Wherever silver leads, gold follows. Or at least that’s the way it’s been recently. During silver’s dazzling rise from March to early May … and during its equally remarkable fall … gold followed the lead of silver, although with somewhat less dramatic price swings.
These wild markets should not come unexpected. About two years ago, I wamed that the precious metals were going to be more volatile in this bufl market than in any previous. Today, there is simply too much organized, trend-following speculation for these notoriously thin markets to handle in a clean, orderly fashion. Twenty years ago, there were no hedge and commodi- ty funds throwing hundreds of millions of dollars in hot money in and out of markets on a daily basis.
Silver, as the thinnest of the big three precious metals, is particularly vulnerable to being manhandled by these powerful speculators. And this is precisely what happened over the past few months. Someone, somewhere, orchestrated the rise and fall by first excercising of thousands of silver call options, then, as the upward trend petered out around $6.00, the original buyer pulled out, leaving the market hanging with no support.
Silver began a free-fall that took it from above $5.80 to below $5.40 in minutes, and the original speculator no doubt made as much money on the way down as up. After it was all said and done, market watchers could do little but gawk in stunned admiration.
“The operation has been perfectly executed. Someone has made a fortune in silver over the last month,” exclaimed Rhona O’Connell, metals analyst with T. Hoare Co.
THIS GAME HAS NEW RULES
Rumor had it that the main perpetrator behind this silver spike was Phibro, a division of Salomon, Inc. But it matters little who was behind the operation, or how brilliantly it was performed. Anyone could have done it, and others will attempt it in the months ahead.
The lesson here is that the precious metals are razor thin compared to the enormous tides of cash sloshing around the world markets. Gold, platinum and especially silver will continue to be exceedingly volatile, and it will be our job to continue our focus on the primary trend, and the fundamentals that will continue to keep this trend in force.
In short, buy on the dips, and don’t get impaled on the spikes. And remember that silver will continue to be the speculator’s main playground. For reasons I will explain below, gold refused to rally with the same enthusiasm as silver in this latest run. I would be leery of any fiiture spikes in silver that are not confirmed with an appropriate response in gold.
TWO DIFFERENT MARKETS
Why are the speculators playing with the white metals, and not gold? Why does gold keep bouncing against at $400 ceiling … why hasn’t it responded more strongly to the drop in the dollar?
The answer seems obvious: Central banks don’t own silver and platinum, yet they hold thousands of tons of gold over the market like a guillotine. The speculators believe that central banks will slam gold on any serious attack at $400, and it doesn’t matter whether they are right or wrong – perception is as strong a market motivator as fact.
Still, the evidence continues to pile up against the central banks, and the question of their involvement really is fundamentally important. We can only hope that they are toying around with the gold price. Because every past official intervention in the gold market has only served to prush demand and prices higher, as investors recognize how desperate and incompetent the bankers must be to attempt to rig the monetary thermometer,
This is why, if there is a coordinated effort to cap the gold price below $400, it is being kept deathly secret.
But more and more analysts are recognizing that something’s up, and are contesting the widely reported “official” statistics on central bank gold sales. Frank Veneroso, with Omega Partners, believes that an additional 1,000 tons of gold was sold into the market last year, above and beyond what is reflected in the annual reports of Gold Fields Mineral Services Ltd. Supporting his theory, Belgium just recently sold 175 tons forward, and Australian producers checked in with another 100 tons.
The simple fact is that there is and has been an enormous amount of gold coming onto the market from central banks. And it doesn’t really matter whether this is an organized effort to hold down the gold price or just a general dishoarding by bureaucrats with little respect for this “barbarous relic.” The end result has been the same: The market – primarily private and institutional investors who are scared out of their wits – has soaked up every last ounce, and gold prices have remained strong.
Now, British Chancellor of the Exchequer Kenneth Clarke is calling for the sale of much of the Intemational Monetary Fund’s gold hoard to pay for development in poorer nations around the world. Remember the last time the IMF sold gold? The price soared, because investors realized that the powers- that-be were exhibiting their weakness and desperation.
So, long term, we should consider such sales as a confirmation of the bullish trend. Short term, regardless of what the central banks and speculators do in the gold and silver markets, there appears to be quieter, stronger underlying demand for the metals these days from plain old investors like you and I … not as much for speculation as for safety.
RUNNING FOR COVER
Investors across the world are running for safety, and they’re primarily finding it in the Deustche mark, the yen and precious metals. But what’s really important right now is not where they’re running to, but where they’re running from.
They’re running from the dollar.
