15 April, 2015

Newsletter - The DELAIRE Report

Gold prices have bounced off their recent six-week low on Monday, but have remained under pressure as traders remain cautious on the timing of a US interest rate hike.

As far as I am concerned too many traders are fixated on when the Federal Reserve might launch an interest-rate hike. For now it seems that they want to put a cap on the gold price at around $1,215 an ounce. Furthermore, I have no idea how analysts have come up with the theory that higher interest rates are bearish for gold. This certainly wasn’t the case in the eighties when interest rates soared.

Greece has made a payment to the International Monetary Fund, or IMF, in the amount of 200 million euros ($224.9 million), the interest of loans granted by the agency to Greece during two bailouts, an official at the Greek Debt Management Office told Efe.

So far this year, Greece has made all of its loan payments on time, a sum that amounts to around 6 billion euros, according to government data.

Of more importance is the insidious action taken by many banks in several countries around the world that most people are not even aware of. Suddenly, having cash is becoming a problem.

Governments and banks around the world are making it more difficult to save and transact with cash in their latest attempt to financially suppress their citizens. Their goal is to force you to deposit cash and charge you interest as well as having total control over the money on deposit.

Not surprisingly, the reason given was to “fight terrorism!”

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The war on cash is proliferating globally. Recently, the Swiss National Bank implemented negative interest rates without first solving the “problem” of how to prevent cash from fleeing the banks. And as to be expected, prudent depositors started doing some maths.

In one example, a Swiss pension fund, calculated it would save 25,000 francs for every 10 million it held in the bank by simply withdrawing those millions and storing them in a vault. The vault storage fees are less expensive than the negative interest rate.

What happened next is truly stunning. When the pension fund informed the bank that they wanted to withdraw their funds, the Swiss bank responded to the fund’s withdrawal request with a letter stating: “We are sorry, that within the time period specified, no solution corresponding to your expectations could be found.”

Although we all know that fractionally reserved banks literally don’t have the money their customers hold in demand deposits, the contract states clearly that customers may withdraw their funds at any time on demand.

This occurred in a country that is highly regarded for their banking. And, Switzerland regularly makes it to the top three on the list of countries with the highest degree of economic freedom.

“Since the national bank has introduced negative interest rates, pension funds in the country are in trouble. Banks are passing the negative rates on to them. This results in the saved pension money shrinking, instead of producing a return. A number of pension funds are therefore thinking about keeping their money in an external vault instead of leaving it in bank accounts.

Meanwhile, the Swiss National Bank is berating the likes of the pension fund for trying to circumvent negative interest rates and it is encouraging retail banks to be “restrictive” with regards to cash withdrawals. And apparently no one should be questioning the wisdom behind the policy!

It now appears that the same thing is happening in the USA. Recently, JPMorgan Chase sent a letter to some of its large depositors informing them that the bank will no longer accept cash from customers who want to use it to make mortgage payments, pay credit card balances or to cover their automobile loan.

No Cash or Bullion Allowed in Safe Deposit Boxes

Chase also rolled out new restrictions on what can be put into safe deposit boxes. The “Updated Safe Deposit Box Lease Agreement” customers must sign states, “You agree not to store any cash or coins other than those found to have a collectible value.”

The bank coined a euphemism. It stated that from May 1, it will charge certain customers a “balance sheet utilization fee” of 1 percent a year on deposits in excess of the money they need for their operations. That amounts to a negative interest rate on deposits.

It is obvious, that the U.S. Federal Reserve bank and its owners, the largest banks on Wall Street, want to be able to charge you interest for the privilege of depositing your funds.

Depositors are already unhappy about zero percent returns on checking and savings accounts. If they must start actually paying the bank to hold funds on deposit, many will opt to simply withdraw the cash and store their notes elsewhere. This is where things promise to get interesting for gold and silver investors.

Financial repression has long been a driver of demand for physical precious metals. This demand will accelerate as measures become more draconian. Some bank customers, perhaps even the Swiss pension fund mentioned above, will decide that bullion is a better option than sitting on bales of depreciating paper currency or paying banks to hold deposits.

