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Marc Faber: Gold and silver stocks ‘absolutely undervalued’
Marc Faber, noted Swiss investor, frequent guest on Fox Business and CNBC, and author of “Tomorrow’s Gold: Asia’s Age of Discovery,” was interviewed recently on Palisade Radio. Faber sees reasonable value in the gold mining stocks right now, and in fact says gold mining stocks are deflated, he says government bonds and other assets are essentially inflated.
“Now, the only asset class that in my view appears relatively and absolutely depressed are gold-mining shares and silver-mining shares.”
Gold price manipulation called ‘the very point of government’
Gold market manipulation is not just a fact of history, but a governmental imperative, Gold Newsletter editor Julian Phillips writes.
Governments, Phillips writes, “have a need to govern and control all types of money, their economy, and their people. Without control over money, the majority of a government’s power dissipates. That’s man’s history and his future, in this world.”
Gold is so crucial to the world financial system and to government power, Phillips adds, that he considers gold confiscation a serious possibility.
Phillips’ commentary is headlined “Of course the gold price is manipulated – that’s the point!” and can be read here.
From King World News:
Central banks in ‘battle to the finish with market forces’
Central banks are in “a battle to the finish” against market forces, Sprott Asset Management’s John Embry tells King World News, and among their allies is the Toronto Globe & Mail, which this week published a long and misleading attack on gold, he claims.
Embry’s interview is excerpted at the KWN blog here.
Century-old London gold price benchmark starts makeover
The operator of the London gold price benchmark said it formally started the process to find a new administrator for the century-old mechanism that will halt the telephone call that four institutions enter twice a day in favor of an electronic solution.
The London Gold Market Fixing Ltd (LGMFL), along with the London Bullion Market Association (LBMA), said in a statement that the choice will be announced in October, and implementation will be complete by the end of 2014.
The price-setting process, also known as the fix, has been used by producers, consumers and investors to trade gold and value their shares since 1919.
A similar process to find a new price benchmark administrator recently took place in the silver market. That yielded an electronic auction mechanism that replaced a daily conference call with three banks on Aug. 15.
As it happened for silver, the LBMA is again launching a consultation among market participants, including central banks, miners and refiners, to assess how they would like the new price mechanism to be derived.
The London platinum and palladium market also launched an RFPs process that is looking for a new administrator and appointed an independent chairman in August.
Regulators across Europe, the United States and Asia have scrutinized financial benchmarking processes following the Libor manipulation case in 2012.
ECB unexpectedly cuts interest rates as outlook darkens
The European Central Bank unexpectedly cut interest rates to spur economic growth and stave off the threat of deflation.
The ECB’s 24-member Governing Council reduced all three of its main interest rates by 10 basis points. The benchmark rate was lowered to 0.05 percent and the deposit rate is now minus 0.2 percent. The euro slid, as a reduction in the benchmark rate was predicted by just six of 57 economists in a Bloomberg News survey. …
The rate cuts come three months after an historic package of stimulus measures, and two weeks after [ECB President Mario] Draghi signaled he was ready to act again. Additional measures he could unveil later may include a purchase program for asset-backed securities or a larger program of quantitative easing that risks dividing policy makers.
‘How the dollar will die’
By Hugo Salinas Price
The U.S. dollar – and, presumably, all government-issued currencies, which are derivatives of the dollar, the dollar being the world reserve currency – will die, Hugo Salinas Price writes this week. Salinas Price’s observation indicates that futures markets are the mechanism of gold price suppression. As the saying goes, “The futures markets aren’t manipulated. The futures markets are the manipulation.” Salinas Price, president the Mexican Civic Association for Silver, has headlined his commentary “How the Dollar Will Die” and it’s posted at the association’s Internet site, Plata.com. Here is an excerpt:
All the currencies of the world today are derivatives of the dollar, including the Russian Ruble and the Chinese Yuan, and even the miserable currencies of Venezuela and Argentina. As long as they can be used to purchase dollars, either officially or through the black market, they will continue in circulation.
The Mexican Peso circulates and has value, because Mexicans have always been able to purchase dollars with pesos (except for a few days during the “Mexdollar” crisis of the early ‘80s). The price of the dollar in pesos has varied, but at any rate it has (almost) always been possible to obtain dollars in exchange for pesos.
If the new Islamic State “ISIS” should wish to have its own currency, it would have to be possible for its currency to acquire dollars, either directly or through some other currencies. (Just by the way, a 1/10 ounce silver coin would be the equivalent of the dirham, prescribed as money by Islam, and its value would not depend on the dollar or any derivative of the dollar. Maybe someone else will tell “ISIS” about this; I do not want to get mixed up with these people.)
