Gold, silver, platinum and palladium have all recently moved up in price, with platinum, silver and gold leading the complex. Below are 15 reasons why.
Gold is teasing the $1700 psychological resistance marker, whilst silver has broken out above $30, and will now begin targeting the many resistance points in the mid $30 range before taking out the JP Morgan stock price, which will be bullish for the poor man’s gold if not so for the TBTF bank.
Within the context of governments across the world regurgitating fiat at dizzying rates, numerous reasons exist for wherefore the metals appreciate. Silver traded at 27.90 in US markets on July 31. By Thursday, the price had broken out above $30, closing in on $31. Very little resistance was faced at the $29.90 level. And so, silver, after having tested $28 thirty-eight times, has now punched through the violent resistance.
Gold today made noticeable gains after somewhat stealthily breaking out to $1,640. Platinum, also, in the wake of South African mine turmoil, where 80% of the world’s platinum is mined, has broken out well above the $1,400 resistance level it had seen for a number of weeks.
So clearly, gold and silver are now heading higher. Below is a list of some of the immediate reasons.
1. Libor Scandals – Money is a manipulation. If this truism were not household knowledge before 2012, it certainly is now as the world has been exposed to the manipulation of interest rates via LIBOR, a $500 trillion market. World governments are wagging their fingers at 16 banks in the US, UK and Europe, of which JP Morgan, a main player in the silver market, is being investigated.
Could the spotlight on JP Morgan be keeping their traders conservative and shy in the face of a thawing silver market?
2. QE Momentum, Fed Out of Money – Although the FOMC meeting did not bring any headline shattering announcements by Bernanke, it did bring increased hinting at the likelihood that more easing will be needed. This is no surprise, as in the past few months the UK and China have loosened their monetary policy.
TF Metals Report made the realization that the Federal Reserve is out of money. As TF writes on 18 August:
…The Fed is out of bullets. The goal of “Operation Twist” was to create demand for the 10-year and the 30-year, thereby keeping rates low and in a downtrend. They accomplished this “sterilized” program by selling their short-term bills and notes and using the proceeds to buy longer term notes and bonds. Now, look at that final frame again. The Fed is now out of paper to sell. Their current holdings in the 1.5 year and less range are negligible. Therefore, they have no more ammo. Now look again at that last frame. The Fed now owns nearly 70% of the outstanding 10-year note inventory. They arethat market. There is hardly anyone left besides the Fed and the Fed is out of cash to keep it going. Suddenly, we have a simple imbalance of more sellers than buyers and…down goes price.
Although the Fed was not overt about any program outlines, it does seem to be a general consensus that everyone wants a hit of the fiat crack, just one last time before we put it down…for good. For good, good? For good.
“Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery,” said the minutes from the most recent FOMC meeting, yesterday.
3. Euro-Bailout – The euro is at seven-week highs against the dollar as news out of Spain hints at the need for bailouts. In other words, additional quantitative easing from the ECB. According to CNBC, Spain is negotiating with the euro zone over conditions for international (read: Federal Reserve System) aid to bring down its borrowing costs. Moreover, German and French business activities reports are not as bad as feared, thus sending the euro higher. The European Central Bank is expected to lower Spanish and Italian bond yield next month.
4. Platinum Mine Deaths and Disruptions – Platinum took off in the wake of violent mine demonstrations from 16 August in which authorities in South Africa murdered around 40 striking miners. In direct correspondence with the furthering of turmoil in South Africa, platinum began edging higher dramatically. Since that fateful day, platinum has moved nearly $150.
The important Gold-Platinum Ratio:
5. Expansionism – Obama has basically guaranteed war with Syria. Prime Minister David Cameron and US President Barack Obama have said that the use of chemical weapons in Syria or even threatening to use them would be “completely unacceptable.” The two leaders said that it “would force them to revisit their approach so far.” Obama said that any movement of Syria’s stockpile of chemical weapons would be a “red line” and would come with “enormous consequences.”
6. – “Aaaand it’s gone”. Banks can legally claim customer funds as their own. Due to the extremely radical loan packages and reserve tricks that dominate the financial industry, banks have remade their business models in recent decades to presume that the money in your account is really a part of their balance sheet, an asset. They can do as they wish with their funds with the fairy-tale, deeply-embedded belief, that they will have no problem returning your assets. Or they simply do not care.
This trend has become open in recent years. Most recently, the 7th Circuit Court placed major banks ahead of customer claims for funds returned in the event that a bank or financial house collapses. Even if the funds were supposed to be segregated. What happened in this instance was the Bank of New York Mellon (BNYM) sued to be the first in line for return on stolen customer account funds. The US court system granted the bank this right.
