(Michael Maharrey) A bill introduced in the Kansas House would recognize gold and silver specie as legal tender and repeal all taxes levied on it. The legislation would pave the way for Kansans to use gold and silver in everyday transactions, a foundational step for the people to undermine the Federal Reserve’s monopoly on money.
Informative And Educational:
Are gold and silver becoming what Mike Maloney has always suggested, Unaffordium and Unobtainium? The last few weeks have given us a preview of how stretched the physical gold and silver markets can become when the markets move. Join Mike as he welcomes GoldSilver.com President Alex Daley for a special Retail Bullion Update.
Recently, one big name money manager after another is on record telling people to buy hard assets. Why? Financial writer and precious metals expert Bill Holter says they all know what is coming. Holter contends,
“They understand that this is going to be the biggest monetary debasement in the history of history. They understand it’s hyperinflation that is on its way. They are late to the game, and they do manage billions and billions of dollars, and I don’t see how people talking about buying gold and buying silver are going to be able to get actual physical silver and physical gold in their hands or in their vaults.”
Holter is warning of a failure to deliver metal because demand is out-running supply. Holter says, “So far, this year . . . for gold, they have already EFP (Exchange for Physical) 4,200 tons just for the first eight months. . . . They don’t have the inventories to deliver. . . . The point being that is 4,200 tons in eight months. The world only produces 3,300 tons (of gold a year) and if you take out Russia and China, which do not export (gold), the whole total for the year is 2,800 tons. So, it looks like we are going to end up with 6,000 tons of gold EFP demand for delivery in a world that is only producing 2,800 tons. In silver, it’s worse. In silver in the first eight months, there has been 1.6 billion ounces EFP. That number is going to end up to about 2.4 billion of silver ounces (EFP) and the world produces less than 800 million ounces a year. The bottom line to what all this means is there is going to be a failure to deliver. Once there is a failure to deliver, only the Lord knows what kind of prices we are going to be looking at for gold and silver.”
Holter says a failure to deliver is not a maybe but a sure thing. Holter says, “Whether it is this year or the first few months of next year, it doesn’t matter. It is going to happen. . . . I can basically guarantee there is going to be a failure to deliver, and that failure to deliver is going to unmask and scare the crap out of the entire fractional reserve banking system and the fractional reserve commodity system. The whole thing is going to come down in a panic because somebody gets a failure to deliver. . . . If you listen to what Trump is saying, he wants a lower dollar. How much of a lower dollar does he want? He’s talking about debasing the currency to make the debt payable. . . . That is the most palatable way for any government to pay debt and that is to debase the currency and pay it off in monkey money.”
Join Greg Hunter as he goes One-on-One with precious metals expert Bill Holter
The mint issued a statement late Thursday saying they had run out of last year’s and this year’s dated one-ounce coins. “Market fluctuations have resulted in a temporary sellout of 2018 and 2019 silver bullion. Production at the Mint’s West Point facility continues and when sales resume, silver bullion will be offered under allocation,” the mint said.
Year to date the U.S. Mint has sold more than six million coins, the best start since 2017. The surge in sales comes after a dismal 2018 which saw the lowest coin sales in 11.
According to some analysts, silver is attracting renewed investor attention as both precious metals and base metals trade near multi-month highs.
Following in gold’s footsteps, silver prices saw some selling pressure Thursday as momentum traders took profits as the market was trading near a nine-month high earlier in the week. Spot silver futures on Kitco.com last traded at $15.77 an ounce, relatively unchanged on the day.
However, analysts have noted that despite Thursday’s selling pressure, technical momentum points to further upside.
“The silver bulls still have the overall near-term technical advantage. Prices are in a three-month-old price uptrend on the daily bar chart. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at the January high of $16.20 an ounce,”said Jim Wyckoff, senior technical analyst at Kitco.com.
Andrew Hecht, creator of the Weekly Hecht report, said that investors have been quietly accumulating silver since the start of the year with open interest has risen 25%.
“Silver is the kind of metal that sits hidden in the brush like a wild beast waiting for an opportunity to pounce,” he said in a report Thursday.
He added that he thinks silver has the potential to push to $21 an ounce in 2019. However, he said that the first level of significant resistance he is watching is at $17.35 an ounce.
For many decades now, the US Mint American Silver Eagle coin has remained the #1 choice for most physical silver bullion buyers worldwide.
In terms of annual sales volumes and total US dollars sold versus other silver bullion government mint and private mint competitors, the 1 oz American Silver Eagle coin is still the most highly purchased form of silver bullion worldwide (find updated US Mint sales data here).
Not surprising, with this recent downturn in precious metal prices, available silver bullion inventories are beginning to sell out and back order.
