weeks
  • Baltic Dry Index makes fresh all-time lows.
  • The German, Dane and Dutch people balk at PIIGS bailout
  • U.S. and China economies are rolling over; Europe in depression
  • Israel’s allegedly insane PM may trigger WWIII with Iran
  • Invasion of Syria likely
  • U.S. government preparing for revolution
  • Lyndon La Rouche says threat of nuclear war the highest since Bay of Pigs
  • Rule of law unofficially suspended in the United States
  • Gun sales and “prepper” industry go vertical

And all of those troubling events, and many more, are unarguably traced to a coming collapse of the U.S. dollar.  The world has been dependent upon the dollar for trade and banking reserves for 68 years, and it’s removal as a working global exchange vehicle cannot lead to anything favorable, financially or politically.  History tells us so.

Adding to the chorus of dollar collapse prognosticators comes the folks at Charles Nenner Research Center, an outfit that’s been on a long winning streak of successfully predicting with astounding accuracy the cycles of the gold market, currencies and equities.

Nenner warned of an intermediate top in gold as it crossed $1,900 and not to expect anything too troubling for the euro during drama surrounding the crisis in Greece.

Though not as well-known as heavyweights John Taylor of FX Concepts or the parade of guests of Eric King’s King World News, Charles Nedder’s work deserves a fair amount of attention.

Though his demeanor on camera appears somewhat awkward and unpolished, the man who frequently wears a yamaka on air has outshone the best analysts of economic and market cycles.  He doesn’t mince too many words and gets to the point rather quickly during his interviews.

Speaking with Financial Survival Network host Kerry Lutz, managing director of Charles Nenner Research Center, David Gurwitz, says Nedder’s research indicates that gold should easily go to, “for sure, $2,100, $2,500” per ounce as the world begins to scramble out of the U.S. dollar—the world’s reserve currency that, he predicts, will collapse within 15 to 18 months.

“Gold is going to $2,100, $2,500 and silver should go back up to $49 . . .” says Gurwitz.

Moreover, Gurwitz says Nenner expects a strong euro against the dollar in the coming year, or so—a prediction that’s also consistent with other extreme dollar bears, such as Europacific Capital’s Peter Schiff and ShadowStats’ John Williams.  Both Schiff and Williams see 2013 as the turning point in the dollar’s relative strength against other major currencies.  And all three forecast a dollar collapse within two years to 30 months.

“Our dollar should fall apart in about 15 to 18 months, which is just going to create a whole mess of things,” says Gurwitz.  “And the euro will be the currency of choice, which it is now, believe it or not.  And he [Charles Nenner] has been saying to people for a while, ‘don’t short it; don’t short it; don’t short it’ and he’s been right.”

In March of 2011, Nenner told Fox’s Bull and Bears the DJIA would drop to 5,000 and that war would break out by the close of 2012.

In May of 2012, Nenner told Bloomberg if the weak nations of the eurozone left the supranational currency, the euro would take over the role as the safe haven currency, which suggests, maybe, that a resolution of the global financial crisis will include some, or all, of the PIIGS leaving the common currency by 2014.

Today’s Silver Price Critical, says James Turk

With silver hanging ruggedly firm above the $40 battlefield, the naked silver short cartel could completely lose control this time, James Turk told King World News  (KWN).  But today is a critical day, as the cartel typically throws everything they’ve got at the paper market before the August options expiration of July 26.

The result of that expected struggle will be telling, he said.

“The fact that we are breaking through $40 [for silver], which has provided overhead resistance for so long, is a clear sign that the shorts are losing control,” Turk told Eric King of KWN.  “The upper hand is shifting to the buyers of physical silver.”

Coincidentally, signs of another break from the correlated moves up and down in the Dow and the precious metals market are evident in the Dow-to-gold ratio, which has been teetering on collapsing below the 7.8 mark this week.  If broken, as it was in the panic month of March 2009, the precious metals could attract buyers of the metals this time around and trigger another short squeeze, especially in the razor-thin silver market.  In 2009, the rush to liquidity took the gold price down.  Today, the problem in the global financial system is solvency—not liquidity.

