GET READY: The Great Transfer of Wealth in Gold & Silver is Coming

THE END IS NEAR

The U.S. Economy stands at the edge of the abyss while the financial MSM debates whether or not the FED will taper in the fall.  Silly analysts.  Serious cracks are beginning to appear in the economy while the precious metals have now seemingly decoupled from the broader stock market in a big way.

The heartbeat of the U.S. retail economy is in serious trouble when we see this in the headlines, “WalMart Earnings Disaster Exposes a Collapsing Economy: Davidowitz.”   I have been watching Howard Davidowtiz for years, and you got to like the guy because he doesn’t sugar coat anything — just calls it like it is.  He says that the real unemployment is closer to 14% because 75% of the jobs created so far this year are low-wage part-time jobs.  Basically, Davidowitz says the U.S. Economy is collapsing.

Furthermore, the housing market is about to hit a brick wall, “Mortgage Activity Plunges 50% to April 2011 Levels.”  We can see from the Zerohedge chart below, that existing home sales (shown in brown) are about to fall in a big way as mortgage applications have dropped to three-year lows:

Mortgage & Home Sales

The continued health of the housing market is based on low-interest rates.  However,  bond rates have been rising substantially over the past 3-4 months which impacts the mortgage rates for the housing market.  Since May, the 10 year U.S. Treasury yield has increased a staggering 63%:

10 Year Bond  Rate

The whole idea of the FED’s QE3 program was to keep interest rates down while stimulating the housing market and overall economy.  Well, as we can see… both of these critical components of their QE3 program are rapidly disintegrating.

Foreigners: Getting a Whiff of the Stinky U.S. Bond Market

Well, the U.S. Treasury TIC data came out today, and it showed what most of us in the precious metal community realized… and that is a broad sell-off.  If we look at the table below, foreigners unloaded $56.5 billion of U.S. Treasuries and Bonds in the month of June.

TIC DATA U.S. Treasuries June 2013

As you can see from the highlighted area on the top of the table, China & Japan sold the most at nearly $42 billion combined.  Furthermore, Hong Kong dumped $12.2 billion, the Oil Exporting Nations dropped $7.7 billion and Russia decreased its holdings by $5.4 billion.

It seems as if the Eastern and Middle East countries are beginning to realize that the U.S. Treasury market may not be the traditional safe haven for much longer.  With this in mind, how is the FED going to taper its QE3 program at a time when foreigners are dumping treasuries and bonds by adding more supply to the market?  This means that the FED will have to purchase MORE, not LESS treasuries if it doesn’t want the interest rates to skyrocket.

The U.S. Brontosaurus Warning

There’s all this talk about the infamous Hindenburg Omen that signals a huge stock market crash on the horizon.  However, I believe the U.S. has a much worse omen starring it in the face — the Brontosaurus Warning.

It’s one thing to see the negative signs in a single market, but another to witness the disintegration of an entire economic system.  The indicators below reveal the Brontosaurus Warning of an “Extinction level event” for the U.S. economy:

MARKETS (Aug 15th)

DOW JONES = -220 points

US DOLLAR = -48 points

10 YEAR = +4 points

GOLD = +29.70

SILVER = +$1.28

———————————–

Not only are the broader stock markets down in a big way, so is the U.S. Dollar.  Moreover, the U.S. Treasury 10 year rate is up 4 points when it should be negative and gold is up nearly $30 while silver is up almost 6% at $1.28.

These indicators paint a very bad picture for the whole U.S. economy going forward.  There is no way the FED can stop QE3 as foreigners are already dumping their bonds while buying a great deal of gold and silver bullion.

At some point in time this whole situation will get very ugly forcing people to move into the historic safe havens of gold and silver.

The Great Transfer of Wealth is Just Beginning

Only a fraction of the public are ready for what is coming.  Most are still totally invested in paper assets that have no future… and the future is now here.  Even though many in the East are buying gold and silver, those in the West are totally asleep at the precious metal wheel.