The reasons are clear. The U.S. deficits – both the budget deficit and the trade deficit are now at the point where it is impossible to reverse or even slow their growth without drastic and dangerous action. Barron’s editor Kathryn M. Welling recently noted that “…when combined, these dual deficits have turned the U.S. into the world’s largest debtor. Twenty years ago, the U.S. was a net overseas creditor; today, we’re indebted to foreigners to the tune of more than 10 % of GDP. By contrast, both Germany and Japan have lent well over 10% of their GDPs to the U.S. and other neediest cases ’round the globe.”
Uncle Sam is just another credit card junkie: 84 percent of new debt issued by the U.S. in the last eight years went to pay the interest on the old debt! Moreover, about 25 percent of all U.S. debt securities are now being purchased by foreigners. The U.S. is literally at the mercy of our overseas lenders, and our lenders know it. We must keep borrowing to pay our debts – – a widely accepted definition of bankruptcy – and our lenders are beginning to doubt our creditworthiness.
Ray Dalio, the lead currency analyst at Bridgewater Associates and one of the keenest observers of international money flows, wams that the outcome of our credit dependence will be severe. “Imagine the withdrawal effects,” he says, “if this credit disappeared – either we would suffer a severe credit/eco- nomic contraction or we would have to manufacture enough new credit to make up the difference, thereby producing a currency/monetary inflation.”
The sad truth is that our overseas credit line is already being withdrawn.
A FOREIGN POINT OF VIEW
If the world is a global village, then the shopkeepers in the village market are casting a leery eye toward anyone trying to pay in doflars.
There are a lot of things about the U.S. that worry foreign investors, including our unwillingness to address the deficit, our unwillingness to support the dollar, our willingness to throw billions of dollars that we don’t have into a Mexican black hole, and the potential of political instability at the highest levels of government, to name just a few.
Overseas investors are already beginning to say “enough is enough,” as evidenced by the unprecedented flight from the greenback and its corresponding drop in value. While we should fully expect a short-term dollar rally at any time, it looks like nothing can stop the dollar’s long-term fall except a severe tightening, which would quickly lead to a recession.
As Dalio explains, “when a currency weakens, it usually continues to fall …. a fall in a currency – if it is not met with a material tightening of monetary policy and a material reduction in borrowing requirements — causes more selling of the currency. It creates a panic.”
Does anyone really think that the Federal Reserve will raise rates again… sending the economy into the depths of a recession as we enter an election year … to prevent a lower dollar? From all appearances, their next move may well be to drop rates to keep the economic expansion going. In support of the dollar, they will merely continue their ineffective game of public relations, smoke and mirrors.
The recent G7 statements in support of the dollar provided nothing more than a day’s respite in the trend. Central bank interventions have been equally ineffective — and may have dire consequences of their own. Japan and Germany have been buying dollars hand over fist, literally throwing good money after bad. The result is that both countries are now reported to hold more dollars in their official reserves than the U.S.! Eventually, most of these dollars will have to return to the market, quickening the downward trend.
The fact is, there is simply no long-term support for the dollar And, quite frankly, a surprisingly large number of people are happy about this.
The cheap dollar is making U.S. companies more competitive and profitable worldwide. U.S. chip makers like Texas Instruments and Motorola are watching their sales and profits expand, and shrink for their Japanese competitors. The ailing greenback is helping IBM too. In the last quarter, for example, Big Blue’s profits quadrupled, and the weak dollar provided fully one-third of the company’s increase in revenue for the period. With the com- pany’s stock up 70% over the last year, you certainly won’t find many IBM investors bemoaning the drop in the dollar.
So, at least for the short term, some power-brokers and investors will be cheering the dollar’s fall. But things could, and likely will, quickly get out of hand, as the dollar loses respect around the world.
AN OLD, FAMILIAR FACE
To the list of problems facing the dollar, you can now add the growing specter of inflation.
For some time now, you could think of gold and the dollar as being at opposite ends of a teeter-totter with the dollar being the heavier kid that pretty much controls who goes up or down. When the dollar drops, gold rises, and vice-versa.
But over the next six months we are going to see inflation-the big bully on the block – coming over to lift up on gold’s end of the teetertotter. While gold has been strong, but not spectacular, with only dollar weakness working in its favor, things will change dramatically when it will have two powerful factors pushing its price higher.
Back in early 1993, I alerted Gold Nezvsletter readers that gold and silver prices were going to rise. But I made it clear that this new bull market would have nothing at all to do with inflation. Instead, it would be a powerful supply/demand imbalance that would pull prices higher. I noted then that it would be about two years before rising inflation would begin to have an impact on the precious metals.