“My near-term target is still something in the mid $40s, but if gold starts moving higher, as I expect, silver will be testing that $50 level by next month,” said Turk, who has warned of that scenario nearing reality all year.  “That is going to spoil the summer vacations of many of the silver shorts who will be left shocked and in disbelief as they buy hand over fist to limit their losses.”

Several bullion experts have expressed disbelief that the Commitment of Traders report (COT) indicates subdued bullish sentiment in silver under the circumstances in Europe and the U.S.  It appears that possibly the large speculators (specs) have mistaken the summer of 2011 as any other summer of the past 29 years, according to Turk, and may not fully appreciate why this summer could be one for the record books.

“I’m surprised by all of the bearish sentiment, particularly in view of the fact that both metals look ready to rocket higher,” Turk continued in the interview.  “The summer is just getting started and this is already looking more and more like the summer of 1982 when gold was up 50% in three and a half months.”

The continuing crisis in Europe and renewed weakness in the U.S. dollar against the commodities producing nations of Australia and Canada, as well as the record print against the Swiss franc, could indicate the dollar’s morphing status from safe haven to one of just another currency in line for trouble after the euro and sterling.  With the euro under threat of unraveling, the dollar, remarkably, still trades at near 1.44 against the dollar, or only $0.16 off its all-time high before the crisis began.  At this time last year, the dollar traded at near parity, and has lost approximately 25% against the Swiss franc within those 12 months.

Is the Swiss franc’s strength foreshadowing the summer rally in the metals?  Today’s silver price action could give traders a clue as to the possibility of such a rally.  If the price of silver can struggle to trade above $40 amid the expected cartel onslaught, Turk could be spot on with his analysis of a breakout and test of the $50 mark.

“So tomorrow [July 26] is shaping up to be an interesting battle between the option sellers and the physical buyers,” he said.

Look who’s predicting $1,900 gold by October

Predictions of lofty prices coming from regular hard-money advocates and gold bugs are certainly not hard to find.  Predictions of $2,000, $5,000, $10,000 and $100,000 targets for the top in the gold market are numerous.  But when a mainstream money manager of the highest esteem projects a major move higher in Wall Street’s most despised asset—gold, traders should sit up and take notice.

Speaking with Bloomberg on Wednesday, FX Concept’s founder, John Taylor, the man who pioneered the analysis of foreign exchange cycles, expects the gold price to soar to $1,900 by October, or a 20% rally from today’s price within a time frame of between 11 to 14 weeks.

Taylor sees gold as the ultimate safe haven asset while the developed nations deal with crushing debt loads; but he singles out the euro as the more likely currency in the U.S. dollar/euro cross to devalue against the other on the way down against gold during the next leg down in the global debt crisis, which he said could begin “within three or fours weeks time from now.”

Taylor also sees the euro dropping to $1.15 against the dollar during the next down leg.  And, if correct, then, he expects the gold price in euros to achieve 1,650 euros per ounce by October, which calculates to a nearly 50% jump in euro terms.  And it gets worse for the euro.  By next year, the euro is going to par with the dollar, he said.

When asked why the euro has held up so well up til now, Taylor quipped, “because the dollar is so weak.”  But as the euro zone flounders in the handling of Greece’s sovereigns, it will eventually become apparent that “the euro has to be restructured, and not just a little restructuring, but very, very significantly restructured to make it work,” he said.

But after the fireworks of new highs in gold in every currency, he expects the rally to turn ugly, as the second leg of the global debt crisis takes every asset down in a heap, including gold.  And how far will the gold price drop as the U.S. and Europe plunge back into a deeper recession?  Taylor believes gold will touch $1,100, a target which may seem incomprehensible during the gold mania, but will be the result, he said, of institutions and hedge funds scrambling to get liquid to meet redemptions.

