In America, today is a special day to reflect and appreciate those who gave all for freedom (US markets are closed in remembrance). Unfortunately, the world continues onward in a complex monetary fashion attempting to correct decades of mistakes. Today we will feature several current events affecting the precious metal most of you own. Currencies across the globe are now in search of the next safe haven but few are yet to realize one currency is no better than the next. This will eventually lead boatloads of wealth into the ultimate safe haven of silver & gold.
NY Times– Giant Lender in Spain asks for Billions to Fend Off Collapse
MADRID — Spain’s banking crisis worsened Friday as the board of Bankia, the country’s biggest mortgage lender, warned that it would need an additional 19 billion euros ($23.88 billion), far beyond what the government estimated when it seized the bank and its portfolio of delinquent real estate loans earlier this month. When Spain seized Bankia May 9, Luís de Guindos, the Spanish economy minister, said it would need at least $11 billion.
The government is trying to head off a collapse of the bank, which could threaten the Spanish banking industry and reverberate through the financial centers of Europe and beyond. The fear is that it will not have the money to save its banks, and their $1.25 trillion in deposits, and will need a rescue by the rest of Europe — even as political and financial leaders struggle to resolve Greece’s debt debacle.
The rising fear now is that the recent steady outflow of deposits from Spain’s banks, which are suffering from the bursting of Spain’s real estate bubble, to institutions outside the country could eventually turn into the sort of bank run that almost brought the financial world to its knees after the collapse of Lehman Brothers in 2008. Read it here.
FXSTREET.com– Central Bankers Bought More Gold While European Leaders Kept Talking
Central banks gold purchase data in April cheered gold market on Thursday, however. Mexico, Kazakhstan and Ukraine added about 204,000 ounces in April. The Philippines added a whopping 1.033 million ounces in March with gold now at 13.6% of its total reserves. UBS highlighted the Philippines’ gold purchase is significant as this is the second largest monthly Central Bank’s purchase after Mexico’s purchase of 2.5 million ounces in March 2011.
World Gold Council (WGC) reported that central bank purchases were 80.8 tonnes in Q1 2012 or around 7% of global gold demand. What is more interesting is that WGC is now confident that central banks will continue to buy gold and has added official sector purchases as a new element of gold demand while eliminating official sector sales as a negative supply factor. Read it here.
MONEY MORNING–Good News for Gold Prices: Commodities are Wounded, But Far From Dead:
Greece is frozen in a political stalemate. Youth unemployment is running at over 50%. And there has been a $1 billion run on Greek banks. From near and afar, there appears to be no easy way out, especially now that the Eurozone is heading back into a recession.
It’s times like these when investors pour into the U.S. dollar for its “perceived safety.”
With commodities priced in U.S. dollars, this spike in the greenback has sent commodities-including gold prices-into a tailspin since early March. That has many doubters asking: “Has the commodities super-cycle ended?”
It’s a reasonable question considering the Continuous Commodity Index (CCI) is back down to levels it last saw in September 2010. What’s more, gold prices have backed off to near $1,500/oz., and oil prices have fallen from $110 to $90/barrel.
But as you’ll see, the commodities coin does have another side.
And debt in the West (U.S., Europe, England, and Japan) has doubled in a little over three years to almost $8 trillion in a veritable monetary flood that’s bullish for gold. Read it here.
The Commodity Futures Trading Commission (CFTC) has been negligent in failing to terminate the obvious manipulation ongoing in silver. Furthermore, the agency may be complicit in this manipulation. Worse, it has lied to the public and elected officials. This all goes back to the time when Bear Stearns was taken over by JPMorgan in March of 2008.
It is well known that Bear Stearns went under as a result of a sudden loss of liquidity amidst a run by creditors and customers. What is not well known is that those problems were greatly exacerbated by a $2 billion margin call on silver and gold short positions from the end of December 2007 to March 2008. I believe the silver and gold margin calls were at the heart of Bear Stearns’ failure. Read it here, thanks to a reader named Jeff.
Comments & Questions:
I have been a reader of your website since early this year and reading your book re-emphasized what you have written at TPS. I just finished reading Why Silver & Gold Will Go Higher and enjoyed it.
You raise a lot of good questions, and its clear that sooner or later US monetary system are forced to increase interest rates and when that happens we can see gold skyrocketing as banks will be unable to pay back on its obligations demanding more bailouts and devaluing the dollar further. Maybe that will be the start of the biggest bubble of all? Time will tell.
I had big aha when you said that the world is moving into a scaled down version of itself, like when home equity owners scale down to protect remaining equity value in PM. I guess we are all on the same ship, and like you said, this ship seems more like a titanic ship, were there just isn’t enough lifesaving boats for all! Lets hope not.
Cheers for all!
Prospector Reply: Thanks for reading and commenting. You mention “obligations” and it’s important to realize another word is soon to find worldwide popularity, default. This happens while we watch a giant currency shuffle from euros into USDs. The problem, the USD is no more worthy to take on liquidity than the euro is.
The ability to print over monetary mistakes causes a false belief that will someday leave masses very disappointed. Good for you, and other readers too, for not falling for this “lifesaving boat” to nowhere.
QUESTION: (edited for space) Hi, I am just a small investor in Physical Silver Bullion. I have currently about 720 oz’s of all types, & sizes of silver bars, rounds, and coins. All .999 Fine Silver, some Canadian Silver that is .9999 Fine. My goal is 1000 oz’s before I can’t afford to buy silver anymore. 90 % of the silver I own I bought when spot price was still under $20 an oz spot price, so I am already way ahead financially.
What I need to know is when it is time to get out, what do I invest in, or sell My silver for when it has reached the top of the Bull? Not US dollars, because that would be defeating the purpose of owning Physical Silver Bullion.
Prospector Reply: Thanks for the question and nice job on the silver stack. I’m guessing many readers are wondering when to jump from PM (precious metals) but the truth is we are nowhere near the end of this bull run, at least in my opinion. Think of it like this if you will. Everything sending PM higher is soon to enter warp speed. Deficit spending, unilateral fear or concern, equity market volatility, loss of real estate faith, etc are all feeling the ill effects of fiscal irresponsibility.
The “top” you ask about could look more like a last man standing scenario if central banks refuse to back off. Be sure to keep at least 1/3 (or more) of your physical silver close at hand. Don’t be afraid to store some silver internationally, but outside the banking system, just in case some bureaucrat decides to target PM. Keep up the good work.