Zombie Bank Analysts Rise from the Dead to keep Fiat Money Alive

Zombie Banking Analysts2

It didn’t take long for the hoards of zombie bank analysts to come out with their bearish precious metal forecasts now that the price of gold and silver are down 25% and 40% respectively since the beginning of the year.  Coming straight out of the bankers play-book, it looks like we should get used to seeing more of this sort of high quality analysis in the future.

Barclays Smiles as it Forecasts Lower Silver Prices

Silver sits on shaky ground: Barclays was published on Bullionstreet, July 13th.  According to the article:

LONDON(BullionStreet): Sizeable, cash-negative and physically backed ETPs expose silver prices to considerable downside risk, major global financial services provider Barclays said in a report.

“Silver has been the worst performer across precious metals, but we believe it faces further downside risk in the near term. While there is some scope for industrial demand to improve and lend support to prices as the year unfolds, given the muted response to lower prices thus far, we believe this cushion is unlikely to materialise in the coming weeks,” analysts at Barclays Plc said.

What a surprise coming from Barclays.  They believe the market will see LOWER not higher silver prices going forward.  You will notice that they now believe “Industrial demand” will pick up in the latter part of the year, but this won’t help offset the “muted response to lower prices thus far.”

What they really meant to say was this, “Due to the manipulated take-down of the price of silver by fellow member banks, the psychology of the investing public in silver has presently been destroyed.  Furthermore, we believe as we push prices down lower by naked shorting of paper contracts, there will be even less investment demand until the latter part of the year.”

We must remember, as the price of a commodity or item falls to an extreme, the public becomes increasingly wary of purchasing additional units.  Even though the fundamentals may be outstanding for an oversold item, the public doesn’t want to be buying and holding onto what they perceive as a LOSER.  The public only wants to buy things that are increasing in value — hence the warm feeling associated with being a WINNER.

For example, I have friends in Hawaii who were trying to purchase a home recently.  Where they live, a home worth $500,000 is considered below average.  So if they wanted something decent, they would have to fork over at least $750 grand.  With the help of the FED buying $40 billion a month of MBS, and willing mortgage brokers who could get them financing for upwards of $1 million, all they had to do was find a home.

As they went to look at some of these higher-end homes, they found out that buyers were bidding up the prices, and at times there were five individuals competing for the same property.  Hawaiian real estate (as well as what is taking place in the states) is now immersed in another wonderful speculative bubble.  Another well done job by the Federal Reserve.

This is a perfect example of human buying psychology at the opposite end of the spectrum compared to what is taking place in the gold and silver market.  Where were these buyers when the prices of homes in Hawaii were 20-30% lower in 2009?  Nowhere, because no one wants to be perceived as a LOSER.

Getting back to Barclays, it’s not surprising at all to see their analysts coming out with bearish analysis on silver.  It would be more strange if they weren’t.  We must remember this is the same bank that was subpoenaed along with JP Morgan (custodian of the Silver SLV ETF) on supposed rigging of the Libor rate:

JPMorgan, Barclays Subpoenaed Over Libor Scandal

JPMorgan Chase & Co. (JPM) and Barclays Plc (BARC) are among seven banks subpoenaed in New York and Connecticut’s investigation into alleged manipulation of Libor, according to a person familiar with the matter and company filings.

bloomberg article

The gold and silver investor must realize that in order for these dead zombie banks to give the illusion that they are still alive, they have to control precious metal market sentiment by lowering price and destroying demand.  Even though higher prices are very problematic to the fiat monetary institutions, ongoing high physical demand is actually more damaging.

The banks have the ability to control paper prices, but they do not have an unlimited supply of physical gold and silver bullion to meet an insatiable demand.

NEXT:  The Ghouls from Natixis Economic Research are Bearish on Gold

Today, as I did my morning web-surfing from the list of websites that I check daily, I came across this article on Mineweb, Gold supply surplus could send prices plummeting–Natixis:

The negative momentum being generated by investor gold sales is a natural market stabilizing mechanism, which could send gold to below $1,000 oz., says Natixis Economic Research.

….“Our best guess is that, if selling by investors persists, short-term equilibrium would be reached somewhere between $1,000/oz and $900/oz,” Natixis advised.

However, the analysts suggests that once investment demand returns to its long-term “normal” of around 6-9% of the global market, “so we should return to a price level that compensates mining companies for their continued participation in the gold market.”

Well, according to Natixis, $1,200 gold is just not low enough for their blood…. looks like they want to see sub $1,000 for the yellow metal.  They mention that “negative momentum is being generated by investor sales.”  This is a peculiar piece of analysis as we know investors are not selling their physical gold at these prices.  From the articles and reports I have come across, buying is still out pacing selling by a wide margin.

Then they say “once investment demand returns to its long-term ‘normal’ of around 6-9% of the global market, we should return to a price level that compensates mining companies.”  What they really mean to say here, is that they don’t want gold investment demand ABOVE its normal 6-9% of the global market.

You see, investment demand at say 10-15%+ of the global market would put severe stress on physical supplies, thus pushing the price of gold higher.  This would then cause gold market sentiment to rise which in turn would make the psychology of buying gold positive again. Thus, we have a positive feed back loop that scares the living hell out of the bankers.

Basically, the fiat bankers don’t care if investors buy a little gold —  nothing wrong with allowing the public to pick up a few crumbs here or there.  However, when the price of gold was getting ready to break above $1,800 in the beginning of October, 2012, investment demand was starting to get out of hand.  With bullion banks sitting on record short positions after the FED QE3 announcement in Sept, drastic measures had to be done to save the fiat monetary system.

For those who read this article and are not familiar with Natixis Economic Research, they are apart of the Groupe BPCE, France’s second largest banking group.

Zombie Banks Stick Together

While its true that not all bankers or analysts see gold and silver as a threat, the overwhelming majority do.  The whole global banking system is based on a fiat monetary system that is still becoming weaker each passing day.  Gold and silver are a real threat to the banking system because they offer a competing monetary currency that has 2,000 years worth of solid experience.

Furthermore, gold and silver are real money as they contain a store of value locked in each ounce.  On the other hand, the store of value in a Federal Reserve Note is just a few cents worth of printing costs.

The Zombie Banks and their analysts will continue to put out bearish precious metal forecasts, because…. IT’S IN THEIR BEST INTEREST to protect their fiat monetary system.

Fortunately, for the precious metal investors, we have time, fundamentals and the “Energy Factor” on our side.  More about the Energy Factor in future articles.

 

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6 Comments on "Zombie Bank Analysts Rise from the Dead to keep Fiat Money Alive"

  1. Save_America1st | July 16, 2013 at 8:09 am |

    Great write-up…the psychology of the regular investors is odd. They never learn to be contrarian to the public sentiment and scoop up the bargains at cheap levels. Always buying high and getting fleeced.

    As a stacker only I hope the EE does crush gold and silver down further. It doesn’t help the false dollar value of everything I paid for above 30 and 1400, but I don’t give a rip about that now. Buying more ounces for less fiat just helps bring down my dollar cost average and allows me to stack more phyzz before this whole thing implodes!

    I’m 95% silver and 5% gold…it’s just easier for me to buy the cheaper ounces of silver, and with this GSR so high it just seems smarter to buy silver now and wait for the GSR to come back down to earth and then try to make some silver/gold swaps.

    Can you see the GSR eventually getting to 20:1, 10:1 or even lower one of these days? I mean with all the uses for silver and the insanely low supply, not to mention the energy it takes to get silver only costing more and more for fewer returns, mines closing, etc., couldn’t silver eventually explode in value ratio closer to a 1:1 on par with gold?

    I’ve heard that like 98% of all above ground silver mined in history has been destroyed due to industrial use…or basically if it’s around it’s buried in scrap yards in tiny little pieces of smashed electronics, etc. And I’ve heard of that USGS article from a few years back that Max Keiser talked a lot about where they estimated by 2020 silver would become the first element to become extinct on the periodical chart.

    What do you think of those claims? Kinda “bullish” for physical silver in the long run if all that is true, don’t you think?

    Keep up the great work man! See ya all the time at TFMR too!

    • SaveAmerica1st… yes, I believe we are going to see much higher silver prices and a lower Gold-Silver ratio. I believe part of the reason why the Gold-Silver ratio increased so much in the early 1900’s was due to the extremely high EROI -Energy Returned on Invested of oil.

      Before the late 1800’s, most of the gold and silver were extracted by human and animal labor. Thus, the historic 15/1 gold-silver ratio was tied to the limited ability for these metals to be extracted at their geological composition in the earth by human & animal energy.

      However, when oil appeared on the scene, it inflated the gold-silver ratio, because 1 barrel of oil is the equivalent of 18-20,000 hours of human labor. With technology and this very high EROI of oil, a great deal more base metals could be mined, thus we have a great deal more by-product silver than before.

      Now that the world is peaking in oil production, that high gold-silver ratio will fall considerably, not only because of less energy, but due to the fact that the majority of paper assets are nothing more than FUTURE ENERGY IOUS.

      So, when the world realizes paper assets will become increasingly worthless going forward for various reasons, the mad rush into the precious metals will push the price of silver up much higher in percentage terms, lowering the gold-silver ratio substantially.

      steve

  2. When the dollar is worthless what will it matter how many “worthless dollars” you can get for your gold or silver?

    When stores and other companies only take gold or silver as payment, what do you think gold and silver will be worth?