Silver’s a Good Buy in the Low 30s, says Peter Schiff

Schiff puts his money where his mouth is

As silver consolidates from its near-triple bull run to almost $50 on May 2 from last year’s July low of approximately $17.50, Peter Schiff said he believes silver represents a good buy in the low 30s.

Speaking to Eric King of King World News, the Europacific Capital president and author of several financial books told KWN that U.S. sovereign debt is the “grandaddy of all sovereign credit problems, credit problems and our crisis is going to be too big to hide beneath a bailout or to kick down the road.”

As an Anglo-American institution established in 1945 to oversee the global financial system, the International Monetary Fund (IMF) has been an integral part of negotiations and sources of funding for many member nations under financial duress.  As a means for smaller nations to access debt financing, the IMF has been involved in the vast majority of emergency loans throughout the world.

But when large member states become insolvent, analysts wonder what will happen then.

Greece’s GDP of $330 billion is akin to the total production of the U.S. state of Maryland.  Other EU members under financial stress, Portugal and Ireland, weigh in at approximately slender $230 billion a piece.  Those are relatively small potatoes when compared with Spain’s $1.5 billion and Italy’s $2.1 billion, respectively.  Many analysts have little doubt that if traders take Italian or Spain 10-year bonds to rates of more than 10%, the end of the euro in its present form is near.

But Schiff is looking far ahead.  He believes the euro is already on the slippery slope to a breakup, and has set his sights further down the road to the U.S. dollar and the zero chance of a bailout from a dollar crisis.

“The IMF is not going to step in with loans to the United States government,” said Schiff.  “The IMF is getting its money from the U.S., and of course we are getting our money from China.  So when we fail, there is no way out.”

To put the U.S. fiscal deficit in prospective: presently, the yearly U.S. budget shortfall per year is more than the entire GDP of Spain.  So when the music stops in the U.S. Treasury market, the yearly fiscal deficits could skyrocket more than the unprecedented $1.6 trillion deficit slated for fiscal 2012, which would then create a Greek-style negative feedback loop to “fiat currency graveyard,” as James Turk of Goldmoney likes to put it.

“We’re [U.S.] going to have the same problems as Greece,” added Schiff.  “The reason that Greece can’t pay its bills is that interest rates are rising and the Greeks don’t have the money.  Well, the same thing is going to happen in America.  When interest rates eventually rise, we can’t afford to pay because we’ve borrowed so much … and unless we can find new buyers of our debt, we’re going to have to default.”

What would happen to the price of silver and gold under that scenario?  Schiff, a big proponent of the precious metals since the early 2000s, said prices will move “straight up,” stressing to investors that the time to buy the metals is “before that atmosphere” comes upon us, not during the crisis.

His advice for silver aficionados is to stay the course through the volatile price swings in the metal and buy at discounts from recent highs, which today calculates to approximately a 33 percent discount.  In the Monday morning trade in New York, silver trades at $34.01.

“I think anything in the low $30s represents a pretty good entry point for people to buy … Once we go through $50 … I see silver going to $200 an ounce,” concluded Schiff.  “I own a lot of silver personally because of that outlook.”

Don’t Trust the U.S. Government, says Marc Faber

Speaking with UK-based financial magazine, Money Week, famed Swiss investment manager Marc Faber said America needs to experience “a devastating crisis” before real growth and jobs can be created.

Foretelling the inevitable burst in debt several years before the collapse of Bear Stearns, Faber’s has gained a reputation as someone who is able to spot the effects of years of mal-investment within the U.S. (and globally), dispassionately, while others cannot, or won’t.

As today’s disciple of the Austrian School’s Karl Menger, Ludwig von Mises, and Friedrich Hayek, Faber’s track record of “getting it right” has amassed him a huge following of investors grown weary of the 1984-like communications and deceptive practices of the U.S. government and its financier cohort, the U.S. Federal Reserve.

