Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

The Calm Before the Gold and Silver Precious Metals Storm

Commodities / Gold and Silver 2013 Oct 10, 2013 - 06:42 PM GMT

By: Steve_St_Angelo

Commodities

The financial hurricane hit the world in 2008 destroying huge swaths of assets, real estate valuations, numerous banks and financial institutions.  As the storm cleared, the Fed and central banks stepped in by flooding the world with money to supposedly assist in dealing with the damage while providing special programs to rid the banks of debris and garbage clogging up their businesses.

After trillions of dollars of so-called monetary assistance, the financial damage appears to be repaired giving the public a false sense of security that the storm has finally passed.  Unfortunately, the world has only dealt with the first part of the storm and is now sitting in the eye of the financial cyclone.


Even though we now have the additional drama from the U.S. Government shutdown, up until recently, the economy has been plugging right along.  However, this was a much different story back in 2008 when the public and investors thought the world was coming to an end.

This can clearly be seen by the huge increased buying of Gold Eagles during 2008 & 2009:

Notice in 2007, total Gold Eagle sales were only 198,500 oz, but after the banking and housing collapse in 2008, buying more than quadrupled to 865,500 oz.  Furthermore, when the broader stock markets continued to tank in 2009, Gold Eagle sales reached 1.4 million oz.

As the Fed and central banks continued to print, prop-up and backstop their respective fiat currencies and broader stock markets, the demand for gold continued to decline.  In 2011, Gold Eagle sales slipped to 1 million oz. and down to only 753,000 oz. in 2012.

This is typical market psychology.  A similar but more volatile trend took place during the millennium.  Americans worried about Y2K purchased record amounts of Gold Eagles in 1998 (1,839,500 oz) and in 1999 (2,055,500 oz), but as the 2000 came and went without any major disruptions, demand nearly dried up to a pathetic 164,500 oz.

After the world escaped the collapse of the financial system with the help of the Fed & Central Bank Global QE, economic conditions in the U.S. started to wane in 2012.  This can be seen by the decline of energy consumption in the country:

Here we can see that as energy consumption fell, so did the GDP.  However, there was a disconnect that started in 2011 and increased significantly in 2012 as energy consumption declined, the GDP increased -- nothing like manipulated economic data to give the illusion of growth

This is part of the reason why the Fed announced QE3 in Sept of 2012... it had to add additional stimulus to keep the economy from imploding further.  Unfortunately for the Fed, this huge increase in monetary printing would have had a direct impact on the precious metals pushing their prices to new record highs.

To keep the precious metals from exploding higher, price action was capped at the end of 2012 and then after several huge raids in 2013, market sentiment in gold and silver was severely eroded as demand in the West dried up.

In the chart below, we can see how orchestrated manipulation of the precious metals can impact market psychology.

During the first take-down in the price of gold, investors bought record Gold Eagles in April.  However, as gold was hit again in June, buying slowed considerably and has been falling ever since.

The one thing that fiat monetary authorities understand, is market psychology.  To destroy market sentiment in gold, a broad-based approach had to be implemented.  With the help of its member banks and financial networks, investors now question if gold really is a safe haven anymore.

Of course this does not apply to the "1% Educated" precious metal investors as they realize you can't manipulate fundamentals forever, but it does impact the psychology of the 99% -- and this is the group that would ultimately push gold to highs never seen before.

This next chart shows just how desperate the Fed has become in taming the Wild Monetary Golden Beast:

The price of gold presently ($1,310) is actually lower than it was before the Fed started QE2 back at the end of 2010.  Now, some analysts are saying that the reason why gold is under-performing is due to the fact that inflation is not as much of a threat as previously forecasted.

That is an interesting notion if we consider that the price of a barrel of West Texas Crude Oil increased from $85 in Nov. 2012 to a high of $110 recently (quite an inflationary trend) as gold declined from $1,750 to below $1,300 during the same time period.  I find it simply ironic that the price of oil in the United States has risen nearly 30% in the past year as domestic production has increased to levels not seen for over 20 years.