Well, that time has come. Fearing that the economy’s much heralded soft landing could quickly turn into a nose-dive, the Federal Reserve has been pumping money into the system at a furious clip. (This will not only boost the inflation numbers, it will also hasten the fall of the dollar.)
But add in the fact that commodity prices have been surging for some time now, and industrial capacity utilization is up over 85 percent. While manufacturers have been reluctant to pass price increases in raw materials on to consumers, there is no more slack left in the system. Prices simply have to rise. As we will see over the next few months, inflation is back.
By the time the first dramatic increases appear in the Producer and Consumer Price Indices, it may be too late – gold prices will have already taken off.
WHAT TO DO NOW
The correction created by the recent speculative selling has given us what may be our last chance to buy mining shares and coins near these cyclically low levels. We need to take advantage of this opportunity as soon as possible.
Carefully review the accompanying list of our recommended gold shares, each with a contact number, trading recommendation and price that you should be able to buy below. You’ll note that this list now includes all of our South Afiican share recommendations as well as Corriente (a new addition) and Zappa (which was inadvertently left out the last time this list was pub- lished). I strongly recommend that you call Rick Rule’s office to purchase these shares (800-477-7853). They’re up-to-date on every one of these companies.
Our junior North American recommendations are plays on the exploration success of the individual companies. Our South Aftican picks are plays on the price of gold rising and remaining above $400. This issue, we’ve reviewed our South African recommendations; next issue we will review their North Amen’can cousins.
We’ve also reviewed our bullion and rare coin recommendations this time around. The rare coin market has become especially tight, and prices are rising. This is another area where the quick-acting investor could profit handsomely.
After 30 years experience in the precious metals business, I must receive more than a hundred publications each month with information on gold and silver.
This includes dozens upon dozens of excellent newsletters, newspapers, magazines and private reports from the U.S. and abroad. Plus, our computers are hooked up to every major wire service, and I even have my own clipping service pulling gold and silver news from financial publications and newspapers in every corner of the world.
Despite the enormous amount of reading material I get, despite having seen almost every aspect of the markets over three decades, I still enjoy reading every line of type I can find on the precious metals. And I’ve been finding quite a lot of little-known, bullish news recently. So when someone asked me the other day if I would summarize some of this information for an article in Gold Newsletter, I was surprised that I had not thought of it sooner.
So I’m going to do it now, with a sampling of some recent reports, most of it very good for the precious metals, presented in sort of a bulleted, “Potpourri-type” format with my interpretation following each headache or nugget of information. When you see the combined impact of the type of news I analyze every month, I believe you’ll understand why it will be only a matter of months, not years, before gold breaks through the magic $400 barrier and trades dramatically higher, thus opening a new, bullish era for the metals.
Headline: “First Half 1995 World Gold Demand Hits Record” (Reuter’s)
“Physical gold demand climbed to a record level of 1,793 tonnes in the first half of 1995, according to researchers at Gold Fields Mineral Servwes (GFMS)
…Soutbeast Asian and Indian jewelry makers were mainly (responsible) for the growth from 1,476 tonnes in (the)first half of 1994.
…In addition, coin fabrication recovered somewhat and bar hoarding moved sharply higher due to a surge of investment demand in Japan,’ the report said. Mine production fell by one percent from the 1994 first six months’ total to 1,100 tonnes. Jewelry fabrication demand rose 21 percent to 1,391 tonnes from 1,147 tonnes…
Indian consumption rose to 272 tonnes from 154 tonnes, the Middle East to 205 from 172, the Far East to 361 from 310, and Europe to 302 from 286 tonnes. The aftermath of the Kobe earthquake in Japan meant Japanese investment offtake, when expressed at an annualized rate, was at a new record level exceeding the 174 tonnes of 1986.
Indicating that Asian buyers had adjusted to higher gold prices, GFMS noted that total physical demand in the region in the first half of 1995 of 1,129 tonnes exceeded the previous record of 1,061 tonnes established in the first half of 1992, when the average gold price was $345 against $383.40 now.
All four of the Western World’s major producers-South Afnca, the U.S., Australia and Canada-showed decreases in newly mined gold tonnage, according to GFMS. ”
The latest figures show that the same, basic supply/demand scenario that we sketched out two years ago has not only been validated, but is growing more powerful with every passing day. Supplies of newly mined gold have grown only modestly and are even decreasing according to this report-while the booming, powerhouse economies of Asia are demanding more and more of the yellow metal.
We are witnessing the emergence of Asia, the secular transfer of wealth and economic power from West to East. This is one trend that won’t go away. Not tomorrow, not next year, not for decades to come. Imagine the gold and silver demand of the future, when hundreds of millions, even billions, of poor Asians will be prosperous buyers of jewelry, cameras and investments.