We foresaw and wrote about this shrinking silver bullion supply situation coming a weeks ago in SD Bullion’s new research blog.
Thus today, the following communication issued by the US Mint’s Branch Chief was not surprising to us:
Date: Wed, 5 Sep 2018
Subject: 2018 American Eagle Silver Bullion Coins Temporarily Sold Out
This is to inform you that due to recent increased demand, the United States Mint has temporarily sold out of its inventories of 2018 American Eagle Silver Bullion Coins.
All orders received prior to this communication shall be honored and settled according to pre-agreed upon value date arrangements.
The United States Mint is in the process of producing additional 2018 American Eagle Silver Bullion Coins. We will make these coins available for sale shortly.
Please let me know if you have any additional questions.
Jack A. Szczerban
Branch Chief, Bullion Directorate
United States Mint
Of course this latest US Mint sell out only pertains to Silver Eagle coins.
US Mint American Gold Eagle coin supplies still stand at reasonable, albeit recently lightened levels.
For seasoned bullion buyers, this latest sell out of US Mint 1 oz American Silver Eagle Coins is not a new phenomenon.
We have seen this happen in various years past, including periods of bullion product rationing, sell outs, etc.
What is different this time around is the low Silver Eagle coin volumes being sold by the US Mint month on month, compared to somewhat recent years of 2009 through 2016.
It appears like much of our industry, perhaps the US Mint has cut down on staffing, even silver planchet inventory levels, and other resources required to meet this latest spike in silver bullion product demand.
Typical to past US Mint silver sell outs and coin rationings, product and price premiums usually also increase in order to meet the silver bullion supply demand equilibrium. Smart bullion dealers are not going to sell out of their shrinking inventories without a reasonable profit to match.
You can see various 1 oz American Silver Eagle coin premium price over spot spikes in the following chart below.
The price premiums spike coincide with the fall 2008 fiasco where virtually any and all bullion dealers ran out of bullion inventories, the early 2013 allocation rationing, and the middle 2015 sell out and order shut down.
Historically price premium spikes for American Silver Eagles tend to flow into other silver bullion product premiums. In other words, if the price premiums for Silver Eagles pops higher, you can expect various price increases and sellouts in competing silver bullion products to also ensue.
US Mint American Eagle Bullion Program 2010 Amendment
Yet even most industry onlookers and bullion buyers do not know that a small change to US law was made in 2010. It allows the Secretary of the US Treasury by fiat, and not outright public demand per say, to alone determine what quantities of American Silver Eagle coin supplies are sufficient to meet ongoing demand.
(e)Notwithstanding any other provision of law, the Secretary shall mint and issue, in quantities sufficient to meet public demand,
(e)Notwithstanding any other provision of law, the Secretary shall mint and issue, in qualities and quantities that the Secretary determines are sufficient to meet public demand,
We do not expect the recent sell out of Silver Eagle coins to the be the highest priority of Secretary of the Treasury at the moment.
Bullion buyers should expect further silver bullion supply constraints both currently and ahead, especially if silver spot prices dip into the $13 or $12 oz zone some respected technical analysts have been calling for weeks / months in advance.
The following US Mint Silver Eagle coin annual sales chart encompassed the entire history of the US Mint American Eagle Bullion Coin Program. As you can see, the 2008 global financial crisis took the program to another level entirely.
Even 10 years after the greatest financial crisis started, the worst since the 1929 depression, there are still both new and an already established base of silver bullion buyers who continue to aggressively buy silver bullion on spot price dips.
This recent US Mint sell out is just one example of that fact.
The following US Mint tour video was cut in 2014, but it’s still applicable to the way in which the American Silver Eagle coins are produced today. The only real difference is that the US Mint is currently selling less than ½ the volume it was then, yet still having issues meeting demand spikes in the short term.
More than likely the US Mint is currently dealing with a shortfall of silver planchets on hand.
The silver used in the program does not have to be mined in the USA as that law too was amended many years back. The US Mint does use silver coin planchet suppliers from Australia as well as domestic suppliers like the Sunshine Mint.
In terms of silver bullion on hand, don’t expect the Secretary of the US Treasury to have any available as they rely on private silver planchet suppliers and ‘just in time’ delivery for their program.
As most bullion buyers know, en masse the US government figuratively sold silver out in 1964.
The fact that the US government’s often clunky silver bullion coin program remains the largest in the world, illustrates just how tiny the silver bullion industry remains in the grand scope of global finance and economic financialization.
Sneaky law amendments aside, it does not take much silver bullion demand to break the industry’s small supply demand equilibrium.
2008 has special significance for gold bugs, both because of the money they lost in August of year and the the money they made in the half-decade that followed. Today’s world is beginning to feel eerily similar.
