“It’s quite shocking to me… It’s very harmful to the shareholders… It is manipulation and it’s used frequently. Yet, the exchanges don’t step in because the exchanges are owned by the banks… the self policing system doesn’t work because no one wants to police themselves because they’re all making too much money.”
Before you jump the gun and think it’s the end of the world for precious metals, let’s look at a few things. The Fed has continually threatened to raise rates since 2008 but has only managed to raise rates twice since then. This is paramount to understanding that the bust economy may not be over and a stock market crash might be on the horizon. Why? Because the last time the Fed raised rates before this week was in 2015 on Dec 16th.
Every year at Christmas time precious metals fall and the dollar tends to go up because economic indicators improve. That’s right, the temporary seasonal hiring and buying and selling for Christmas is treated as if it’s an economic recovery. Believe it or not, this happens every year, AND NO ONE SEEMS TO REMEMBER!
Suddenly around mid-January, we realize all that data was seasonal and possibly wrong. Metals then start to move up again with the fed threating to raise rates all year long (at least this was the pattern last year). The public has a short memory, and I think what happened in 2015 when silver closed lower than it is today will repeat itself in 2016 resulting in a big bounce in 2017. One big difference…? The stock market has rallied like never before. What goes up, must come down. With that downward correction, we could see a panic into gold and witness an unprecedented surge
Look at this week’s interest rate increase as smoke and mirrors. The Fed is riding on the wave of fourth quarter seasonal economic growth, not real economic change.
The top chart above shows the drop from the Dec 16th, 2015 rate hike (See 17-Dec). The second chart above shows the current prices after the most recent hike.
The January 2016 chart shows us the rate hike of Dec 2015 had little impact and gold continued its seasonal upward trend with silver following. Do not listen to me. I sell gold. Check out the charts for yourself and draw your own conclusion.
By Mark Hutto
A man from the French region of Normandy recently inherited a house from a deceased relative, only to discover his newly acquired home was actually a secret gold depository. Throughout the house, the man found a total of 220 lbs (3208.33 Troy oz.) of gold coins and bars totaling $3.7 million.
The man’s identity has yet to be released, but reports indicate he was in the process of preparing furniture for sale when he stumbled upon part of the horde.
Local auctioneer, Nicolas Fierfort, who had visited the home in order to appraise the furniture confirmed “5,000 gold pieces, two bars of 12 kilos and 37 ingots of 1 kilo” were found in total.
Fierfort also said the golden contents were “extremely well hidden” and scattered throughout the rest of the residence.
The first stash was a tin box of coins, which had been screwed to the underside of a piece of furniture. Like breadcrumbs leading the way home, the man continued finding gold coins in places like boxes to hold whiskey bottles, “under piles of linen, in the bathroom … everywhere,” according to Fierfort. Eventually, the two modern day Conquistadors stumbled upon the mother lode: 2 – 12 kilo gold bars. That’s 386 Troy ounces each.
A little detective work dated the gold’s purchase to sometime in the 1950s and 1960s. After the gold dust settled, the newly minted millionaire was able to locate the certificates of authenticity within the dead relative’s estate papers and eventually sell it to various buyers.
However, this story of good fortune doesn’t end as happily as we would like. Along with death comes taxes. It seems the French government will be hitting the man for a 45% inheritance tax along with charging him 3 years of back taxes because his deceased relative failed to declare the gold.
Story Here: http://schiffgold.com/key-gold-news/man-finds-gold-horde-worth-3-7-million-deceased-relatives-home/
The marketers claim a diamond is forever.
And sure, it’s a hard stone. It lasts a long time.
But what about financially? Is it equally durable? You’ve just sunk a small fortune into those rocks you’re giving on Valentine’s Day. Are they likely to hold or gain value over time?
I decided to investigate. And the results, alas, aren’t sparkling.
Even before looking at all the transaction costs, diamonds have proven an absolutely disastrous investment for decades.
According to the Rapaport Diamond Index, a respected industry benchmark, prices of top-quality stones have collapsed by as much as 80% in real, inflation-adjusted terms over the last 30 years. Even if you set aside the short-lived but massive price bubble back in 1980—around the time of a similar bubble in gold and many other commodities—the results have still been abysmal.
The index has been measured since 1978 by Martin Rapaport and his firm, the Rapaport Group, which provides a variety of research and trading services to the gemstone industry. The index looks at prices for top-quality one-carat stones, those with the best color and clarity. While every stone varies, in 1978 a typical such stone, according to the index, cost around $6,100. Today it costs nearly $11,000.
On the surface, that looks like a gain. But investors are frequently fooled by the effects of inflation. Taking that into account, the stone has actually lost about half its value in real purchasing power.
Stone prices peaked in 1980 at about $60,000 in today’s money. Some store of value.
After the crash in the early 1980s, prices bottomed out in 1985 at about $9,600 in today’s money. Since then, in real terms, they’ve barely edged up. They have, at least, kept up with inflation. But that’s ignoring all the related transaction costs, from broker’s fees and commissions and retailer markups on buying and selling to insurance costs.
Never mind that during the same period, anyone investing in a broad-based stock index fund—or even government bonds—made many times that money.