Faber’s forecasting record and delivery style on the deteriorating state of the U.S. has taken on a air akin to the counterculture revolutionaries of the 1960s but with a viewpoint more focused on financial and economics matters—ironically, maybe, directed to the same a demographic most affected due to inability to recover in time for retirement—the Babyboomer.  Faber, himself, is 65-years-old—another Babyboomer who still sports a ponytail and distrusts those in authority to take selfless actions for the sake of the greater good.

Faber told Money Week that the debt hasn’t gone away in the U.S.  Instead, it’s grown much larger but shifted into the form of public debt and away from the ones who created the original oversized debt load in the first place.  And the only way out of a default (either outright, or through inflation) is “to impose a flat tax and cut government expenditures by 50%.”  But only a financial catastrophe would affect those cures, he said.

The consequences of attempting to solve a U.S. solvency crisis with ever more debt from Treasury and the Fed doesn’t have Faber chanting the “king dollar” mantra on public airways to millions of U.S. viewers each day on programming outlets such as CNBC.

He points out that in dollar terms, the rebound in the S&P from the March 2009 low appears to some investors that an economic rebound in the second half of 2011 and 2012 is expected.  But when the S&P is priced in other currencies, such as the Swiss franc, Australian dollar, Japanese yen, as well as the monetary metals, gold or silver, equities have dropped from 50% to 80% since the market peak of 2007, he said.

Of the various forms of protection from future dollar declines, gold is his favorite.  Gold (and silver) doesn’t have a constituency to placate, especially as it relates to the U.S. dollar.

“Not to own gold is to trust the value of paper money and the government’s integrity,” said Faber.  “No one in his right mind could trust the U.S. government any more.”

And finally, Faber shrugs off the talk of a gold bubble.  He insists that the bubble is NOT in the gold market.

He said the world is, instead, “grossly underweight gold” but “flooded with U.S. dollars.”

“Risk rally” to End by July, says Forex Guru

In a Bloomberg exclusive, the world’s largest currency hedge fund manager John Taylor of FX Concepts LLC said the risk rally in emerging market currencies, equities and commodities that began in March 2009 is coming to an end.

“This is the end of the nice slow moving risk rally that has lulled us pleasantly to sleep since the first half of 2009,” Taylor, chairman of $8.5 billion New York-based FX Concepts LLC, told Bloomberg. “This warning is worthy of a brass band and bright lights as the other side of this low volatility rally will most likely be a scary descent that will have a very negative impact on markets. Our statistical models say we are about at the end of the road for risk.”

Taylor, dubbed the new ‘Doctor Doom’ for his dire assessment for the possibility of today’s global monetary system surviving anywhere near its present construct, carries significant weight among professions within a tight circle of institutional Forex management firms.

Maxime Tessier, vice president of French investment firm Caisse de Depot et Placement du Quebec, told Bloomberg in August 2008 following the collapse of Bear Stearns in March 2008, “Taylor is up there with George Soros.  He’s a beautiful example of how someone can be a successful investor in the foreign exchange market.”

Not unlike George Soros, Jim Rogers and, more recently, GMO’s Jeremy Grantham, Taylor believes the U.S. dollar and the EU euro are destined to failure.  But in the shorter term, Taylor expects a reversal of the relatively strong euro against the dollar as the eurozone enters phase II of the financial crisis.  Ditto for equities, he said, though Taylor expertise lies in currencies and not equities markets—which have been supported by multi-billion dollar injections of fresh capital through the U.S. Fed’s Permanent Open Market Operations (POMO).

“Higher-risk assets, such as equities, the euro and emerging market currencies, have either peaked or will do so by end of July,” Taylor told Bloomberg.

“There is absolutely statistically no way that Greece can survive,” Taylor added. “There is a one in 10,000 chance; if the Germans give Greece their money to pay back their debt then they’ll be fine. But there is no way Germany will do that.”

That, he said, will trigger the next leg in the three-year long financial crisis.

Investors appear to agree with Taylor, too, as the market appetite for the poster child of risk, Greek sovereign debt, presently shows two-year’s notes yielding a record 26.77%, according to Bloomberg.