Nothing more needs to be said … although I won’t let that fact stand in my way. Here’s more:
Headline: ” R.D. Presses East Europe For Free Gold Markets ” (Russia Express Intelligence)
” The European bank for reconstruction and development (EBRD) will no longer lend money for gold mining projects unless the gold can be sold in the United States at a market price.$quot;
That isn’t all; the EBRD is also pressing East European countries to develop free gold markets for their countrymen. This is another example in a powerfully bullish trend, as more and more countries free up their gold markets. Examples of the past years have included India, China, and some smaller African and South American countries.
Headline: “Gold Imports Up, One-Third Of It Smuggled” (India Abroad)
“Despite an 11% recent drop in global gold supply, there is an increasing flow of the metal througb the illegal channels to India, the largest market in the world.”
The article points out that the demand for gold during the first quarter of the year is estimated at 125 tons, a 38% increase over the same period last year. This indicates that there is a huge demand for gold in India. Officials in India say that over 320 pounds of gold entered India last year; 118 tons of this was smuggled. And there’s a staggering increase in demand for silver as well. The jewelry industry is growing dramatically with the freeing up of the whole economy, and Indians traditionally keep a part of their wealth in gold and silver jewelry.
The Indian government is getting more and more supportive of free markets in gold and silver because the jewelry industry has become a major foreign exchange earner, accounting for one-fifth of the countries exports!
As the Indian economy becomes freer and freer, look for India to double its gold imports by the end of the century, if not earlier.
Headline: “China’s Gold Production Increased 20.6% To Record Level In First Half (The China Post)
China, perhaps more than many other country believes in the value of gold and knows through its history that paper currency eventually returns to its intrinsic value. The government has completely changed its gold policy over the last several years and is encouraging domestic gold production. Gold importation in China continues to increase dramatically, which is extremely bullish for the long-term global supply/demand balance, and therefore the gold price. In comparison, gold production, although increasing, is still a modest 130 tons.
Headline: “Gold Attracts Foreign Investors” (Balkan News and East European Report).
“As Eastern Europe’s economies free up, gold production should increase, but not dramatically enough to meet the tremendous demand for gold as an investment.”
This article is another indication of the new interest in both the production of gold and the consumption of gold in Eastem Europe.
Headline: ” Istanbul Gold Bourse Officially Launched” (Balkan News and East European Report)
“The Istanbul gold bullion bourse was recently launched to establish the city as a major financial crossroad between Europe, the Mid-East and Asia. Initially the new bourse expected an annual volume of 300 tons.”
This new exchange is hoping to exploit the tremendous, hidden wealth of gold in Turkey, estimated at 5,100 tons. The Turks historically know that the risk of paper currency and demand for gold in the nation continues to improve.
Headline: “Gold Reserves Growing” (Tbe New Europe Global Independent Weekly)
“Romania’s central bank government announced that the country’s gold reserves had topped 83 tons in July compared to 81 tons in mid-1944.”
This is one nation bucking the trend among central bankers of lowering gold reserve ratios. The bank is also considering a more active policy in handling Romanian national gold reserves.
Title: Silver (A private report by Frank A-J. Veneroso).
In 1993, ace investment analyst Veneroso was the first, I believe, to understand the dynamics of the new bull market in gold (i.e., an incredibly tight supply/demand dynamic with an emphasis on Asian demand). He has now written an extraordinary new article explaining the on-going silver deficit to the market that has eroded lendable London supplies. Silver lease rates, which are normally one percent or less, rose as high as eight percent and are still much higher than nonnal. He points out that bullion stocks and dealer vaults in Europe have dropped from 550 million ounces in 1990 to 200 million ounces in 1994. Dramatic declines have occurred in the commodity warehouses of New York, and the storage facilities in Delaware, London and Zurich.
Veneroso points out that there is probably more silver ” on deposit ” in these facilities (approximately 300 million to 400 million ounces), than is recognized, but the important point is that hundreds of millions of ounces have been loaned out and absorbed in the marketplace in the production of film, electronics, jewelry and the like. “In effect, at the beginning of this year, there may not have been 230 million ounces of physical silver in Europe available to the market, but only a fraction of that total”
Thus, the market is in an extraordinary short position. The only way that position id going to be resolved is by higher silver prices. Veneroso believes it will necessitate “a several dollar price increase” to move enough silver on the market to meet this huge silver deficit. He appears to be talking about silver going to well above $7.00, and further states it is likely that there will be an ” overshooting of this market clearing level.”