Let’s start with a little background. The mid-2000s economy boomed in part because artificially low interest rates had ignited a housing mania which featured a huge increase in “subprime” mortgage lending. This – as all subprime lending binges eventually do – began to unravel in 2007. The consensus view was that subprime was “peripheral” and therefore unimportant. Here’s Fed Chair Ben Bernanke giving ever-credulous CNBC the benefit of his vast bubble experience.
The experts were catastrophically wrong, and in 2008 the periphery crisis spread to the core, threatening to kill the brand-name banks that had grown to dominate the US and Europe. The markets panicked, with even gold and silver (normally hedges against exactly this kind of financial crisis) plunging along with everything else. Gold lost about 20% of its market value in a single month:
Gold mining stocks – always more volatile than the underlying metal – lost about half their value.
Silver also fell harder than gold, taking the gold/silver ratio from around 50 to above 80 — meaning that it took 80 ounces of silver to buy an ounce of gold.
The world’s governments reacted to the crisis by cutting interest rates to record lows and flooding the financial system with credit. And precious metals and related mining stocks took off on an epic bull market. So it’s easy to see why the investors thus enriched look back on 2008 with nostalgia.
Is History Repeating?
Now fast forward to Autumn 2018. The global economy is booming because of artificially low interest rates and massive lending to all kinds of subprime borrowers. One group of them – the emerging market countries – made the mistake of borrowing trillions of US dollars in the hope that the greenback would keep falling versus their national currencies, thus giving them a profitable carry trade.
Instead the dollar is rising, threatening to bankrupt a growing list of these countries – which, crucially, owe their now unmanageable debts to US and European banks. The peripheral crisis, once again, is moving to the core.
And once again, gold and especially silver are getting whacked. This morning the gold/silver ratio popped back above the 2008 level.
So are we back there again? Maybe. Some of the big western banks would probably fail if several major emerging markets default on their debts. And historically – at least since the 1990s – the major central banks have responded to this kind of threat with lower rates, loan guarantees and, more recently, massive and coordinated financial asset purchases.
So watch the Fed. If the EM crisis leads to talk of suspending the rate increase program and possibly restarting QE, then we’re off to the races. Just like 2008.
QUESTION #1: [_____] says that the dollar will collapse because with the debt ceiling gone – no more buyers of Treasuries in the markets and only the Fed Reserve buying – inflation goes to the wazoo. All over USA. care to comment?
ANSWER: Total nonsense. The USA debt of $20 trillion is a tiny fraction of global debt at $160 trillion. This entire theory does not hold up. Just where is all the money going to run? Gold? Institutions do not buy gold and cannot function with gold, which is not legal tender for even paying your taxes. The only thing that matters is the general public confidence. When the average person on the street no longer trusts government, that is the tipping point.
There is a whole series of people given a choice between a bar of chocolate and a bar of silver. They take the chocolate. Kids line up in Starbucks and pay with their phone – not even cash. Not until you shake the confidence of these people will you see the explosion in markets. That is what took place in the late 1970s. I was there. OPEC created the image of wholesale inflation. People were hoarding toilet paper.
QUESTION #2: What will Fed Balance Sheet Shrinkage do to Gold?
ANSWER: The opposite of what people think. Shrinking the Balance Sheet will be anti-inflationary to the standard reasoning and thus gold should collapse with deflation. However, the Fed has turned away from QE because pension funds are at serious risk. They have run off to emerging markets and bought very long-term paper desperately trying to get their yields up. As the stock market rises because there is no alternative, the Fed politically will be forced to raise rates. They will end up creating inflation with rising rates that will blow interest expenditure through the roof.
QUESTION #3: Since we bounced off the reversal again, obviously this still does not negate a break of $1k and then the slingshot up. But it just seems as if gold is on its deathbed. If nuclear war could not get it to exceed last year’s high, is there anything left in this bag of fundamentals we have been hearing about forever?
ANSWER: I understand. This is what the Reversal System is good at. We stopped within a dime of that number. What will be will be. We are running out of fundamentals to keep buying gold. It’s like the fake news about the storm in Florida that a 15 foot wall of water would destroy the coast. It never came and many people are really angry at the media. How many times can they do this before people no longer listen. Gold is a confidence game – plain and simple. This number is just incredibly important far more than most people dare to consider. I will be doing the gold report soon. It is very critical at this point.
CLOSING COMMENT: The number of long positions verse net shorts in gold reached about 5:1 and you saw what happened – it simply bounced off of the reversal and did not exceed last year’s high. I am always amazed at how people get so bullish and say I am wrong and then within 2 days they lose their shirt. As they say, you can lead a horse to water, but you cannot make him drink. Some people judge the next 10 years by a few days of price movement. That is how the market separates traders from fools.