The Morgan Report Blog

Claudio Grass…All the Governments are Trying to Get Away From Cash

Claudio Grass…All the Governments are Trying to Get Away From Cash
By Rory, The Daily Coin

I sat down with Claudio Grass, Managing Director of GlobalGold.ch out of Switzerland, on June 18. Our conversation began with a lively discussion of the local politics in Switzerland, the new UP Independent Party. The UP Party is a Libertarian movement that believes the Swiss Franc should be backed by 20% gold. This is one of the platforms that is gathering momentum in Switzerland and, hopefully, will take root and spread.

Our conversation quickly turned to a cashless society, which is being pushed all across the globe, in some locations it is more in-your-face than others, but it is being pushed everywhere you turn. The UP Party has already stood against a piece of legislation, and won, barring the governments desire to keep people from making purchases of more then $100,000 Francs with cash. Ridiculous, it is my money and I should be able to spend how much I want on what I want, when I want. I should not be forced to use some type of electronic tracking device, I mean electronic payment in order to make a purchase.

Jim Rickards has stated that gold will go to $9,000 an ounce and be used as backing for the International Monetary Funds (IMF) SDR’s (Special Drawing Rights). SDR’s are a global currency. Claudio doesn’t know if this is going to happen, as he states “no one knows the future…”.

I ask for Claudio’s opinion regarding the situations in the Middle East, Eastern Europe, more specifically Ukraine and Russia. Claudio doesn’t see a world-war breaking out, but I believe that history has shown once the narrative from the global elite no longer works on the people they resort to large scale war.

Much more in the interview and we hope you learn something and share something with friends and family.



David Morgan is a precious metals aficionado armed with degrees in finance and economics as well as engineering, he created the Silver-Investor.com website and originated The Morgan Report, a monthly that covers economic news, overall financial health of the global economy, currency problems, and the key reasons for investing in precious metals.

As publisher of The Morgan Report, he has appeared on CNBC, Fox Business, and BNN in Canada. He has been interviewed by The Wall Street Journal, Futures Magazine, The Gold Report and numerous other publications. If there is only one thing to teach you about this silver bull market it is this… 90% of the move comes in the last 10% of the time! Where will you be when this happens?

 

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Gold and Silver versus the Petrodollar Peril


Transcript

Welcome to HoweStreet.com Radio, the online source for market opinions.

Jim Goddard: My guest is David Smith, Senior Analyst for the Morgan Report which you can find online at Silver-Investor.com. Welcome to the show David.

David Smith: Good to be back, Jim.

Jim Goddard: Gold and silver versus petrodollar perils, maybe explain to us what you feel that is and why investors should be concerned about it.

David Smith: Well, the petrodollar is a term for US dollars that are used by different countries in exchange for buying petroleum and other goods. It’s extensive enough that it has come to be called the reserve currency of the world – but now that status is beginning to change.

It has been underway for several years and it’s now picking up speed with a deal that the Russians and the Chinese signed for a natural gas agreement. It’s going to be very significant, and it won’t be paid in petrodollars.

The extent of that significance for the United States is that we depend upon being able to print an almost unlimited amount of dollars and circulate those outside the country so that we can export our inflation -and so we can buy a lot of goods at cheaper value than would be the case otherwise.

If the petrodollar, which is defined as a dollar circulating outside our country for that use, comes into question as to how frequently it’s going to be used, that’s going to change the whole metric for us.

I was thinking this morning, not just for us but even with countries that are so-called dollarized. There are countries in South America where the currency is actually the US dollar and then there are other countries like Argentina which has its own currency, the peso, but it has one of the largest accumulation of dollars anywhere in the world.

So you could imagine if the value of that dollar were to decline substantially, it would have all sorts of unexpected and unintended effects, and not just for the US.

JG: What could be some of those effects for Argentina and other countries?

DS: Certainly it would increase inflation. It would increase the concern people have about confidence in the monetary unit itself. If you think about it with the debts that we’ve been running over the last few years, confidence is primarily what’s holding it up.  If people lose confidence they may want to hold something else. The lifeboat gets pretty crowded when that happens and there aren’t many options. The other lifeboats that are around have been the historical ones – gold and silver.

I think the record flows of gold and silver into private hands, as well as public entities over the last few years is an indication people have that all is not well with the petrodollar, in addition to the other things we’ve discussed. They know that gold and silver will give them an opportunity to have insurance and assurance. That’s a pretty powerful concept for putting away part of your wealth to try and preserve it in that way.