This is a phenomenon that has historically been particularly powerful in the silver market, implying a silver price of perhaps $8.50 to $9.50 as a speculative overshoot of a sustainable price. Even a price just above $7.00 would spawn a major run-up in the mining stocks and offer great potential for those who trade the metals markets.
Headline: “The Fate Of The Yen”(Jim Turk’s Freemarket Gold & Money Report).
In this typically insightful article, Turk explains that the deflationary collapse of the Japanese economy will probably be bailed out by inflation. At least that’s what the Japanese are being advised to do.
I believe that the yen reached a major peak this year, and that the price of gold in yen terms has bottomed as it breaks out strongly above a long downtrend. The Japanese will have total imports of 400 tons going almost entirely into the private investor sector. At some point, the Japanese central bank will see that the price of gold in yen term is (since the central bank prints the yen), is so attractive that it may move to increase its gold reserves. In fact, that would be the way for the Japanese to halt what could be a collapse of the yen, if things get much more difficult. The more gold the Japanese buy for reserves, the more faith the world will have in the yen.
Headline: “Non-Store Gold Retailers Growing.: 10% Of Total Sales” (The Gold Institute’s Gold News).
In this interesting article, the Gold Institute points out that non-retail sales of gold jewelry reached $1.1 billion in 1994, mainly from TV shopping channels and direct mail retailers, as reported in the World Gold Councils 1994 study. This represents fully 10% of the total U.S. gold jewelry sales of $11.3 billion. It is also encouraging for future growth in gold jewelry demand as the electronic highway produces more direct shopping via personal computers, television, etc.
Headline: “Switzerland, Still A Crossroads For Gold” (The Gold Institute’s Gold News).
Timothy Green, one of the world’s top gold analysts for many years reports that those who contend Switzerland has lost its multi-century tradition as a center of gold trade and investment are greatly mistaken.
Green gives many examples of how central gold has been, and still is, to Switzerland. For example, in 1919 the Swiss Bank Corporation was a buyer at one of the very first London gold fixings on behalf of watchmakers. Today, 90% of Swiss watchmakers’ products are exported. Also, Switzerland has several large gold refineries and semi-fabricators of gold, including everything from karat gold, alloy for dental gold, gold for the electronics industry, etc. And of course, the major Swiss bank corporations, Credit Suisse, the Union Bank of Switzerland, etc., all have major, dedicated departments serving world gold investors, particularly those in Europe and the Middle East.
Headline: “Poland Strikes First Bullion Coin (Coin World).
“Poland released the fine gold bullion coins in its one-thousand-year numismatic history on June 26 (1995) according to the National Bank of Warsaw.”
This is interesting because Poland will likely be an example to not only other formerly communist East European states, but also to the many different governments within the former Soviet Union. Gold bullion coins, particularly when sold within a free gold market, can be a major source of supplemental funds for the government. More importantly, it gives the citizens a chance to protect themselves from currency fluctuations. Ten years ago, who would have thought that the communist states of East Europe and the Soviet Union would be moving toward production of gold bullion coins for a private, free gold market? All this argues well for gold demand.
Headline: “Australia To Launch A Gold Coin In South Korea” (Reuters)
Australia’s gold corporation, which sells the Australian Kangaroo gold bullion coin, will begin marketing this coin in South Korea-the ninth largest world economy and a nation with a strong appetite for gold. This is another step in the growing increase in investment gold demand throughout Asia.
Headline: “Central Banks Gold Sales Soared In The First Half” (Dow Jones Wire Service)
“Gold sales by central banks in various countries soared to 244 metric tons in the first half of this year from 86 tons in all of 1994, according to a biannual report by Gold Fields Mineral Services … Much of the gold was bought by jewelers and hoarders, mainly in Asia and other developing nations.
Among the sellers was Belgium, which sold 175 tons to boost the proportion of foreign exchange in its reserves.. Russia sold an undisclosed amount, and Canada sold five tons. Rumors about large Mexican sales were unfounded…..
We had record central bank sales in the first half of 1995, and what happened to the gold price? It stayed rock solid, and even made another run at $400. This clearly illustrates one of my major contentions: No matter how much gold the central banks sell, the exploding economies of Asia are going to keep on soaking it up. For one thing, if the banks increase their sales to any significant degree from the current rate, they risk creating a monetary panic that would harm their national currencies dramatically and lead to even greater gold demand.
The current situation creates a floor under the gold price. And to understand the upside potential, you merely have to realize that the central bank sales will eventually end … but the gold demand from Asia will continue to grow for decades.
Headline: “Japanese demand explosion boosts gold investment” (Financial Times).
Japan has seen explosive growth in physical gold investment because of “the general sense of unease that has dominated the financial climate in Japan. The Japanese demand for gold as an investment rose 107% in the first half of 1995.”