I wanted to re-post these charts from a previous article to show how little is invested in gold and especially silver:

Global Gold Investment

Global Silver Investment 2007-2012

According to the CityUK Fund Management Report, there are over $85.2 trillion in conventional assets under management.  These include pension funds, insurance funds and mutual funds.  In 2012, total gold investment was $234 billion which turns out to be only 0.3% of world conventional assets.

Now, if we look at the silver chart we can see just how little has been invested in the precious metal compared to gold as well as global assets under management.  In 2012, for every dollar that went into gold, a little more than 3 cents went into silver.  Total silver investment in 2012 was 3.4% of gold and 0.009% of all the money held in pensions, mutual & insurance funds.  This is precisely why I believe silver will outperform gold in percentage terms in the future.

Mike Maloney talks about this great wealth transfer into gold and silver in his newest video, “Hidden Secrets of Money — Seven Stages of Empire.”   In the video, Mike explains the past 140 years of monetary history in ten minutes and also discusses why countries makes the same mistakes over and over again by what he labels as the “Seven Stages of Empire”.  Basically, the world goes back and forth between “quality money” and “quantity currency.”

Seven Stages Of Empire 140 year history of money

The world is entering the last stage in which we shift back into sound money such as gold and silver and away from the worthless fiat Dollar.  This is becoming more apparent as we see the huge amounts of physical precious metal buying from the East as well as the decoupling of their prices from the broader stock markets.

Not only will the values of gold and silver increase substantially in the future, but they will also be an excellent investment due to the upcoming global energy constraints.  It’s one thing to re-value gold and or silver to match the amount of fiat money in the world, and another to become one of the best investments while the value of most other asset classes will continue to disintegrate.

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18 Comments on "GET READY: The Great Transfer of Wealth in Gold & Silver is Coming"

  1. Maybe this will be a day people look back on as a demarcation point; maybe not. Maybe PM’s get smashed overnight, although the ammo to do that is getting lower. We will see.

  2. Seems to me people have to start by remembering that prices should never have been as low as they have been over the last four months. So $26 will be here pretty fast…followed be $30 and then $33. But even so, we will ‘only’ be back to where we got smashed down to….
    $40 By Christmas is not unreasonable; Begin to toss in many of the cause and effects that you’ve been shining the light on Steve…and look out.. a 30 cent increase a week might not even look like Silver was moving sometime soon….

  3. The price action today is described by La Metropole Cafe as being extremely rare. I think it is prudent to sit back and watch what is going on for awhile before predicting that silver will reach 40 before Xmas. Although all us stackers would love that. But, most of us are underwater on our metals right now if we bought in the last 2 and a half years. It has been miserable and hard to come to grips with. I think a healthy bit of skepticism is in order until we get back into the 30’s. I am hoping for the best but preparing for the worst.

    • 4 oz & Glen… I believe this was a very interesting day. We have to remember, the whole market is based on QE. Just the thought of a TAPER throws the markets into a panic… can you imagine if they really did decide to taper?

      Furthermore, the whole INTEREST RATE DERIVATIVE SWAP MARKET is nothing more than a low interest carry-trade. If rates go up… the WHOLE MESS COLLAPSES.

      This, I believe is one of the most overlooked factors.

      steve

  4. Steve,

    We can’t tell if this is another rally or the real deal price move for gold and silver. My guess is just another point where gold and silver are trying to find their real value. I have no doubt that the powers that be will smash the price down once again.

    I did not realize gold and silver were such a miniscule part of overall investment demand, even if 10% of the investment money, which is not that great when you consider sound money in the future may be backed by gold and silver, were put into precious metals the price would go to the moon. Thanks for the info.

    Keep posting these great articles.

    Aaron

    • Aaron… correct. However, we do know the fundamentals and they are:

      1) EAST continues to buy gold & silver hand over fist

      2) Comex continues to bleed gold

      3) The whole Interest Rate Swap Market is in serious trouble if rates keep rising at the present rate

      4) Only a fraction of a fraction are invested in precious metals

      Even though I enjoyed this nice move up in gold and silver today…. I am patiently waiting for the REAL FIREWORKS.

      steve

  5. Great article. Been following Davidowitz for years. No one with more knowledge about the retail sector. What he says is true. I believe in the fundamentals such as that.
    Have been following the global high end auction scene, trying to glean some trends. The smart wealth (high end net worth and old family wealth), have been very busy! Dumping as much of their paper wealth as possible and parking their wealth in ANYTHING that has intrinsic, tangible wealth, that will keep its value.
    Items such as gold, silver, precious stones, jewellery, art, wine, cars, farmland, real estate, natural resources, etc.