JG: Well, the Canadian dollar has gained a couple of cents on the US dollar over the past few weeks. Take a look at what has happened to the British pound over the last six months. It has gone from being $1.50 something to around $1.80.

DS: Currency moves have been all over the board. What’s interesting also are some of the elections that have been going on in the UK and in the different European countries. There’s an unease which is becoming more and more obvious that people are uneasy about the debts being run by their governments.

All of that chips away at confidence and so it seems to me that even though the metals are very quiet now – they’re trading in a sideways range, but they are moving to a position where we’re going to see some interesting fireworks. Not necessarily predictable exactly, but certainly there’s going to become increasing volatility, probably before summer ends while people are waiting to do something after Labor Day. But what if it turns out that something gets underway before then?

JG: Within these elections and business-friendly prime minster being elected, are they likely to lift their restriction on gold sales?

DS: It seems like they may lift it or at least lower the amount of current taxation. Either way, you’re going to see a continued flow of gold and silver into India.

This would make imports more transparent. To all accounts – Narendra Modi is a free market capitalist, a lot more so than his predecessors, and there are high hopes for him. The Indian indexes are responding favorably as well, so we will see what happens. This is one more straw in the wind that should underpin gold and silver prices, – and may well take India back to the top spot in terms of gold consumption as the year progresses.

JG: The banking system in the US, is it healthy?

David Smith: It depends on how you define it. A lot of the so-called bad bank loans have been sequestered by the Fed and somehow those are supposed to be fed back into the system later on. But a number of banks have failed the stress test they were placed under to see how they might handle themselves in the crisis.

The thing a lot of people don’t realize – regarding the average people like you and me is we think we can access our money just like that. But the reality is, there are all sorts of legal impediments placed in our way that would suddenly become visible if there was a concern on the part of the bank about a run or a financial panic along the lines of 2008.

People who may be overly confident really might want to look under the hood so to speak to see if they really want to have everything they own in a location where they might not be able to access it when and if they really needed it.

JG: I know a lot of folks are concerned about a Cyprus haircut as they call it, where the bankers go in and take a certain amount from accountholders. If you have a certain amount in a bank account, anything above that, they can haul it off. Both Canada and the US have legislation that allows the government to seize your personal gold.

DS: Well, the so-called bail-ins where banks get into trouble and then they have their depositors help them out by – so to speak volunteering to give them some of their money – which is not volunteering at all. That is definitely written into the banking language. It’s hard to believe that it’s even there, and yet it is. Furthermore most of the countries throughout the world have some form of this language.

I think what bothers me – and watching what’s going on with the metals being so quiet – is that we’ve got inflation starting to move up in a big time way, especially with food but also with a lot of other goods and services that do not reflect themselves in the annual monthlies that the Fed puts out.

I remember an individual – I think it was Michael Ballanger who talked about inflation and he said inflation is like toothpaste. Once it’s out of the tube, it’s impossible to get it back in. The Fed wants a certain amount of inflation but they want to be able to control it and they actually think that they can do that. But once that toothpaste gets out of the tube, we can’t stick it back in. Not to mention that a lot of times you can’t have a decision about where it goes either.

JG: Well, anytime a government thinks they can control inflation – if you’re old enough, you will remember the late 70s where Canada brought in price and wage controls and they did nothing to control prices but they sure did keep your wages down.

DS:  It caused all sorts of speculations. In the United States, we had the same thing, wage and price controls – they didn’t work very well. In fact it didn’t work at all and I will never forget – I think it was President Ford where his idea about controlling inflation was to come out with these little WIN buttons which stood for Whip Inflation Now. The moment they were produced, it was laughable and of course if that’s the best you can do, then it’s no good at all.

So I think we’re headed for higher inflation. It’s going to kind of stair step upwards as we go on. Some people feel that by this time next year we could be in a pretty severe bout of it. It’s hard to tell right now but the point is all this is going to be beneficial for precious metals holdings, but it’s not going to be good for the general stock market.

JG: David, Cambridge House is holding its annual resource conference but it’s not the same resource conference you went to last year is it.

DS: It’s a little bit different and I will be looking forward to going up this weekend. It was primarily a resource sector conference in the past. Now they have a good, strong resource presence, but also there will be technical, high-tech companies in attendance and speakers about wealth preservation through tax work strategies, etc.

I think they’ve got three speaker halls rather than two, so it will be interesting to see how the attendance is and the breadth and depth of the presenters.