As I’ve noted, I think that Japan will play a key role in the prospects for gold in both the short term and the long term. Japanese demand in the wake of the Kobe earthquake and the soaring yen helped support gold this year. Before that, demand from the economies of Southeast Asia, India and China took turns in sustaining gold, while the world’s central banks have been selling the metal to increase their foreign reserve ratios.
Now we are starting to see record or near-record demand from more than one Asian economy at the same time. During precisely the same period, central bank sales have accelerated. Coincidence?
Perhaps. But as I said just above-it doesn’t really matter. The growth m Asian gold demand is a freight train that is just beginning to build up steam. The central banks will be powerless to stop it. Sooner or later, and probably sooner, prices will have to rise significantly to balance the market. And if the central banks have indeed been manipulating the market, if they have to suddenly cease their sales, then the impact on the price of gold could be explosive.
An analysis of a new, population-weighted gold price index.
Plenty of voices keep reminding us that gold is forever dead. It has failed to blast off against the dollar, mark, or yen, and wifl never come back.
Well, there’s one good thing about being an “old guy.” If you hang around markets long enough, you’ll finally learn to recognize that same old tune. Remember when coffee was never coming back? And sugar? And cotton? And cocoa, right before it doubled? If you made a case for gold (or oil) doing the same today, you wouldn’t be building a very surprising chart pattern. It might look like the pattern all those others made before they blasted off.
G. Michael Rouzee (pronounced Rue-ZAY) of Vilas-Fisher Associates in New York brings a completely new slant to those watching gold’s corpse for signs of life. You’ve probably seen a trade-weighted dollar index. What if, Mr. Rouzee mused, we looked at the price of gold on a population-weighted basis? For people who live in the U.S. or Germany or Japan, gold may not have risen against their national paper currencies, but what about the rest of the world? Is the price of gold rising in their local currency for most of the people in the world?
A PARTY CONVERSATION
We first read about Mr. Rouzee’s idea in Grant’s Interest Rate Observer. It interested me enough to call him, and he kindly made time to discuss it. The index grew out of a dinner party conversation with friends, he said. When he breathed the heresy of buying gold shares, they were incredulous, until he asked them a question that stifled their amazement.
In the last year, he queried his guests, what did you buy for your wife for her birthday, Christmas, and Valentine’s day? Seventy percent of the dinner party had spent more buying gold as gifts than financial assets. That, he pointed out, is fabrication demand. What’s more, the gold that those wives own is not coming back on the market. Maybe at $3,000 an ounce, but certainly not at $300.
WHAT’S THE FIRST THING THEY’LL BUY?
What about the Chinese, and the Indians, and the Indonesians, and the Egyptians, and all the other people who live in countries where incomes are rising and currencies are depreciating? When they get a little extra money, the first thing these people will buy is NOT a call option on the Hong Kong stock exchange. Rather, they head for the jewelry story to buy rings or earrings or some other golden glitter to hang on their beloved. If the argument for Coca-Cola in China works, then it must work for gold, too.
People who live under rapidly depreciating currencies trust gold as money before they trust paper. And while Mr. Rouzee denies he is a gold bug, in our conversation he did mention that a willingness on the part of merchants to trust paper is a very recent phenomenon. History is not ambiguous: Whenever paper has been trusted for any length of time (twenty to fifty years), sooner or later it fails and nations have to return to a specie standard. Certainly that would be cheaper than paying traders-the “bond vigilantes”-six figure incomes to stare at cathode ray tubes all day long. That’s a misallocation of resources. With bonds backed by gold, the whole economic system could be financed more cheaply.
POPULATION WEIGHTED GOLD PRICE
But back to our point. Mr. Rouzee went to Bob Marks, president of SOM Economics, and asked him to analyze the gold price in local currencies on a population-weighted basis. Mr. Marks converted the dollar price of gold into local-currency terms, and then weighted the prices according to the populations of the countries. The group includes Britain, China, Germany, India, Indonesia, Japan, Mexico, South Africa, Egypt and the United States.
Since the index is weighted by population, China’s population contributes almost 40% to the index, India’s a little more than 30%, but Germany, Japan, and the U.S. combined contribute only about 15%.
Once he saw the population weighted gold index, Mr. Rouzee drew four conclusions:
Global inflation is roaring. For most people in the world, gold has been the place to be for some time.
In terms of local currencies, gold is in a global bull market.
Periodically we have to check and revise not only financial indices but also the way we look at markets.