Even in the case of a fiat currency to be used exclusively within national borders, with no plan for commercial purposes outside of its own zone, such a currency would have to be issued with a value that could not be other than an external reference either to the dollar, or to some currency derived from the dollar, which would amount to the same thing. A fiat currency cannot be born out of nothing; it has to have a “parent” and in our times, that parent must be, in the last analysis, the fiat dollar.
The same principle prevails in the case of the dollar.
The existence of fiat currencies depends on their ability to acquire dollars. In the case of the fiat dollar, the dollar will continue to exist as long as dollars can be used to acquire gold.
The condition under which no quantity of dollars can acquire a gram of gold, is known as “permanent backwardation”. (There will always be individuals who will be disposed to part with a small quantity of gold, in exchange for dollars or other fiat currencies. But the purchase of gold in quantity can only be done on world markets, and while “backwardation” is temporary. This possibility disappears when “backwardation” becomes permanent).
In “backwardation” – which has presented itself momentarily, in recent times – gold goes into hiding (its owners do not wish to part with it) and in the markets there has been no one willing to purchase gold for future delivery, even though its future price is lower than the price of physical gold for immediate delivery. So far, this condition has been temporary and not permanent.
When “backwardation” imposes itself permanently, the dollar is finished.
The process will be as follows: At some future date, gold for future delivery will cost less than gold for immediate physical delivery, that is to say, it will be in “backwardation.” However, the normal condition, which is called “contango” and which is the opposite of “backwardation,” will not be re-established. The price of gold for future delivery will stagnate at a low price – apparently very attractive – but the price of physical gold for immediate delivery (“spot” gold) will begin to rise. “Backwardation” will not disappear because the world wants physical gold, received in hand at the moment of payment, and not a promise of future delivery of gold.
When the price of physical gold for immediate delivery is superior to the price of gold for future delivery, and this condition becomes permanent, it will mean that the dollar is no longer acceptable: The price of future gold may be extremely cheap, but the market is not interested in that offer, because the market wants physical gold in hand, immediately.
The price of physical gold for immediate delivery – “spot” gold – will rise to the thousands and thousands of dollars, and the “backwardation” will remain permanently. Finally, the price of gold in dollars will be so high that there will be no further quote in dollars – or in any derivative of dollars, of course.
The dollar will have died.
When the economic and financial crisis in the world explodes – as it will have to explode – the reaction of states around the world will have to be to print up enormous quantities of fiat money, because that is all they know how to do.
This will give rise to a huge run into gold from the dollar and every derivative of it.
This will bring about “permanent backwardation” of gold and will put an end to the world-wide empire of the fiat dollar.
Why gold and silver miners don’t complain about price suppression
Writing at the Silver Doctors website, Bill Rice Jr., managing editor of the weekly newspaper in Montgomery, Alabama, The Independent, asks why gold and silver miners won’t fight back against gold and silver market manipulation and price suppression:
First, many gold and silver mining executives are simply uninformed. They tend to be technical people with a background in geology rather than financial people with a background in markets. As a result most have little idea of the monetary nature of their products, little idea of the competition those products present to government-issued money, and no idea at all about how the price of their products is suppressed by the creation of vast imaginary supplies in the futures markets to prevent competition with government money.
And second, while some gold and silver mining company executives do have an idea about the monetary aspect of their products, the difficult nature of the mining industry makes them too scared to pursue it.
That is, more than any other industry, the mining industry depends on the good graces of government for all aspects of its operation – mining permits, royalty requirements, and compliance with environmental regulations being the biggest issues. And since the mining industry is also the most capital-intensive industry – getting a mine into production can easily cost more than $1 billion – the industry is dependent for financing on the big investment houses that are openly the agents of the central banks in the various markets.
Since government is the instigator of gold and silver market manipulation and the major investment houses are the scheme’s implementers, any substantial gold or silver mining company that complained loudly about price suppression might soon find itself facing all sorts of government regulatory and bank financing problems.
But even if they don’t complain about price suppression, mining companies are likely to die from it anyway, so they really don’t have much to lose. Unfortunately few have realized this yet.”
Complaining about price suppression should be the work of the World Gold Council, a mining industry organization that could give cover to its individual members even as there would be strength in numbers. But the council really is not very representative of the industry. Its limited membership list can be found here.
And the council’s personnel long have been far too close to central banks and the investment houses that work for them.
For years, GATA has been providing the council all its documentation, but the council never acknowledges it. Indeed, the primary objective of the World Gold Council long has seemed to be only to ensure that the gold mining industry goes to its grave quietly.
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