    Bottom line is the wealthy of the globe, do not want their wealth stored in paper castles. What is coming is getting very near. eg: This past January at a coin auction held in L.A. someone paid over ten million dollars for a 1794 ‘Flowing Hair’ silver dollar!

  6. Does anybody know how many ounces of Ag have been thrown to the landfills in the electronics age? It is a substantial amount, I’m sure, but I can’t recall anyone ever estimating specific numbers on that. We see hard estimates on the mining production, currently about ~10:1 Ag/Au but how much has been mostly permanently removed from circulation?

    • lastmanstanding | August 16, 2013 at 7:32 am | Reply

      Hey Webster, how could anyone know how many tv’s, radios, cd players, vhs’s, beta’s, amps, etc. etc. have been tossed since they took silver out of our money?

      In fact, how much has been blown tfu in the space race, mil industrial complex, etc., etc.

      Just imagine when they need to part out all the nuclear missiles/warheads to make i phone 6…But now I must digress…

      It’s Friday bro…you need a beer!

  7. Perversity and more perversity… Here I am promoting the PMs to my own family with no favourable responses and I know that if I sent them this article about buying gold and silver they would, lemming like, take those minuscule investment numbers and determine that the public is right not to buy – just as it has not been doing..
    G.

  8. comex doesn’t publish real-time OIs. but shanghai do. last night US session til this morning asian session, quite many shorts finally covered bacause they ran out of margin. but tonight shorts come back in droves again.

    the manipulators have turned many retail investors into automatic shorting machines.

    i believe as long as the shanghai market shows moderate premiums and shorts are still willing to bet on price retreat, we’ll see further, relentless, non-stop bounce, all the way to 26, the 200 day moving average area.

    gold taking out 1350 on strong volume is a very significant event.

    comex not publishing real-time OIs is very evil, i believe jp morgan, et al, can see real-time OI change! it’s not a technical difficulty. it’s purely rigged for manipulators’ benefit!

    i’m glad i have shanghai market for guidance.

    silver can test 50 again early next year. but i believe it’ll finally break 50 in aug-sept period next year under normal circumstances. if we do have a end-of-game black swan event, silver can break 50 early next year! why not?

    • judejin… thanks for the interesting insight. Even though I don’t believe in Technical Analysis in a rigged market, taking out the $1,350 level is indeed a significant event for those in the market using this as a guide.

      We never know how the prices of gold and silver are going to unfold in the future, but it is going to be a wild ride and I know at the end of it all… we are going to see values many never thought possible.

      steve

  9. I am buying some silver on Monday!

  10. Steve, you are inching towards becoming the go-to site for people who just wanna know the facts – minus the ra ra crap that comes out of pretty much every other site that handles the topic of precious metals.

    You’ve acquired some good readers to go with your good analysis. ” I am hoping for the best but preparing for the worst.” That lil gem of a comment sums up what ‘having both feet on the ground’ is all about.

    If you are prepared to hold to the analytics, and stop short of the interpretations which feed into the fallacious frenzies of the mind-controlled lemmings, I think your site may be able to ‘break out’ even faster than silver ca, to the upside.

    Of course, that means giving due credit and exposure to the possible ‘downsides’ of holding pm’s in a totalitarian terror state which intends to appropriate whatever wealth it’s ‘citizens’\inmates hold – by whatever means. Full disclosure of the risks AND rewards of holding the metals. Now that’s a space waiting to be filled – by the boldly going!

    As the other commenter presciently stated – the subscriber sites have to cater to their ‘market’ – and stay locked in the fantasy world those subscribers hunger for – your site could break through the b.s. and tell it like it is… with a slight declination of the compass away from ‘confirmation bias.’ Everybody knows that ‘the game is rigged’ – the question is – what to do about it!

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