For most of mankind, the reign of central banks is drawing to a close. While those brilliant Western central bankers are walking out of the golden gate by selling gold, Chinese, Indians, Indonesians, Egyptians and others are beating feet for the golden door, selling paper currencies just as fast as they can. He concludes that “somewhere in here, gold doesn’t go to $440 or $410. It goes to $800.”
We couldn’t have put it better ourselves. -
What is Foreclosure?
Foreclosure is something that no one wants to experience and most never forget going through it. Foreclosure can be a very traumatic experience so if you are heading for it you should know all of the steps and if possible how to avoid it all together. For most locations the steps for foreclosure are pretty straight forward and similar regardless of where you live.
Basically a foreclosure will take place when the monthly payments owed to the bank for a mortgage is missed, interrupted, or falls behind in which the bank receives no payments from the owner. When you take out a mortgage the house will be used for collateral and if you fall behind on the payments the bank will take your home to cover the missed payments. The bank will be given a court order for the foreclosure giving them the right to kick you out of your own home and sale the property. Most of the time the local sheriff’s department will deliver a Notice of Intent to Foreclosure via certified mail. Next the bank will go through the courts to make it valid and legal which will then be published in the local paper. Until the foreclosure date you will be given the chance to catch up on payments or come to some type of arrangement with the bank unless they have demanded the full amount due to several missed payments. If you are unable to pay or come to some type of arrangement there will be several more notices that the home is in foreclosure in the local paper to attract potential buyers. If you are not able to pay there will be a date set that the home will be auctioned off or placed on the market to give other buyers the chance to purchase the home. Normally the bank will let the house go for a lower price than the pay off amount in order to retrieve some of the lost money. This leaves you and your family in a very stressful situation with very little options. This is why you should do your best to avoid foreclosure all together.
How to avoid foreclosure?
The first step to avoiding foreclosure is making sure you understand the full concept of what it is. Foreclosure is the legal process used by a bank or lenders in order to repossess property due to the borrower’s inability to make payments or meet the mortgage agreements.
If you are having problems paying your mortgage payments or the full amount the first thing you will want to do is contact your lender directly. Do not avoid or ignore the situation otherwise it will only get worse and possibly to the point that your lender will not be willing to help you. Most lenders don’t want your home so if you contact them when you first start having problems they will be more than happy to work with you to come to a compromise that will make you both happy.
Your lender will normally send you a first notice that will contain information on how to prevent foreclosure and what options are available to help you. You should never avoid the phone calls or letters that are sent to you by your lender. You should also research about foreclosure online so you know your rights and the consequences that may occur if specific actions are not taken. There are also programs out there that may be able to assist you so that may be another option.
Foreclosure for some may be inevitable but don’t give up without a fight. Do everything possible to help yourself get back on track. Talk to your lender, find government programs or family members that may be willing to help you. Try revaluating your current lifestyle and spending habits. Is there anything you can cut out such as hair salons, sporting events, second car, babysitters, eating out and other luxuries that are not a necessity? You will be surprised in how much money you can save by doing things yourself or from home.
Don’t let foreclosure take the home of your dreams.
The thought of debt elimination can be scary especially if it is something that you have never had to deal with. However, in order to free yourself from this hardship you need to start as soon as possible in eliminating your debt. There are several ways to work on debt elimination with a bit of hard work and self discipline.
The first rule to follow is never to spend more money than you are earning. This is a rule that would have helped prevent you from being in debt to begin with but once it has happened it’s never too late to live by. For many individuals this is easier said than done so pushing yourself may be a requirement in order to fully help you in the long run. Keep in mind while you are trying to pull yourself out of debt it’s imperative that you do not go on shopping binges. Only purchase items that you really need for you or your family. Also do not buy items that you cannot pay for in full at the time of purchase. You will quickly notice how these small changes add up and eventually your monthly expenses will become lower.
If you are at the point that you have already accumulated debt there are a few different options to consider including debt consolidation, debt settlement, debt relief, and as a last result bankruptcy. Bankruptcy is the most drastic measure you could take and while it will help to remove the debt it can also hurt you long term such as affecting your credit score or preventing you from being approved for a loan for a home, car, or even personal. So if at all possible you should avoid bankruptcy for as long as you can.
Debt settlement or debt consolidation would be better options because they allow you to pay off your debt either for a lower pay off amount or combine all of your bills together at a lower rate. This often helps individuals to be able to get control of their life again paying off the debt as they can. Any extra money that you earn or can save should go directly on your debt especially any bills that carry a high interest rate.
