At Sydney Gold Traders, We use state-of-art technology to test the amount of pure precious metals in your pieces. Our XRF machine analyses the spectrum of light reflected from your item to calculate the purity of the metal.
XRF machine (X-ray fluorescence) The machine is widely used for elemental analysis and chemical analysis, particularly in the investigation of metals, glass, ceramics and building materials, and for research in geochemistry, forensic science and archaeology.
This technique is non-invasive and does not damage your piece in any way. It simply points a beam of light at your item and analysis its reflection.
Please visit us and have your precious metal tested then you can decide whether to sell them for money.
Silver gets little respect, but that is sensible in a world dominated by paper assets and pretend values. Similar to a murder investigation, let’s examine the motive, means and opportunity used to “manage” silver prices.
MOTIVE: The price of silver is important to industrial users, since there are thousands of uses for silver, many of which have no alternative except silver. If the price of silver rises too rapidly, people notice. Worse, a price rally in silver probably will spread to the gold market, which is watched globally by banks, institutions, and people. A rapidly rising price of gold informs the world that central banks are “printing” to excess, governments are creating too much debt, and the financial elite are mismanaging by “skimming” too much from the global economies. A rising gold price is worrisome to many.
Obviously, the price of gold and silver must be “managed” so that confidence in paper currencies, central banks, and governments is maintained. We know that central banks intentionally devalue their currencies, but they want the process to remain slow, deliberate, and largely unseen. Hence, central banks, governments, and the financial elite have a strong motive for managing the price of silver and gold.
MEANS: The annual value of all silver mine output is perhaps $15 Billion. By contrast, the US government increases its official debt by that much in less than a week. Comparatively speaking, the silver market is tiny. Therefore the means to levitate or crush the market is both easily available and clear. A few $Billion can drive COMEX prices far higher or lower quickly, especially if “the managers” use futures contracts during illiquid times in the overnight market. Andy Hoffman has extensively documented this process.
OPPORTUNITY: The futures markets are open 250+ days per year. The silver market is also open but illiquid about the same number of nights per year. That alone provides ample opportunity for price suppression or levitation as needed by the financial elite. Additionally silver is traded in London and can be “trashed” or hyped in the media. The opportunity to “manage” prices is clearly available.
HIGHER AND LOWER:
Management is not limited to pushing prices lower. Look at the 40 year log scale chart of silver. Clearly prices increased substantially between 2001 ($4.01) and April 2011 (over $48). Subsequent to that large rally silver prices crashed below $15 in July of this year.
silver_price_1975_2015
COMMENTS:
- Silver prices spend most of the time moving little and then, for a short time, move too far and too fast, both up and down.
- The moves up are more fun for those of us who understand the value of silver, the counter-party risk of most paper assets, and the dangers of debt based fiat currencies. But down moves are opportunities.
- Crashes occur: Japanese real estate, silver after 1980, the NASDAQ in 2000, real estate in 2008, Enron stock, and a few political reputations. Managed crashes can be highly profitable for the financial elite and costly to the bottom 95% of the public. Expect more crashes, more often.
- In my opinion, one of the best ways to discourage silver investors is to run the price up, hype it all the way, massively sell futures short near the top, “encourage” the COMEX to increase margins, and ride the price collapse down. Retail investors typically come into the market late, ride it up, feel euphoric until the crash, get out too late, and then, after huge losses, swear they will NEVER look at silver again. This process works well for the banks – such as in 1980, 1987, 2008 and 2011. If the rally and crash happens every decade or so, a new group of retail investors can be roped in, fleeced, and discouraged regarding silver.
- Silver prices are approximately triple what they were a decade ago, but are down 70% from their 2011 highs. Sentiment is bearish after 52 months of declining prices.
- If silver had slowly risen from under $10 in 2008 to $15 today, nobody would be excited, but the pervading negative sentiment would probably be absent. The too far, too fast rally and subsequent crash succeeded in crushing sentiment. Not coincidentally since 2011, the dollar and bonds have rallied, and the S&P reached all-time highs. Real assets down, paper assets up! There is method to this madness.
But madness it is – paper assets based on fiat currencies crash every seven years or so – and they are due for another adjustment lower to match their underlying value. Similarly, silver is due for an adjustment much higher to regain its underlying value.
Last weeks’ column dealt with security for your collectibles and valuables should you decide to keep them in your home. Hopefully it made you aware that there are others who want to relieve you of the burden of keeping them safeguarded. One thing I forgot to mention is that it is a good idea to periodically check to see if your collection of valuables or jewelry is slowly shrinking. This happens when someone has access to your home (friends of your children, your children themselves, baby sitters, relatives and others). Instead of taking everything at once, they may take a piece at a time over weeks, months and even years, so that the shrinkage isn’t evident until almost everything is gone. You may think these things won’t affect you, but I have witnessed every one of the examples I described above and in last weeks’ column. Boy Scout motto: Be Prepared.