“As the spread of Greek two-year debt goes absolutely crazy over German, it means that at some point we are going to have to have a crisis,” said Taylor, whose 2%-and-20% hedge fund gained more than 3.3% last month. “And I think it’s very soon.”

Dollar poised for “waterfall decline,” says James Turk

—U.S. Dollar breaks 2009 support, silver eyes $50, gold $1,520

Investors again woke up Monday to soaring gold and silver prices in Asia as the U.S. dollar crashed through technical support on the USDX index.   Adding to last Monday’s news shock of Standard and Poor’s downgraded outlook for U.S. government debt, China’s monetary authorities issued a shock statement of their own over the Easter weekend.

News reports out of China, indicating Beijing’s appetite for U.S. Treasury debt has reached the limit, sent the dollar declining to 73.93, below its previous technically significant low of 74.227, set Nov. 25, 2009.

Gold futures touched $1,517.20 per Troy ounce during the dollar’s fall, while May silver reached a high of $49.82—just shy of the all-time high of $50.35 achieved in the first quarter of 1980.

“China’s foreign exchange reserves increased by 197.4 billion U.S. dollars in the first three months of this year to 3.04 trillion U.S. dollars by the end of March,” China’s Xinhua News Agency reported on Sunday.  “Xia Bin, a member of the monetary policy committee of the central bank, said on Tuesday that 1 trillion U.S. dollars would be sufficient.”

Back-to-back dollar-negative news events aren’t likely to surprise chairman of Goldmoney’s bullion storage service, James Turk, however.  The old hand of the bullion business had been making the rounds within the bullion community during the month of April, promulgating to clients and financial public of his expectations of an imminent plunge in the U.S. dollar and strong reflexive rise in gold and silver prices in response to the dollar’s woes.

“We’re closing in on those lows of 74.17.  Once that level breaks, the floodgates open. Put another way, the dollar falls of the edge of the cliff,” Turk warned listeners of King World News.

April has become the month of truth for whether the U.S. dollar would regain a bid following a decline of 16.4% off the Jun. 7, 2010, high of 88.70.

The triple-whammy of a failed effort by Congress to move in a Greece-like direction  to rein in government spending, a long-awaited downgrade of U.S. by Standard and Poor’s, and, now, a Beijing bombshell announcement regarding its intentions to impose its own limit on a profligate U.S. spending spree, has conspired against the dollar bulls—all of which taking place within two week in the month of April.

“The politicians unwillingness to cut spending or have any kind of discipline forced on them, the S&P credit rating, putting the U.S. government’s AAA rating on negative credit watch, cumulatively all of these things like one stone at a time or one straw on the camel’s back, eventually the camel’s back is going to break,” Turk added. “That’s why when I talk about a waterfall decline, I think we are really at that stage where this is going to go all at one time.”

Turk’s observation of the dollar’s remarkably weak bounce during the rapid spread of civil unrest and chaos in N. Africa and Middle East, the absence of the typical sell-on-the-news profit-taking out of the euro and into the dollar following the rate-hike announcement from the European Central Bank, Beijing’s move to support the euro through its participation in troubled Portuguese debt markets, and PIMCO’s boycott of the U.S. Treasury auctions, indicate a profound change in sentiment of the dollar’s premier reserve currency status among those most influential for determining its value.

Moreover, China’s most recent announcement, signaling an end to its tolerance for any additional dollar reserves held at its central bank, coincides with Beijing’s recent steps taken to pop a real estate bubble within the People’s Republic.

Turk had forecast the eventuality of bad news coming out of Beijing regarding its intent to further diversify its currency reserves, offering it as one of a number of catalysts that would trigger a dollar breakdown against a USDX basket of euros, yen, sterling, Swiss francs, Canadian dollars and Swedish krona.

“Chinese unwilling to buy U.S. debt securities can’t really forecast what that one little news item is going to be,” said Turk.  “But that will break the confidence and then you are going to see that waterfall decline.”

At 07:51 EST, the USDX stands at 73.89.