Debt elimination can seem like one of the hardest things that you will ever have to go through but you can succeed if you work at it. Along with freeing yourself from debt you should also work on credit repair. In order to better yourself and your financial situation you need to cut out unnecessary bills in order to pay off things that are outstanding. There are several ways to save money starting with luxuries that are not needed such as eating out, hair salons, vacations, cell phones, movies, dancing, or other activities that require you to budget or save for. This may not be ideal but overtime you will be amazed how these small things add up to a large amount of cash that can be used to pay on your outstanding debt. As bills are paid off you will notice that it will also help with credit repair.
There are many ways to help with credit repair without hiring an expert. The first thing which we already discussed is working on your debt. This alone will help to improve it over time. Paying off high interest credit cards or other outstanding debts should be your first priority. The longer it takes you to pay these types of debts off the more will be tacked on top for interest rates. Paying off your debt is the simplest way to work on credit repair.
Another thing that you can do to help with credit repair is work on building a budget. Cutting out unnecessary expenses and paying on debt regularly will help to shape your credit history for the better. The quicker you pay off your debt or at least have a steady payment history this will improve everything overtime.
One option that many individuals aren’t aware of is debt consolidation. For most their debt is scattered in different areas so this makes paying them off a bit harder for those with limited funds. If you are able to consolidate your bills this will put them into one place allowing you to track and manage your debts much easier. You may even consider using a balance transfer to consolidate your credit card debts which will allow you to pay them off as one instead of several. A consolidation loan may also help to pay off your credit card debt as well as other outstanding debt as well. Once you have moved all of your debt to one place you will want to work on building a budget to pay as much as you possibly can each month as required. This helps with debt elimination and credit repair at the same time.
Debt settlement is another option to consider but will require you to hire a professional to help you with the process. They will work with the creditors to lower your current balances to a pay off amount that will allow you to pay them off sooner if you have a budget to work with. Normally with debt settlement you can pay off a large portion of debt that you owe. You can do debt settlement yourself if you have good negotiation skills and the patience to deal with each creditor individually. If you are not comfortable sitting on the phone all day or being told no then it may be worth it to hire a professional. Debt settlement can help you to pay off your debt faster as well as repairing your credit along the way.
Credit repair may take weeks, months or even years to accomplish but is worth it in the end. By having a good credit score and history this enables you to get the help you need when you need it most. A good credit history is imperative for those individuals who will be applying for a loan or financing for a new home, car, business, or even loans for school. The better your credit score is the more likely you will get the loan that you need.
Keep in mind that it does take patience and time in order to repair your credit but is something that should be taken serious and made a top priority.
Bankruptcy is something that most of us hope to never experience. Unfortunately more and more individuals around the globe are turning to bankruptcy after dealing with months or even years of hardship. With the way the economy is today finding or keeping a job is becoming harder with each passing day. For those who are lucky enough to have a stable job it still may be hard to pay their bills on time with prices increasing. As more bills roll in many turn to credit cards or even a second mortgage in order to stay ahead of the game. When things get to the point that there seems no way out other than bankruptcy it may be time to sit down and take a good look at how you can change yourself to help with debt elimination.
While bankruptcy may seem like a quick way out it will have a negative effect in the long run. Normally if you file bankruptcy you may lose several personal items such as your business, car, electronics, and other large items that you currently own. You may even be forced to surrender your home to the creditors that you owe. This is one of the biggest things that could affect you and your family so why put them through that torment if you can prevent it. Filing bankruptcy can also damage your credit score which will prevent you from obtaining a loan for a new place, car, college, or other things that you currently do not have the money for.
Bankruptcy should only be used as a last resort. Debt elimination is never easy but can be achieved with a few changes in how you live your life. You need to prioritize everything such as your monthly income, monthly expenses, and what you can cut from the list. Things such as eating out, dancing, vacations, lessons, salons, and a second car are all things that should be eliminated until you get a better grasp on your financial situation. All of the things listed above are luxuries that you can live without for awhile which will allow you to put more money towards paying off your high interest rate bills.
There are more drastic things that you can do as well in order to prevent bankruptcy. If you currently own a home that carries a high mortgage rate you may consider downsizing. This may not be the perfect option but it will allow you to get extra cash to pay off debt and still be able to afford to live on your current income. Another option is for those individuals who have two or more vehicles. If it’s possible to get by with only one car this will save you money in several ways. You will only be paying for gas and insurance for one vehicle as well as tune ups or regular maintenance fees. Overtime this money saved can be used to pay off of outstanding bills. Vehicles that are a bit dated also tend to have lower insurance costs so even the one you choose to keep may be eligible for cheaper rates.
This is just a few things that you can do to prevent yourself from being forced to file bankruptcy but some the outcome is inevitable. If at anytime you are in the situation that your last resort is bankruptcy do not feel as though you have failed because many individuals around the world are faced with the same decision every year.