Enough seriousness, let’s get to some fun issues, which is what this column is supposed to be about.
An article I just read about the four major independent coin grading services written by a grader for one of them said it was his feeling that the same coin (denomination, date and mint) that had the same grade designation – if these four coins were to be placed in auction, they would receive different bids, even though they were graded the same.
The four top grading services, ranked in order of the acceptance of the grades they apply are PCGS, NGC, ICG and ANACS, and this ranking will also demonstrate the difference in values assigned to the coins they grade. The lesson here is to buy the coin, not the slab that the coin is in, (the slab being the plastic container the coin is encapsulated in after receiving its grade).
I have written before about the benefits of having coins graded by a third party grading service, especially very valuable coins, but it is important that you, the buyer be familiar with how the coin should look. Everyone can have a bad day, and graders are no different. I’ve seen coins (and this goes across all grading services) that show obvious signs of wear graded uncirculated and gem coins receive low grades. Also, the grading standards have been somewhat relaxed over the years, where coins graded 20 or 30 years ago would receive a higher grade now, especially uncirculated Morgan Dollars receiving grades now that were never experienced.
An interesting trend I’ve seen is the grading of the modern commemorative coins made by the U.S. Mint. Dealers try to get their hands on as many examples of the new coins when they are released by the mint and have the designation “Early Release” shown along with the grade. The expectation is that these first coins struck will show sharper detail than those that are minted later. The dealers also attempt to get as many coins that they can graded MS70 (perfect) so they can sell them to collectors. This came to a head with the recent release of the new Eisenhower commemorative dollar. It seems more coins found their way into dealers’ hands, resulting in many collectors’ orders not being filled, causing collectors to complain to the mint about their practice.
My take on the practice of grading modern coins: First, consider the service that graded the coin (see above). I will only accept the grade of the first 2. Only MS70 coins (perfect) will command a premium, lesser grades will be priced the same as coins that are raw (ungraded). Only time will tell whether these coins will appreciate in value as supply and demand dictates. A case in point is the Ultra High Relief gold piece struck in 2009. Its value is currently $1,000 less than it was several years ago.
In the past, only dealers could submit coins to the grading services, but now most are accepting submissions from collectors, so if “you’re feelin’ lucky,” try sending in some of your coins to see what grade they will receive. It will be a worthwhile experience.
The fundamental proposition of the moment is that owners of significant amounts of capital liquidity have some difficulty seeing where to store it. Bank deposits and negotiated bank instruments (purchased from JPM in New York) were not only a fairly safe deposit, they also paid above market interest. But JPM has ceased making those available and has notified everyone who has them open to liquidate them and convert to T-Bills (without much explanation for why). However in the context of new regulations treating bank credits as bank capital under certain circumstances, it is pretty easy to contemplate that in any kind of real estate or general corporate liquidation, many if not most of the major institutions will become insolvent and many bank accounts are going to be subject to bail-in charges.
Stock Market ‘Monetized’
The stock market? Whether you buy the argument above or not, a number of factors point to a significant liquidation period over the next 90 days. Fed and Treasury policy has effectively monetized the stock market. In talking to owners of capital in Hong Kong and other Asian location, it becomes clear that US stocks are the only vehicle for any kind of safe storage of liquidity with any hope of a real return, and those investors are all in. Many of them already recognize their exposure to losses in a liquidation — general recognition is developing.
Treasury instruments? That is really where I am at present–in money market funds that invest only in T-bills and notes with maturities in less than 13 weeks. But those credits are initially exposed to a significant political hazard in the immediate future — whether the Planned Parenthood appropriation or the outright Continuing Resolution itself, there is a very good prospect that Democrats will shut down the government.
Looking for Liquidity?
So where does liquid capital go for storage? Seeing this set of conditions develop, I posted here during the spring that the bottom in gold would be seen before Labor Day. I have since had second thoughts, in part because of the technical analysis we have seen in Rick’s Picks; and in part because I know that negotiations in D.C. offer the prospect of settlement of the shutdown issues. However, at present I am a little more negative than I was several weeks ago, and I see the current spending situation as a small part of the long-term federal fiscal crisis. The federal government is insolvent. Cash flow at adequate levels continues only so long as federal taxes get paid at something like current levels with interest rates at something like current levels. I don’t see much that is likely to prevent a significant liquidation in the stock market, and once that gets established as a firm trend (and I don’t see it stopping at a mere 400 S&P points), capital conditions that support continued activity that generates tax revenue are also likely to disappear.
So with all due respect to those of you who see gold as just another imminent general commodity liquidation away from $850 or lower, I think that is not exactly the way it is going to play out. We may see more sell-off coming as current conditions develop; yes, I may still be a little early; but gold still represents the ultimate store of value for liquid capital.
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