Hold tight to your precious metals and commodities investments, and stay awake for new opportunities to add to your positions. The Fed’s fundamental outlook on gold, money, and money printing will continue to lead the central bank to take actions that will most surely help precious metals and commodity investments rise dramatically!
Congressional Hearing on July 13, 2011
Congressman Ron Paul: Do you think gold is money?
Fed Chairman Ben Bernanke: No.
Paul:Why do central banks hold it?
Tradition… Really? Last November, World Bank President Robert Zoellick shocked many observers by calling for a new system of floating currencies to be pegged to gold. He wrote in a Financial Times article, “Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”
The demise of the dollar and the rise of precious metals as emerging monetary instruments are exactly what our team at Independent Living predicted several years ago – even back when such predictions drew ridicule and laughter. Today, central banks are net buyers of gold. Earlier this year, even Mexico bought nearly 100 tons of gold, equivalent to nearly 3.5 percent of total world mining output.
One reader – a commercial airline pilot for 27 years – sent this eye-popping comment to David Morgan, editor of our Money, Metals, and Mining newsletter: “…After flying another two tonnes of gold to Bangladesh last night and one tonne of gold to Beirut last week in my cargo, I have never seen so much precious metals in transport as recently over the last six months… I have flown over 40 tonnes [worth $51.4 million at current prices] this last eight months on my flight alone.”
Gold is on the move in more ways than one!
Do Bank Tellers and Petty Criminals Understand More about Money, Currency, and Metals Than Fed Chairman Bernanke?
In reaction to Congressman Paul and Chairman Bernanke’s discourse, author Peter Schiff, CEO of Euro Pacific Capital, wrote in an article, “Mr. Bernanke demonstrates that he… lacks the competence to be a bank teller.” Schiff may have a point. Even petty thieves understand the value of metal. Since 2003, when the price of copper quadrupled, petty criminals have been busy stealing it and selling it to scrap-metal dealers.
According to news reports around the country, they’re ripping out copper pipes, air conditioning units, fire hydrant caps, phone and DSL cables, even live electrical wiring from homes, churches, and right off of public streets. The U.S. Department of Energy estimates that copper theft results in $1 billion a year in losses!
It seems petty criminals have enough street-level common sense to know that a base metal like copper often can be worth more than the fiat money “Helicopter Ben” prints.
In fact, major economies of antiquity, such as Mahajanapadas in India, medieval Europe, and China used a tri-metallic system for their coin-based monetary system: gold, silver, and copper.
Even the U.S. used to make pennies out of 95% copper, but all that ended in 1982. Interestingly, the melt value of a pre-1983 copper penny is worth about 2.9 cents today. That’s nearly 300% more than its legal tender face value. Caution: it is illegal to melt down pennies (and nickels), as well as steal copper from homes and public works.
New Confirmation We’re Still in a Long-Term Precious Metals Bull Market…
You don’t have to start hoarding pennies or ripping out the plumbing in your home to profit with metals. Gold, and especially silver, have the profile to continue their dramatic rise, especially when the Fed sticks to its inflationary habit of money printing.
Our editor David Morgan often says it’s the investment demand for gold and silver that has the ability to blow the lid off prices. As the Fed continues to devalue the fiat dollar currency unit, silver and gold become more attractive as growth vehicles and stores of value.
Just look at the behavior of the world’s central banks… they don’t buy and fly planeloads of gold around the planet because of tradition, they do it because they want more money, or at the very least, to retain the value of their money.
You’ve probably heard something like this: Hiding money under a mattress is not smart. Well, if you stored gold or silver bullion under your mattress, back in 1913 when the Fed got its start, you’d have vastly more wealth today than if you hid an equal amount of paper currency. (The same is true for copper pennies!)
The trend of gold and silver as money, as currency, or as a better store of value than fiat currency units will likely continue. Schiff wrote, “…Gold is money because central bankers like Mr. Bernanke cannot be trusted with a paper substitute… my gold buying has nothing to do with “uncertainty.” In fact, it’s just the opposite…”
If you’re concerned about silver
and gold price manipulation…
Many people around the world have the same concerns; especially, the foreign central banks that are replacing dollars with gold.
Here’s something that could potentially affect the highly leveraged, bullion shorts on the market. China recently opened a new gold and silver exchange, the Pan Asia Gold Exchange, and some call it the Comex alternative. JPMorgan Chase and HSBC whistleblower Andrew Maguire says this exchange “will ultimately destroy the remaining short positions in both gold and silver.”
The Chinese exchange has created the first-ever rolling spot contract. According to analysts, the new exchange allows Chinese bank customers to easily access gold or silver bullion contracts in Chinese yuan (RMB), not dollars, directly through their bank account online. Maguire adds, “China is keen to diversify their cash holdings and is also encouraging citizens to make investments in gold and silver.” He offers these two examples to describe how this new exchange could affect the global bullion market:
“The Agricultural Bank of China has over 320 million retail customers and 2.7 million corporate customers and has integrated its customer account information system with this platform… if just 1% of their customers bought a single 10 ounce contract, that would equate to 1,000 tons of physical gold being drawn down…
“…The impact on the price of silver will be even more pronounced… [it’s] a much smaller market and already in tight supply. If just 1% of… customers buy 500 ounces of silver, that would require 1.6 billion ounces of silver! I believe the leveraged and naked existing short side concentration in silver will be blind-sided by this. In my opinion it will create a massive short squeeze.”
He goes on to mention that analysts have not factored in any of this new potential, physical demand. Maguire therefore believes there could be a large and unanticipated drawdown of physical gold and silver over the next few months.
For solid analysis on metals, mining, and the commodities markets, continue reading these free Executive Bulletins, but even better, consider subscribing to Independent Living. In just the last few months alone, we’ve alerted subscribers to new opportunities on the horizon in water, energy, and agriculture. And we’ve helped them protect their privacy, save money on everyday expenses, and become generally more self reliant.