JG: A lot of people in the resource industry are finding that they have to diversify if they’re going to stay alive.

DS: That’s true. The good news is that the companies which do survive in the sector are going to be the strongest ones.  It should be easier for people who have done their homework – when the next up leg of the bull market begins in gold and silver – to pick a winner. A lot of the dogs and some of the outright frauds just won’t be around anymore.

JG: One of the analysts I talked to in the past year or two, says we’ve seen, say 1200 resource-based junior companies shrink down to eight hundred. Even now he still says no, they could use some more pruning to make sure everybody is healthy, because when you have losers mixed in, investors don’t know where to go where their money will be safe.

DS: That’s true. They’re left for dead but some of them are still hanging on. The downturn has taken a heavy toll already and it’s going to continue until just the strongest have survived.

JG: How are PGMs doing?

DS: The PGMs have been holding up well. Platinum and palladium just continue their little stair stepping movement up and I think one of these days you’re going to see a pretty powerful breakout that leaves some gaps behind. A lot of pressure and tension is building, and the fundamentals just keep getting better and better.

Jim Goddard: And the gold versus silver index?

David Smith:  When looking at SIL which is a silver miner’s index, the volume is increasing. We have a bullish falling wedge from a technical analysis standpoint. Gold is a bit more obscure. There’s a triangle that’s coming together in an apex, which indicates it’s going to make a pretty good-sized movement one way or the other.

The trouble with triangles, is that there’s a one-third chance they can break out in either direction. So my bias is up but until the market tells me which way, I’m not going to try and tell it anything at all. I’m watching intently to see which way the triangle breaks out. It could be this week or next week Jim. It’s so close to that apex point. So we shall see.

JG: Will the election in Ukraine make any difference?

DS: No, I don’t think so. Compared to the systemic issues that are driving gold and silver higher are – that’s just one little thing. Ukraine’s just a symptom, not a cause by any means.

JG: David, thanks for chatting with us.

David Smith: It’s been good speaking with you Jim. Have a great day.

Jim Goddard: My guest has been David Smith, Senior Analyst for the Morgan Report which you can find online at Silver-Investor.com. You’re listening to HoweStreet.com Radio. Find us on Twitter, @TalkDigitalNet. Comments about the show can be sent to info@ HoweStreet.com. I’m Jim Goddard.

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A Precious Metals’ IRA – Where YOU hold the metal!

Many precious metals investors like the idea of using an Individual Retirement Account as means to save in precious metals. However, many are reluctant to do so because their metal is being held by someone else.
What if I told you that you could fund an IRA with precious metals and keep them at home?

The IRA LLC is a treasure to the precious metals community and few even know it exists. The structure allows the individual to take physical, at-home, possession of Gold and Silver Eagle Coins with IRA funds and it is not a taxable distribution. The metal does not have to be held at a depository and can be purchased from the dealer of your choice.

For those that have considered cashing out their IRAs or 401ks thus paying taxes and penalties, this can be a much cheaper alternative to physically holding precious metals.

It is also important to know the structure has been challenged and upheld in court numerous times, and the IRS ultimately released a field advisory statement in April 2001 stating it would no longer challenge the legitimacy of the IRA LLC structure.

Perhaps the little known nature of this concept is a good thing. Even most experts in the field of precious metals don’t know about it. Most hard money advocates hear the words IRA and metals and immediately assume involvement of a third party storage trustee. We have been conditioned to believe that we cannot hold our IRA assets, that we are not in control and that we must rely on brokers, bankers, and storage depositories. This is not true.

The Investment Alternatives

Taking ‘possession of metals is not the only purpose for the IRA LLC, this structure affords the most open investment platform in the retirement industry. Clients are no longer limited to a blanket of mutual funds. Some alternative investments include private placements, stock in companies, oil and gas leases, energy contracts, real estate, investments, loans, currencies, and more.

This platform has its pros and cons as any other. Upfront cost is roughly $2000 to have an attorney or professional facilitator set one of these up, and the proper setup is crucial. Involved are numerous legal documents, affidavits, and compliance requirements that must be met.

However, once setup the flexibility is incredible and the ongoing fee structure is very low, typically $100 to $200 per year. Within the structure the LLC acts as an investment company that is managed by the individual, whom is also the beneficiary of the IRA. As long as there are no prohibited transactions the investor can invest in literally anything except collectibles and life insurance contracts.