The reason for the big increase in domestic oil production has to do with the so-called success of shale oil in the states.  The hype by the oil industry is that shale oil will provide cheap and an abundant supply in the future.  The United States is banking on shale oil to make the country.... energy independent.

Furthermore, I have stated that an increasing energy supply is vital in keeping a fiat monetary system alive.  However, it doesn't look as if shale oil will be the savior for the country or the Dollar for that matter.  U.S. oil production increased steadily since 1920.  From 1930 to 1970, oil production increased an average of 1.87 million barrels a day (mbd) each decade.

However, shale oil has pushed domestic oil production up 2 mbd from July 2011 to July 2013, which is five times faster than its historic rate.  Shale oil production is increasing at an exponential rate.  The problem with any trends that increase exponentially, is that they decline is the same fashion.  With all BOOMS... comes the inevitable BUST.

Shale oil should be used to assist the United States into transitioning to a more smaller, local and sustaining economy.  Unfortunately, it is being utilized today just to keep the illusion of perpetual growth forever.

Many analysts including those from the Austrian School of Economics believe the U S. has trillions of barrels of oil resources, so there is no need to worry about energy shortages in the future.  A large part of these supposed oil resources are found in geology called OIL SHALE.  This should not be confused with shale oil (tight oil) that is being extracted from the Bakken and Eagle Ford in the U.S.

Oil shale is not even oil, but rather a form of kerogen shale that needs a great deal of energy to heat, extract and then refine.  Several large oil companies have been working on making this resource commercial in the states.  But, bad news just came out recently when Shell announced they were going to abandon their oil shale project:

Shell Abandons 800 Billion Barrel Deposit, Beaten By the Regions Geology:

The belief that technology can always overcome natural limits just took a big hit this week when Royal Dutch Shell PLC decided to shut down its pilot oil shale project in western Colorado after 31 years of experimentation. The ostensible reason is that the company has opportunities elsewhere. Shell says it wants to shift resources away from the intransigent rock and move it to profitable opportunities.

...Proponents of oil shale claimed in 1981 that it would be economical to process if oil were to reach $38 per barrel and stay there. The threshold price kept escalating along with the price of oil all the way up to $80 in a 2008 study by the U.S. Bureau of Land Management.

And, yet here we are. Brent Crude, the de facto world benchmark, hovers around $108 dollars. The average daily price for the past three years has remained above $100. In the face of these consistent record high prices, Shell is abandoning oil shale development. And, Shell isn't the only one. Another international major, Chevron Corp., pulled out of its project last year.

Large oil companies are getting out of the oil shale business at time when the world is experiencing the highest average oil prices.  As the article stated, not only is Shell abandoning its oil shale project, Chevron pulled out if its project last year.

The reason why I include ENERGY-OIL in a precious metal article is that it is directly related to the future valuations of gold & silver even though investors don't see it that way.  They rather focus on short-term information that reinforces their belief in the metals than longer term fundamentals that will guarantee much higher rewards.

The future energy situation is more important to the precious metal investors than are Comex inventory levels or sensational articles based on superficial information.  The world is now passing out of the EYE OF THE STORM and back into the FINANCIAL TYPHOON.

Energy is the blood that allows the fiat monetary system to survive.  Shale oil has been hyped by the industry and broadcasted by the media because it is the only thing left to keep the illusion of growth.  Without energy growth the Dollar would surely die.

Even though the Fed and Central Banks have been able to manipulate, control and divert interest away from the precious metals presently, the rear of the PRECIOUS METAL HURRICANE is still approaching.

At the SRSrocco Report, we will explore how energy will impact the mining industry in the future.  Falling ore grades and decreasing yields are only part of the problem.  As net oil exports continue to decline, energy prices will rise putting more pressure on the mining industry.  Thus, rising energy costs will guarantee rising prices of gold and silver.

© 2013 Copyright Steve St .Angelo - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules