Watch As Precious Metals & Energy Prices Go Crazy As Things Fall Apart

As Wall Street and the financial media carry on business as usual, the underlying foundation of the U.S. economy continues to disintegrate.  Very few Americans realize we have past the point of no return.  This holds true for many of the precious metals investors.

Even though precious metal investors are more educated and better prepared than the typical American as it pertains to the upcoming economic collapse, I still believe a good percentage fail to grasp that the energy situation is the root cause of our problems.

I would guarantee that most precious metals investors know the price of the metals are up substantially since the beginning of the year, but how many realize the price of natural gas is up twice as much silver and three times as much as gold?

Change in Gold, Silver Natural Gas Price 2014

If we take a look at some of the recent metals and energy spot quotes, we can see that while the metal prices are moving up nicely, the price of natural gas is going berserk:

Ktico Quotes 22014

NatGas Chart 21914

The Kitco metal prices are from today’s trading (Thursday), while the energy spot quotes are from yesterday (Wednesday).  The price of natural gas was up another $0.15 at one time today, but is currently trading at $6.04.

So why has the price of natural gas spiked so high and what does it have to do with the precious metals?

Let’s first look at why the price of natural gas has gone up 28% year to date and then I will get into the reason precious metal investors need to pay more attention to the energy markets.

The so-called “Polar Vortex” hitting the Midwest, Northeast and to a lesser extent the South this winter, has caused record withdrawals of underground natural gas supplies.

Here is a graph I posted in my article, Natural Gas & Precious Metals Prices To Spike Higher in 2014 last week:

U.S. Natural Gas Storage 21314

At the time of the U.S. EIA (Energy Information Agency) Natural Gas Report dated Feb. 13th, gas storage levels in the country were already down 34% compared to the same period last year.  I included an estimated trend (blue dashed line) of where the level would fall by the end of March.

Today, the EIA came out with their latest natural gas storage report and we can see… the trend continues:

U.S. Natural Gas Storage 22014

(NOTE:  Bcf = Billion cubic feet)

In just the past two EIA Natural Gas Reports, reported withdrawals were 237 Bcf (Feb 13th) and 250 Bcf (Feb 20th).  Thus, 25% of the total remaining gas supplies were withdrawn in this two-week period.  Here are two tables from the EIA detailing the natural gas withdrawals from the two weekly periods:

U.S. Natural Gas Storage Table 21314

U.S. Natural Gas Storage Table 22014

The dates on these tables represent the last reporting day for that week.  The reports are releasing data from the previous week.  If the Northeast continues to be plagued by the frigid weather, I estimate that underground gas storage levels could fall to 800-1,000 Bcf.

This is not that unrealistic as there are still 6 weeks remaining (on average) for gas withdrawals.

If the U.S. gas underground storage levels fall this low (or lower) by the end of March, it could push the price of natural gas up even higher… possibly towards the $7-8 level.

Even worse, the shale gas industry will have to rebuild the underground gas storage from an extremely low-level.  There is speculation by some energy analysts that the U.S. could peak in natural gas production this year.

If this is the case, it could spell disaster for next winter as the U.S. could head into the cold season with a much lower underground gas supply.  Not only would the market have less gas going into the winter season, we may see natural gas price spikes double of where they are today.

Last year, most energy analysts and institutions were forecasting significantly lower prices than what the market is trading presently.  The EIA made this forecast last summer published in EnergyWire:

Shale gas production doesn’t make a major upward move until 2016, according to EIA. Spot prices for natural gas at the major Louisiana pricing hub will drop to $3.12 per million British thermal units in 2014 and 2015, below this year’s average forecast price of $3.25, according to EIA’s Annual Energy Outlook. Prices don’t pick up until 2016 either, in the EIA assessment.

The EIA forecasted a price for natural gas almost $3 less than where it is today.  While the weather is a major factor pushing the price of natural gas to a new highs…. energy analyst, Bill Powers believes we would have seen much higher prices ($5-$7) by 2015 even if weather wasn’t an issue.

This is due to what Powers forecasts as the “Bursting of the U.S. Shale Gas Bubble.”  Bill also believes the high annual shale gas decline rates will become increasingly difficult to offset with new production.

According to a Citi Report last year, they estimated the annual decline rate for the U.S. natural gas industry is about 24%.  Thus, the shale gas industry has to replace nearly 100% of all production within the next four years, just to keep production flat… much less growing.

So what does natural gas have to do with the precious metals?….a great deal as you will find out.

There is this notion that the U.S. will become energy independent within the next several decades.  This gives the public and investors the illusion that economic growth will continue for quite some time.  If domestic shale gas and oil production peaks and declines much sooner (possibly in the next 1-2 years) than the market anticipated… it could cause serious trouble for the Stock & Bond Markets.

People need to realize that the supposed “American Dream”,  I label as the LEECH & SPEND SUBURBAN ECONOMY, cannot survive without a growing energy supply. 

Once the world realizes that Shale Energy will not allow business as usual to continue, valuations of Stocks, Bonds and most paper assets GO OUT THE FRICKEN WINDOW.

That is why it is so damn frustrating to see my energy articles receive 20-30% of the typical readership compared to a precious metal article.  Do gold and silver investors still not realize that ENERGY IS THE KEY???  The guy in the cartoon below does:

Cartoon Gas Prices

I believe things will begin to fall apart in the U.S. once we experience a peak in shale oil or gas production.  This will cause a profound shock to the Stock, Bond and Paper markets.

Precious metals will be some of the best and safest assets to own during this “Energy Induced Collapse.”

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22 Comments on "Watch As Precious Metals & Energy Prices Go Crazy As Things Fall Apart"

  1. Steve – as you have shown, there is so little silver relative to “money” or “assets” (Rick Rule believes $2 B (cash) would buy out all marginal silver available). Assumptions abound that through technological breakthroughs, we are entering a new era of energy independence. You are showing not only is energy independence a farce (at this level of energy usage) but cheap energy is over and a price shock is likely sooner than later.

    Likewise, increases in US Treasury debt by “foreigners” have been astounding since ’00 and particularly since the GFC…allowing continued deficit spending w/ ever lower rates on this ever larger debt. Now, as the Fed “tapers” it’s QE, “foreigners” will and are increasing their buying to avoid an interest rate shock. As you gander @ increases attributed to “foreign” nations, consider why would “foreigners” buy something @ extremely low yields, sure to be a loser to inflation, and ties them further to a dollar system they are attempting to become less reliant upon???

    Individual country / regional increases (as “assigned” by TIC. below TIC data based on where these are bought / held, not nationality of buyer),

    Jan ’00 —> ’07 —> Dec ’13:

    $1 T —> $1.6 T —> $5.6 T

    China $60 B —> $400 B —> $1.27 T
    Japan $315 B —> $600 B —> $1.18 T
    Taiwan $35 B —> $38 B —> $182 B
    HK $39 B —> $52 B —> $159 B
    Singapore $30 B-> $30 B —> $86 B
    India $15 B —> $69 B
    Thailand $13 B -> $16 B —> $52 B
    TOTAL $497 $3 T (600% increase, ’00-’13)

    Brazil $54 B —> $245 B
    Canada $15 B —> $28 B —> $56 B
    “Carribean banking centers”
    $ 35 B —> $68 B —> $291 B
    TOTAL $55 B $592 B (1100% increase)

    “oil exporters”
    $45 B —> $112 B —> $238 B (500% increase)

    Russia $9 B —> $139 B
    Norway $20 B —> $97 B
    UK $50 B —> $100 B —> $164 B
    Switzerland $18 B> $34 B —> $175 B
    Turkey $25 B —> $52 B
    TOTAL $83 B $627 B (750% increase)

    Ireland $5 B —> $19 B —> $125 B
    Belgium $28 B –> $13 B —> $257 B
    Luxemburg $60 B –> $134 B
    TOTAL $38 B $516 B (1350% increase)

    Germany $54 B —> $50 B —> $67 B
    Italy $20 B —> $14 B —> $30 B
    Netherland $13 B-> $15 B —> $37 B
    France $27 B —> $10 B —> $54 B
    Spain $20 B —> $ $23 B
    TOTAL $134 B $211 B (57% increase)

    I wonder who really owns all these T’s…”foreigners” is simply the term TIC applies to Treasury’s purchased / held in “overseas custody accts”…the data is provided by US based “custodians”…data “may not be attributed to actual owners”…”data may not provide “precise” acct’ing”…

    The data in this table include foreign holdings of U.S. Treasury marketable and non-marketable bills, bonds, and
    notes reported monthly under the Treasury International Capital (TIC) reporting system. The data are collected
    primarily from U.S.-based custodians. Since U.S. securities held in overseas custody accounts may not be attributed
    to the actual owners, the data may not provide a precise accounting of individual country ownership of Treasury

  2. I have a sneaking suspicion that debt ravaged Ireland did not buy $106 B in Treasuries since ’08. And Norway did not add $77 B, nor did Belgium add $244 B since ’08…and on and on. I don’t doubt the Treasury’s were purchased…I simply doubt where the money came from.

    I have a funny feeling there is a shadow QE at least as large as the on the books QE and maybe this shadow QE is double the size of “QE”. Whether this is via currency swaps, ESF, Fed authorized agents, or whatever manner…there are likely many more dollars than acknowledged…in essence in a gigantic Fed induced counterfeiting ring to maintain a “market” for US treasury debt @ ever lower yields.

    All these likely fraudulent dollars, declining cheap energy, and low inventory vs. high demand for PM’s may have some price implications for silver and gold. And these ingredients are coming together now in a perfect storm.

  3. I commented on the global inflation of the USD in the last article – but it somehow just ‘disapeared’ from the comment section! Hmmmm?

    “The price of natural gas is going beserk.” Really?

    As with ALL markets, manipulation is name of the game. The price of natural gas has been kept artificially low for years. With the massively increased presure of demand on supply, the price must rise. As with the price of gold and silver rising on the presure of demand and the increasingly smaller amount of supply.

    I agree with you Steve, that prices will continue going up. However (IMHO) the degree of price rise will be directly in conjunction with the amount of decreasing supply. In the future, only those with wealth that is freely convertable, will be warm in Winter and be able to fill their gas tanks in their cars.

    The remainder of the population had better have an axe, hand saw and a bicycle, if they want to stay warm and get around! Better still, a horse to help pull the plow, since the only way to eat, will be to grow your own food.

    • OutLookingIn,

      One aspect of the energy market that is becoming more understood… IS THE MARKET LIMIT PRICING OF ENERGY.

      In the past, when there were oil supply shocks or constraints due to higher costs, the price of oil would move higher. However, we are beginning to find that at a price above $120 a barrel oil… kills the economy.

      The price of NatGas in the United States has been kept low due to the insane practices of the Shale Gas Industry & Wall Street. That is why I believe we are going to see much higher price spikes.

      That being said… the public or economy cannot afford say $140-$200 a barrel oil. That is, on a long term basis. This is precisely why we seeing the BIG OIL MAJORS selling projects and cutting back on exploration. Why? They are losing big money…LOL.

      The only reason why I believe GOLD & SILVER will revalue much higher compared to just about everything else, has to do with the PHYSICS of paper investors moving into physical precious metals to protect their wealth. The Peaking Energy Factor will motivate the masses probably sooner than later on this switch in asset holdings.


  4. Hi Steve,
    I have followed you since the days back in2006? when you had great discussions with Shelby Moore.
    I so enjoy your incisive work. Keep up the great work please!!!
    Paul M
    ps Shelby seems to have disappeared?

    • Shelby has not disappeared, ( is his website)…but has certainly maintained a low profile.

      As according to him “The financial sites refuse to publish me any more. I make them look stupid.”

      Given that he has no small opinion of hisself, one might want to give the second part of that statement a bit of context. He made some truly amazing predictions about the downward trajectory of the p.m’s couple years back, and expected the insights he shared on metals oriented blogs and news-sites to be admired and respected universally.

      That’s not how it works at all. As Steve is finding out, precious metals bugs are of a groupthink mentality that wants no other information other than that which provides positive reinforcement to their collective genius in being part of the 1-2% smart enough to hold AU/AUG. You have to either cater to that mindset(and ditch voices of reason/objectivethinking… like Market Oracle and the rest did with SM…

      or you buck up for the long haul, realizing that if your information and your standards are of a high enough level, they will find an audience, and maybe even a far different -and better- one than you expected. You might get tired of hearing me repeat that Steve, but the further one goes down the rabbit hole of EROI, the less palatable to the tastes of the insectile part of the community becomes the message. You’ve already uncovered half of the truth… the remaining part of that lode to be dug out may shock even you!

      Paul Martin – I had no idea that Shelby Moore and Steve had been correspondents… any links to that? That would be a great discussion!

      • Rogue,

        Shelby and I had some great debates on Jason Hommel’s old blog website. That was before, Jason threw in the towel and sold all (majority) of his stocks and bought a Gold & Silver store somewhere in California.

        Shelby was a very interesting fella to debate with. I believe I may have pushed several of his buttons on many occasion. While I respect his intelligence… Shelby could dish it out, but he didn’t care to be on the other side of it….LOL.

        Rogue.. I totally agree with you on the GET RICH QUICK SCHEME by many of the gold and silver bugs. While I do believe the precious metals will revalue higher compared to most other assets in the future, I am not counting on PUBLISHERS CLEARING HOUSE coming to my door telling me I just made 1,000% on my precious metal holdings.

        Lastly, while the “OBJECTIVE MINDS” as you have pointed out, do provide more well-rounded analysis on the precious metal and economic markets, there are some BLACK SWANS coming that they don’t see on the horizon.

        Regardless… this all ends badly when we finally get the PHAT LADY SINGING the Fiat Monetary System song … “THIS IS THE END.” Remember that tune by the Doors?


    • paul martin,

      Good to hear from you. Yeah, I remember those wonderful debates with Shelby. I really got Shelby going when I said a person couldn’t shove a bar of gold in a gas tank to run his car….LOL.


  5. Meanwhile, the MSM and several Well known analysts (John Mauldin for instance) continue to propagate the myth that The US is about to become energy self-sufficient and the world’s largest producer, even larger than Saudi Arabia. I suppose it is all part of the smoke and mirrors surrounding all (Used to be) markets.

    I always ask folks who spout this myth, if this is true then why is it that US energy prices are not falling to Saudi levels? The excuse is usually, as for all poor macro data is “Weather”. More smoke and mirrors.

    • philipat,

      Totally agree with you on MSM and the other Energy Butchers such as Mauldin, Stansberry, Casey Research and etc. While Doug Casey puts out some good work on the metals and resource sector, the analysis about shale energy is horrible.

      Not to be a broken record, but I believe the information and data in my upcoming THE U.S. & GLOBAL COLLAPSE REPORT will destroy the shale energy myth once and for all. There will be 25+ charts-graphs in the report.


      • Apparently Doug Casey does not believe there is any market manipulation of PM’s that is government sponsored. According to a Casey employee that communicated with me he won’t look at the GATA evidence. That plus his insistence that his community in Argentina is the place to expatriate [a country in deep financial trouble is not where I would want to live unless I could smuggle in dollars & gold], to led me to question his work. I have however read some of his articles and he is quite intelligent.

  6. steve I have followed you for along time on turds site, and I do believe you are right about energy. I will continue to follow you here, and learn.

    keep up the good work


    • lakemike49,

      Hey… great to hear from you as well. Even though I don’t post a lot on Turd’s site, I still listen to many of his podcasts. Turd does a great job on the current price movement and COT structure in gold and silver.


  7. Great work did not know why energy was so important to gold and silver prices !! Thanks again !

  8. Navitus Strategies | February 21, 2014 at 5:59 am |

    In the next several weeks, record snow and ice will turn into record
    flooding and with it continued demand for natural gas as electric utilities
    struggle to keep their nuclear plants running at full capacity. Think
    Fort Calhoun nuclear plant 2011 flooding. In very short order it
    will be the news of the moment for record daily heat spikes and regional
    heat waves. All that NG burning to generate electricity for AC.

    Steve recognizes the fundamental equation increasingly apparent to
    those who which to take notice as in, climate change impacts energy
    use and supply which aggravates increasingly poor returns on energy
    investments which then drive down the value of paper currency thus
    boosting precious metals. Its all highly connected and interrelated as
    in the exact opposite of how Americans think and how our ‘political
    leaders’ govern.

    • Navitus Strategies,

      Thanks for that input. Yes indeed… things will continue to get interesting with the WEATHER, ECONOMY and ENERGY going forward. I imagine what we have been used to in the past, will be nothing like we will experience in the future.

      The one thing I have not wrote at all about is the CLIMATE. The climate is changing and will continue to do so at a greater degree in the future. I have come across some new data that I will also be including in my upcoming reports.

      While the debate on Climate Change will continue, the data that I have come across is NOT UP FOR DEBATE. What can be debating is the outcome or changes shown by the data.

      AGAIN… the DATA is everything. Humans lie… DATA does not. Well, unless humans are distorting the data.


  9. Steve,

    Since the key factor is to watch peaking shale oil and/or gas production, could you keep us updated on what’s going on in that sector? How are the major shale oil/gas companies doing with production and reserves? I want to know where you’re getting your 1-2 years shale peaking estimate.

    Great work Steve.

  10. Hi
    You have interesting reports on this website. Thank you.
    I think every know and then about the role of energy in our lives. We know we eat about 3kWh per day to survive. So it would be interesting to know how many man-hours is one ounce of silver to estimate the future value (meals). Does anybody has some links?

  11. Gold bugs are morons. They just want to hear that all fiat paper is worthless and that gold is going to explode because of some esoteric reason.. as in, gold is money like god is all powerful.

    EROI is the reason why gold has gone up since 2000. Production costs have been rising from 200-300 back then to 1200-1400 today. The rise in gold has pretty much 1:1 mirrored the increase in production cost. THAT is the managed retreat – the manipulators allow gold to rise along the line of its production cost increase. With some added volatility of course, to rip people off, as witnessed in the massive pump and dump in silver from end of 2010 to end of 2013.

    There is nothing more important to know about gold and silver than the consistent ore grade degradation, and the rise in energy costs, because fossil fuels too are becoming continually more scarce. It is the single most bullish factor for gold and silver.

  12. @Markus:

    “…It is the single most bullish factor for gold and silver…”

    But would this not also be true for the base metals too? viz. EROI is also the single most bullish factor for lead, zinc, nickel, etc. This being the case, why not stack nickel or lead?

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