Diamonds are a marketing gimmick as much as anything else. Most men feel they have to give a diamond ring when they propose—even though, as anyone knows after a moment’s thought, the only woman worth buying a ring for is the one who doesn’t care how much you spent on her ring. (In Shakespeare’s “Merchant of Venice,” I might add, the successful suitor is the one who picks lead over silver or gold.)
The biggest winner in the diamond game is the Oppenheimer family, which runs De Beers, the Standard Oil of the diamond world. The company dates back to Cecil Rhodes and the Victorian era, and once controlled nearly 90% of the world’s diamond business. It is still by far the biggest player. (Annual results, out this week, showed sales and profits tumbled across the industry as a result of the recession. But De Beers has merely responded by cutting production and costs. Rising demand from the newly rich in emerging markets means the future looks bright. And the company had no difficulty raising a quick $1 billion from its investors to pay off some debts. Life is good at the top, even when times are tough.)
Nicholas Oppenheimer, the billionaire in charge of the company, admitted this week that most of the sales growth in the U.S. over the past decade has been the result of clever marketing campaigns.
There’s no logical reason why you should have to cut a check to Mr. Oppenheimer’s family, or even to their competitors, in order to ask your girlfriend to marry you on Sunday. But you probably will anyway. Most of us do. Marketing is a powerful thing.
(If you are doing so, Russell Shor, senior industry analyst at the Gemological Institute of America, has some advice. Pear-shaped diamonds can often seem bigger than round ones of the same number of carats, he says. And small differences in clarity are often less visible to the naked eye than differences in color.)
But you’re much better off selling diamonds than buying them. The numbers tell the story. Anyone who invested $1,000 in the Tiffany & Co. IPO in 1987 and just sat back and left their money alone, merely reinvesting the dividends, would have about $26,000 today. Someone who sunk that money into diamonds instead: less than $2,000.
Anglo American, the South African mining company that owns a major stake in De Beers, has been a terrific investment for decades. Investors in the stock more than tripled their money last decade—while diamond prices rose by less than a third.
Has the longer-term picture for diamonds been any better than that of the last 30 years? Reliable data are hard to come by. Mr. Shor says historical studies show modest price gains before the 1970s boom. “Until the 1970s, prices were relatively stable, trending upwards,” he says. “in the mid-1970s, we had a lot of inflation. Diamonds, all of a sudden, soared in value.”
If the past is prologue, which past? If we see soaring inflation and negative real interest rates again, as we did in the 1970s, diamonds and other hard assets might even take off again. But with investments, as with love, there are no guarantees.
Write to Brett Arends at firstname.lastname@example.org
by Peter A. Grant
Gold continues to trade in a choppy manner within the range established early in the week. In light of some better than expected U.S. data this morning, the yellow metal is showing good resilience.
U.S. retail sales rose 1.3% in April, well above expectations of +0.8%. Not surprisingly, we are already seeing some upward revisions to Q2 GDP forecasts. The preliminary read on consumer sentiment jumped to 95.8 in May, above expectations of 90.0, vs 89.0 in April.
However, the stock market is less than impressed. The same is true of the bond market. The prospect for a rate hike late in the year, based on Fed funds futures, improved modestly. While the dollar did seem to like the news, as previously noted gold remains underpinned as is trading higher on the day.
Perhaps markets are putting greater emphasis on this morning’s business inventories report for March, which rose 0.4%, above expectations of +0.2%. ZeroHedge notes that “overall business inventories at their highest to sales since the crisis and deep in pre-recessionary territory.” The gist being that the persistent rise in inventories portends an imminent recession. ZeroHedge warns, “This won’t end well.”
I think gold remains underpinned because investors remain skeptical about the recovery. Something doesn’t feel right and they are making the requisite portfolio adjustments to protect themselves. That is clearly reflected in the gold demand data released yesterday, which showed a 21% jump in Q1, the best first quarter on record. That of course led to the best Q1 price performance in three-decades.
As economist continue to worry about “secular stagnation” and the likely reactions by central banks with ever-more experimental policy approaches, the demand for gold is likely to remain robust. Something the WGC eluded to their report in saying “the sector does appear likely to benefit further from the improved outlook towards gold among a broad investor base.”
“We are seeing record inflows into gold ETFs. I’ve been saying for over a year that there is very little gold vaulted in London to support that demand, so you are going to see a scramble for physical gold, which is what the ETFs have to have. That, to me, is the big story.
Investors will buy an ETF and then they will see something like the Barclays ETF have a glitch and they will start to ask questions about whether synthetics or surrogates for physical gold are the right thing to own because of the counterparty risks and the type of things we saw with Barclays.
So we will start to see more investors move up the food chain into physical metal, but the metal just isn’t available at this price level. You will then see a serious scramble for physical gold and that will translate in to much, much higher prices than what is being quoted today.”
The current downward pressure on Gold is due to the Fed still entertaining an interest rate hike in December. If this continues through the holidays we might see more decline in spot prices. During the 4th Quarter lots of good hiring and consumption data may be reported, as it has most years at this time – this may also keep precious metals from rebounding.