7. US Drought – The United States is experiencing the worst drought since the 1960s, affecting vast swathes of the country, and namely corn and soy supplies, the central feed of livestock. Nearly 90% of corn and soybean crops have been damaged, as nearly 100 counties have been declared US disaster areas:
8. Oil – Oil is up not only on the stimulus hopes, but also supply worries due to tensions in the Middle East. Brent October crude rose $1.21 to $116.12 a barrel at 11:53 a.m. EDT (1553 GMT), having reached $116.38. Struggle in Syria and tensions over Iran’s nuclear program continue to cast a shadow on the Middle Eastern oil markets. The U.S. Navy, for example, is cutting short home leave for the crew of USS Stennis, sending them back to the Middle East next week to counter any Iranian threats. Oil, like the precious metals, is reflecting the commodities generally:
9. California’s Looming Downgrade – California will be to the US, what Greece has been to Europe. Moody’s has signaled that it will audit each California county after numerous California cities have declared bankruptcy in recent months. This news comes in after California was scrutinized for betting so heavily on Facebook. Amidst the turmoil, California has needed to borrow ten million from Wall Street.
10. Silver “Hoard” Near Record High – Bloomberg reported 14 August that silver ETF products have increased three straight months. Although the report details paper-based products, it is likely that these products reflect to a degree the actual physical market, which, as many observers of in particular silver will know, is showing signs of tightening.
11. JP Morgan-Silver Correlation – CFTC has investigated the JP Morgan silver probe, but one scandal in which the Too Big To Fail bank is embroiled. Signals have leaked that the CFTC will drop the case because it could not find sufficient evidence. This leak despite Bart Chilton, at an October 2010 hearing in Washington, imparted that “There have been fraudulent efforts to persuade and deviously control that price. Any such violation of the law in this regard should be prosecuted.”
Moreover, JP Morgan has 11+ state, federal and international agencies after it. As I wrote in “Catch Me If You Can” JP Morgue Has 11+ State, Fed & Int’l Bodies After It“:
JPMorgan Chase & Co. is being investigated by at least 11 state, federal and international enforcement bodies. Officials in Singapore, Germany and Japan are among a list of agencies probing the largest U.S. bank and its trading errors, according to JP Morgan in a filing Thursday. The U.S. Justice Department, Congress, Securities and Exchange Commission and U.K. Financial Services Authority are all examining the bank, which could still lose $1.7 billion more on its credit derivatives portfolio, the company said.
“The firm expects heightened scrutiny by its regulators of its compliance with new and existing regulations,” the company said. Regulators will begin to bring “formal enforcement actions for violations of law rather than resolving those violations through informal supervisory processes.”
12. Audit The Fed– Ron Paul’s Audit the Fed was passed by the House of Representatives. Although, as the Dollar Vigilante noted, this is akin to auditing a mafia counterfeiting ring.. Ron Paul, the educator, was pleased that the bill passed, thus cementing the secretive Federal Reserve in innumerable headlines. This put pressure on monetary policy and the manipulation thereof, at a time when bank scandals are a constant of headlines.
As Paul said on the floor during debate of the bill, the American people are “sick and tired of what happened in the bailout and where the wealthy got bailed out and the poor lost their jobs and they lost their homes.” With bill’s passage, discussion of Fed asset purchases, in the sphere of $2.8 trillion from $800 billion, were sure to balloon.
Since the crisis, Fed asset purchases have swollen the bank’s balance sheet to $2.8 trillion from around $800 billion. For three-and-a-half years it has kept interest rates at nearly zero, as well as pledged to keep them at these levels at least until late 2014.
On the day Audit the Fed passed, 25 July, the gold price had a sudden spike late in the day, perhaps in correlation with the passage of Audit the Fed?
13. Thin Markets – With european market participants just now wrapping up their summer vacation and increasing amounts of people GTFO of the rigged and vulnerable paper markets, markets have been seasonally thin. An Indian bank strike has added to the thin markets. This has made buyers of size prone to moving the markets in a more dramatic fashion than when the markets are busier.
14. Buyers of Size– At King World News, Dan Norcini imparted that we would not be seeing the precious metals complex move, especially gold and silver, like they have been if not for “large, well-financed, and well-connected entities were positioning themselves ahead of what they see coming down the road. This is simply too large of a move for this to be some momentary blip on the radar.
“It took a lot of firepower to break these markets through these resistance levels. We have had two days of solid action, along with good volume, on this breakout and it signifies a change in direction. It also signifies that some very large players anticipate something very significant down the road.”
15. Stock Markets Highs – The major indices have all performed well since the 2008 crash, though with a sure dose of volatility, and this summer they have sat near their highs, causing many people to take profits, perhaps causing today’s momentum towards a general selloff:
The long-term specifics are pretty obvious, but numerous short-term events can lead to a rise in the precious metals complex in the now. The afore-listed are some reasons why gold and silver are moving higher today, rather than a few months ago or a few months in the future.
To be sure, Doctrinal Keynesiasm has flooded the markets with fiat currencies, thus devaluing them through abundance. Therefore, anything denominated in terms of these fiat currencies are bound to grow more expensive, as they are not multiplying in amount as the currencies. This is a central reason for the long-term secular bull market in precious metals.