If you don’t hold it, you don’t own it…

Albeit a cliché phrase, it holds true today more than ever. It also holds true to the precious metals industry as much as any other. Need we remember MF Global or German gold repatriation? These recent events bring awareness to the cloudiness of title in the precious metals storage industry.

The question is not if an ever-increasing bankrupt government will bail in retirement accounts; it is rather when. Many argue the lowest hanging fruit in the private pension industry are the government employee pensions. That is likely true. If so, then the highest fruit, or most difficult to access, is self-directed IRAs, and furthermore IRA LLCs.

The IRA LLC offers segregation and protection in numerous regards. It provides the ability to physically store gold and silver that is owned by your IRA, or like account. It also adds a layer of separation from banks, brokers, and thieves. You literally remove your assets from the brokerage and banking systems. Take your retirement into your own hands literally and enjoy full protection!

For more information call Perpetual Assets, 1-888-281-2630, or

Go to Perpetual Assets Website Gus Demos
Managing Partner & Co Founder
P 888-281-2630
C 773-647-6799
F 877-637-2742
gus@perpetualassets.com
www.perpetualassets.com

The Palladium Bull Run Is Under Way

Summary

  • Palladium is experiencing a long-term supply deficit, even as demand continues to rise.
  • Palladium has the potential, on a percentage basis, to experience a greater rise than platinum.
  • The PGM bull run can inform investors about how the coming gold/silver secular bull move may look.
A precious metal which has over 80% of its annual production coming from just two countries? Known by the Spanish Conquistadors as “little silver,” it is considerably rarer than its cousin, platinum, yet sells for a bit more than half as much? Like silver, a “two-doors” metal, with both vital industrial applications and increasing investor interest? And like these metals, it can be bought and sold by investors in the form of bullion coins and ingots? That metal is palladium.

Its better known cousin, platinum, also suffers from a supply-demand imbalance, which over the next few years should take its price much higher. However, palladium, which now trades at $600 per ounce less, yet can be substituted for most of the roles platinum fills, is in the eyes of this writer, an investment option with even more lucrative potential.

Canadian Palladium Maple Leaf

Palladium Maple Leaf

Source: Dgse.com.

Most of the world’s palladium (85%-90%) comes from just two countries: South Africa and Russia. South Africa faces ongoing labor strife — don’t expect the recently settled strike to be its last — and rapidly increasing energy costs as it digs ever deeper to reach the narrow vein structures typically hosting Platinum Group Metals’ (PGM) deposits. Of the remaining sources, North America and Zimbabwe account for just 4% each.

Palladium’s largest demand component is for automotive catalytic converters. In an extraordinary development auguring for increased usage, China recently announced its intention to take off the road by the end of 2014, at least 6 million vehicles which do not meet current emission standards.

Use in jewelry is palladium’s second demand component, then electronics/dental and finally investment demand. The advent of exchange traded funds (ETFs) which hold physical metal based upon investment purchase of shares has added a relatively new element to the supply/demand equation. Not to be left behind is the physical purchase of palladium by investors, which as the word gets out is showing increasing strength.

Palladium’s Growing Supply/Demand Gap

Source: Stillwater Mining.

In most mining operations, because the primary ores mined are nickel or platinum, palladium production plays “a supporting role” of 7%-12% of the ore’s total value. For example, take Russia’s massive Norilsk production complex. Though in the past it has been one of the two largest palladium producers on the globe, the majority of its refined ore is actually nickel and copper. Thus palladium is relatively “price inelastic” — meaning that a significant rise in price won’t translate to a big increase in the available supply. This is an important consideration for investors, because it is just one more reason why the current bull run under way in palladium has the potential of lasting longer — and moving higher — than most market watchers currently believe is possible. And this move could last well into the next decade.

Reading the Palladium Tea Leaves

Early last year, I penned an article for The Prospector, a Canadian resource investment news publication. (I mention this, not only because it is relevant to our discussion, but due to its follow-on premise which relates directly to the potential for extraordinary gains during the coming years for all of “the precious metals four” — gold, silver, platinum and palladium.) Titled Lead Indicators for Silver’s Coming Price Explosion?, the premise as it relates to platinum and palladium was stated as follows:

…over the next 12-18 months, an evolving supply-demand imbalance in two precious metals is likely to evolve into a price explosion. In terms of the scale and violence at that time, this may appear to be a secular price blow off. But more likely, they will have merely established a penultimate or secondary top, with their own final all-time highs registered later, around the time that gold, and especially silver, reach the public mania stage.