In France, individuals will not be allowed to make cash payments exceeding €1,000 (down from €3,000). Additionally, cash deposits and withdrawals totalling more than €10,000 per month will be reported to Tracfin—an anti-fraud and money laundering agency.

Currency exchange will also be further restricted. Anyone changing over €1,000 to another currency (down from €8,000) will be required to show an identity card.

Spain has prohibited cash transactions over €2,500. The justification? “To crack down on the black market and tax evaders.”

In Sweden and Denmark the use of cash is being steadily eliminated. In Israel, individuals and businesses are still allowed to make small cash transactions, but eventually, all transactions will be converted to electronic forms of payment. The justification being used in Israel is that “cash is bad,” because it encourages an underground economy and enables tax evasion.

In 2012 a law in Mexico was introduced banning large cash transactions, with a maximum penalty of five years in prison.

In August 2014, Uruguay passed the Financial Inclusion Law, which limits cash transactions to US$5,000. In future, all transactions over that amount will be required to be performed electronically.

Planning a holiday and need some cash? You might need to be investigated for terrorism.

In such an insane environment, gold and silver will become the only real trusted alternative to fiat currencies. And, as more new capital flows into physical bullion, its price will soar.

Historically, only gold and silver have been trusted private stores of value as well as a hedge against political, financial and economic turmoil. As the last crisis showed, gold can rise when everything else fails. And look around the world today: Gold is in a bull market in practically every major currency.

Newsletter - The DELAIRE Report

Silver investing lies far off the mainstream’s radar. Yet, this market could be offering investors an incredible opportunity. But, something strange has been going on in this market.

In terms of paper contracts or silver futures, big players have long manipulated this market, keeping prices artificially and illegally low by short-selling silver in quantities far beyond what actually exists. This practice is also known as naked short-selling.

The biggest culprit of this has been J.P Morgan, a bank that has spent over $30 billion in fines and litigation fees for a list of criminal activities. In what has become a totally corrupt banking system, almost every single major Western bank has been found guilty of similar crimes. But getting back to silver…

All markets are rigged – and silver especially so! That may be a cynical appraisal but the fact remains that any entity with sufficient capital behind it can usually move any market in the direction that suits it – the size of the market concerned perhaps being the key factor here as to whether this would be easily accomplished, or even attempted! And silver is a small enough market to be in the sights of the big money which theoretically can move it whichever way it wants through huge forward purchases or sales in the futures markets.

Officially, JP Morgan holds around 55 million ounces of silver in its vaults, but according to silver guru and well-known silver specialist, Ted Butler, the true figure may be closer to 350 million ounces

Since early 2012, JP Morgan’s stockpile has grown from less than 5 million ounces of physical silver to more than 55 million ounces of physical silver.

Clearly, someone over at JP Morgan is convinced that physical silver is a great investment.

During a time of crisis, investors tend to flood into physical gold and silver. And as I mentioned just recently, JPMorgan Chase chairman and CEO Jamie Dimon recently stated that “there will be another crisis” in a letter to shareholders…

Some things never change — there will be another crisis, and its impact will be felt by the financial market.

Over the past few years, JP Morgan has been amassing a huge stockpile of physical silver, presumably in anticipation of a major liquidity event. Nobody has ever seen anything quite like this ever before. In fact, JP Morgan has added more than 8 million ounces of physical silver during the past couple of weeks alone.

JP Morgan Chase is the largest of the six “too big to fail” banks in the United States. The total amount of assets that JP Morgan Chase controls is roughly equal to the GDP of the entire British economy. This is an institution that is immensely powerful and that has very deep ties to the U.S. government.

Could it be possible that JP Morgan Chase is anticipating another great economic crisis?

Remember that silver, in addition to money, is an indispensable industrial and strategic asset. This changes the entire profile of silver when compared to gold.


About the author

David Levenstein is a leading expert on investing in precious metals.  Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.

His articles and commentaries on precious metals have been published in dozens of newspapers, publications and websites both locally as well as internationally. He has been a featured guest on numerous radio and TV shows, and is a regular guest on JSE Direct, a premier radio business channel in South Africa. Rand Refineries, the largest gold refinery in the world use his daily and weekly commentaries on gold.

David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.

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Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.