15 April, 2015

Newsletter - The DELAIRE Report

Although the price of gold staged a minor rally on Friday, the advance has been capped at around $1220 an ounce.

Even though the fundamentals for gold remain extremely bullish, the price of gold will need to break at least through the $1,220/$1,225 area, or close above the 200-day moving average, which sits a bit higher at around $1,230, to get momentum going.

U.S. employers added the fewest number of jobs in more than a year in March, the latest sign of weakness in the economy and one likely to further delay an anticipated interest rate increase by the Federal Reserve.

Non-farm payrolls showed that employers created 126,000 new jobs, less than half February’s pace and the smallest gain since December 2013.

While the report showed that the unemployment rate held at a more than 6-1/2-year low of 5.5%, in reality unemployment is much higher and this is figure has become meaningless.

The dismal reality is that there are now some 93.2 million people NOT in the labour force. This labour force participation rate has returned to a more than 36-year low reached late last year.

The tepid increase in payrolls has investors pushing back their expectations for a Fed rate hike in June this year. And, some commentators believe that there will not be an increase till 2016.

News from the Eurozone is that Greece met its’ deadline and paid €448 million to the International Monetary Fund calming fears Athens could soon leave the euro.

“The tranche of €448 million has been delivered to the IMF,” reported the Greek news agency ANA referring to senior sources in the Greek Finance Ministry. The money was transferred despite rumours the country would not manage to do it on time, which could push the country out of the Eurozone.

On Thursday, Prime Minister Alexis Tsipras said the main objective of the Greek government is to keep the country in the Eurozone and to find a common European solution to its financial problems.
As far as I am concerned, when any politician offers such a definitive point of view, you know they really mean the opposite of what they say. So, I expect to see Greece exit from the Eurozone in the not too distant future.

Greece has another €768 million falling due in May. Should Greece manage to fullfill these obligations, and the EU approves the reforms proposed by Finance Minister Yanis Varoufakis, the Troika of international creditors represented by the IMF, the European Central Bank, and the European Commission, is expected to allocate the next €7.2 billion in aid to Athens and negotiate the restructuring of its external debt.

Since the financial crisis of 2008 governments and their banking partners have introduced several new rules that will protect big banks and financial institutions at the expense of their own citizens in the event of another financial collapse. They have also introduced a series of new laws in an attempt to eliminate paper currency and replace it with an electronic one.

Not too long ago, cash was king. Now you are practically regarded as a criminal if you hold cash. This is one of the most devious moves I have ever seen on the part of governments who intend to control their citizens. And, to be told that cash is mostly useful for terrorists, drug dealers and money launderers is nothing but a lot of rubbish. Yet, governments know that the ignorant masses probably believe this. Nowadays, having a significant amount of cash can even make you guilty in the eyes of the law until you prove the transaction was legitimate.

The point of this is very simple. Governments want total control of your money. And if a worldwide system can be implemented in which currency transactions can only take place electronically through banking institutions, then you can be certain, governments will have totalitarian control of your finances. And, believe me, if they need your money they won’t hesitate to steal it from your account.

Thomas Jefferson once said. “The two enemies of the people are criminals and government, so let us tie the second down with the chains of the constitution so the second will not become the legalised version of the first”.

Some of the most recent developments that have taken in place include the following:

Recently, France decided to crack down on those people who make cash payments and withdrawals and who hold small bank accounts. The reason given was, not surprisingly, to “fight terrorism!”

French Finance Minister Michel Sapin stated at the time, “[T]errorism feeds on fraud, money laundering, and petty trafficking.”

And so, in future, people in France 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.

In Spain you cannot withdraw or deposit more than €2500 without asking permission and filling in a form to let the banks know what it is that you intend doing with your own money.

In Italy the maximum amount you can withdraw is a paltry €1000. That’s around GBP800 or USD$1500.

Denmark’s central bank, Nationalbanken, has another justification for ending its use of banknotes—producing paper money and coinage is not cost effective.

Of course, we are told that such laws are there to protect us against the activities of terrorists, drug barons and all sorts of criminals. The reality is that removing the rights of the majority in the name of punishing criminals is just another way to enslave us.

And, in another development bank deposits in Austria will no longer enjoy state protection and a state guarantee in the event of bank runs and a bank collapse.

Currently, Austrians have their bank deposits guaranteed to a value of €100,000 – the first half to be provided by the failing bank and the other by the state. From July, however, the state will be removed from the process and a special bank deposit insurance fund is to be set up and paid into by banks to meet potential shortfalls.

However the fund which is to be filled gradually over the next ten years to a value of €1.5 billion will be woefully inadequate to deal with a bank failure.

€1.5 billion amounts to a mere 0.8% of total deposits in Austria. It is highly unlikely that deposits of any major bank would be adequately covered and in the event of multiple concurrent bank failures it is likely that most savers would be wiped out.

What unfolds in Austria will likely follow across the EU.

Average savers can no longer rely on the state to protect their deposits.

This is a good reason for depositors to allocate some of their funds to physical gold and silver stored outside of the banking system, in the safest jurisdictions in the world.

While central banks expansionary monetary policies have propelled their respective equity markets to record highs, while propping up the US currency, this situation cannot be sustained.

The Western U.S. Dollar based monetary system is headed for a disaster. It is inevitable and just a matter of time.

Investors who are chasing equities and bonds and who have ignored gold and silver due to the low paper price are losing out on the best buying opportunity of a lifetime.

Newsletter - The DELAIRE Report

Interestingly, since the price of silver has fallen from its highs achieved in 2011, demand has remained very strong.

In 2014, India imported a record amount of silver. Sales of U.S Silver Eagle coins hit a new high, and there wasn’t much liquidation of silver from the various exchange traded products.

In the latest Silver Eagle milestone, sales have already topped the 13 million mark to 13,049,500 for the year. While the tally is higher than annual sales in 22 past years, going back to the series start in 1986, it is below the record pace. In year 2014 when American Silver Eagle sales ended at a record 44,006,000, the coins by April 13, 2014 reached 15,222,500.

A recent report showed that Turkish imports of silver jumped to the highest on record at 54.6 tons in March.

The figure is up 67% on the previous month’s figure of 32.6 tons, and well-above the previous record of 41.6 tons in December. The country imported 227 tons of silver in 2014.

The metal’s price is currently up around 5% for the year at $16.40 per ounce, after hitting a three-month low in March at $15.29, and is one of the best performing metals in the precious metals complex.

Silver investing is hardly spoken about on mainstream media. Even so, there are many prudent investors who have taken the time to investigate this market. And, it seems that most agree that the price is long overdue for a major move to the upside.

For years, the large speculators, JP Morgan in particular have dominated the silver market by continually 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.

Silver prices have huge upside potential. 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.

While there are various investment options for silver and it is ultimately up to you to decide which is best, I have long advocated that the best way to own this metal is by holding silver bullion bars and coins. This of course does not include numismatic or collectors’ items.

Paying a premium for bullion is customary all over the world, and paying for safe storage is a worthwhile consideration.

Unfortunately, paying VAT is mandatory in many countries. Yes, governments all over the world have stuck their dirty fingers into this even though some of the coins may well be legal tender coins in their respective country. But, in some cases the government will allow you to claim back the VAT.

Although, the premiums as well as VAT push up the price of silver bullion, when this market takes off, these amounts will be negligible compared to the total value of the coin or bar.

Take advantage of the current low prices.

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.