Because they are likely to precede the final convulsive rise of gold – and especially silver, by some time — perhaps as long as 2-3 years, their price behavior may offer an important ‘preview of coming attractions’ for the astute investor. Actions on the charts may tip us off in advance — presenting a mirror image of how silver’s final price surge is likely to look.

With palladium’s breakout above $800 this spring that move now appears to be getting underway. In the following chart, you will notice several sharp price drops which no doubt flushed a number of “weak hands” out of their leveraged positions. Yet each decline was followed by higher prices. The most recent drop of almost $40 was due to the announced settlement of the miners’ strike in South Africa. But keep in mind that during this five-month strike — the loss in new supply was on the order of 5,000-10,000 ounces per day. If demand from both industrial and investment users continues as has been the case over the last few years, a resumption in production will have but a marginal effect on the bullish case arguing for much higher PGM prices.

Daily Cash Palladium

Source: Stockcharts.com

Stillwater Mining, the only significant PGM producer in the Western Hemisphere, has written the following:

Every so often a convergence of events results in a seismic shift, a tipping point or simply an abrupt change in outlook. Such can occur unexpectedly with surprising outcomes even when signs of change are obvious. We call this being blindsided, suggesting a lack of attention….But whatever it’s called – game change; tipping point; defining moment – a market re-rating for palladium is underway in which a new equilibrium between platinum and palladium will emerge.

Stillwater Mining gets it. Industrial users get it. Investors in PGM ETFs get it. Readers of The Morgan Report get it. Should you consider getting some palladium for yourself?

WTI Crude Oil on the Move $112 Next Stop

The energy sector has surged during the last two months which can be seen by looking at the XLE Energy Select Sector Fund. If crude oil continues to climb to the $112 level, XLE will likely continue to rally for another few days or possibly week as energy stocks are considered a leveraged way to play energy price movements.

Another way to look at this info is through the USO United States Oil Fund. This tracks much closer to the price of oil. The only issue is that many ETFs that “try to track” an underlying commodity is in how the funds are built. They own multiple contracts further into the future which does not exactly provide us with the short term news/event driven price movements in the current front month contract as they should.

What does this mumbo jumbo mean? Well, it means funds like USO and the highly respected UNG, and VIX ETFs… (just joking about the highly respected part), fail to track the underlying commodity or index very well when it comes to short term price movements. This means, you can nail the timing of a trade, and the commodity or index will move in your favor, yet your fund loses money, or goes nowhere…

Let’s Focus on the Technicals Now…

WTI crude oil has formed a bullish ascending triangle pattern from March to May of this year. The breakout to the upside is bullish and should be traded that way until the chart says otherwise. This breakout and first pullback must hold, or I will consider it a failed breakout. So if price dips and closes 2 days below the breakout level, it will be a major negative for oil in my opinion.

The range of the ascending triangle provides us with a measured move to the upside which is $112. Typically the first pullback after a breakout can be bought. The first short term target to scalp some gains would be $109, and at that point moving your stop to breakeven is a wise decision. Trading is all about managing capital and risk, if you don’t, then the market will take advantage of your lack in discipline.

Looking further back on the chart, you can see the double bottom formation also known as a “W” formation. Once the high of the “W” formation is broken the trend should be considered neural or up.

Also note that the RSI (relative strength) has been trending higher for some time now. This means money is rotating into this commodity. This is in line with my interview this week with Kerry Lutz and my recent article talking about the next bull market in commodities and the TSX (Toronto Stock Exchange).

WTI Crude Oil Trading Conclusion:
In short, oil has some extra risk around it. The recent move has been partly fueled by news overseas. So at any time oil could get a lift or take a hit by news that hits the wires. I tent to trade news related events with much less capital than I normally do because of this risk.

Happy Trading!

WANT MORE TRADE IDEAS? GET THEM HERE: WWW.GOLDANDOILGUY.COM

Chris Vermeulen
CEO & Founder
AlgoTrades.net
TheGoldAndOilGuy.com

General Access, Investment Scoring and Timing Newsletter

Is The Silver And Gold Bull Market Over?

“Is the precious metals bull market over?” This may be the single most important investing question that we can ask ourselves. Why? If the bull market in silver and gold is not over, then the current setup would likely be an extremely big buying opportunity.

One way to measure if a bull market is over is to compare it to historical bull market movements.

Read full article here…
http://investmentscore.com/editorials/is-the-silver-and-gold-bull-market-over.php

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