  3. Save_America1st | July 16, 2013 at 5:02 pm |

    thx for the reply Steve…I see what you mean. Like Billieg stated, and maybe you could work on a piece regarding this, how do you say? Conundrum?…regarding how we all can wrap our brains around not referring to the price/value of our silver/gold ounces in terms of dollars.

    That’s why in my reply to you above I actually (for lack of a better term) referred to the value of my silver ounces as the “false dollar value”. I was implying that I don’t think of my ounces as dollar values since I believe that the dollar will die eventually and that we’ll need to value our ounces in some other way.

    But how? I’m not sure if I’ve seen anybody effectively tackle this “conundrum” before. Is there a great article that someone has written that helps define how we should value our ounces in the future outside of dollar terms?

    Do we pretty much have to wait until the day If/when another currency is eventually replaces the dollar as the world reserve currency, and then change our terminology accordingly. Such as 100 renminbi per ounce? Or 100 SDR’s per ounce? I dunno…

    I have frequently run into the stupid comment that it seems soooooo many people know to say even though they have noooooooooo clue about anything about what’s really going on economically in this world and have no clue about physical gold and silver. They say, “Well you can’t eat gold…hahahah.”

    I mean, where do so many sheeple get this comment from, yet they nothing else regarding the facts and fundamentals sticks in their minds???? Why does that stupid, ignorant comment have such an impact on so many people that they blindly believe and use it as their only ignorant argument against the ownership of precious metals? lol That always baffles me.

    And let me tell ya…I can and have burned a lot of those people down to the ground in 30 seconds with the facts and fundamentals against that stupid saying, but they all refuse to hear a single word! lol

    It’s mind-blowing! Maybe you’ve also run into that same type of conversation where you’re trying to explain to someone how to basically save themselves and the only thing they can do is act like you’re some conspiracy nut and say, “you can’t eat gold…hahahah.”. How ridiculous is that!???

    So anyway…back to my original point…maybe you could do a write-up about how or what we should do to help ourselves and others wrap their brains around how we should refer to the “value” of our physical ounces.

    Against anything else, it seems to me that we can’t yet compare or barter that value yet in comparison to something like acres of land? Or a car? I guess we have to wait until the day the world-wide paper market crashes, right?

    I mean, like Peter Schiff has his deal where you can store your physical offshore with his company and then use a debit card for purchases against the value of your physical holdings stored in his vault. But how can anyone do this when we have to base the value on a fraudulent paper market price that can be so wildly volatile on any given day based on the whims of JPM and the rest of the Evil Empire???

    If the day comes where the paper market finally dies world-wide, then what is the true value? I guess it might be based on free market human valuation, but how in the heck will that ever truly be established country to country, city to city, county to county, city to city or person to person depending on their wants and needs????

    I mean…one day I’m hoping to be able to use my ounces of silver to trade/barter for a nice hunk of land somewhere. But I don’t even know how that could be done without some form of government interference and with all the legal type shit you have to deal with. I’d like in a perfect world to just go up to someone who has a certain amount of acres and a house for sale for 500 ounces of silver. Then I go up and give them 500 ounces of silver (or talk them down to 450 😉 haha )…and so we just make our trade and go about our lives. Do you think that could ever happen?

    I have no idea if I’m even theorizing in the right ballpark here…I’m still fairly new to stacking and the concepts of this nature. But I think it would be a great subject for someone like you or the Turd to write about.

    Thanks again!

    • Mike Maloney constantly talks about commodity ratios, you may like some of his stuff.

    • Re: the “Conundrum”

      You are spot on Save_America1st. The problem is our use of language in describing PM, using definitions based in currency. It needs to be 180 degrees the other way around. The “price of gold” in hyper-inflated dollars is even more meaningless than it is now. $50,000 per oz. or Unlimited price of gold. NO. NO. NO. Gold is stable. It is the CURRENCY that is LOSING value, not gold going up or down. As a storehouse of wealth, gold has been hijacked by the Banksters and turned into a value-variable commodity by ETFs and fractional paper gold. This is to falsely pretend that the BASIS of wealth definition is the dollar, which is really just another piece of paper.
      WE need to begin to THINK and SPEAK in terms of currencies relative to GOLD/SilVER.
      ie: “How much silver would it take to buy a dollar?”
      “How much gold does it take to buy a deutschmark ?” PM is the basis.

      What is needed is an understandable DENOMINATION of PM, based on the troy oz,that is more understandable than 31.1 grams. The public understand dimes, quarters, halves, etc. and the decimal system. What is needed is a new universally accepted DENOMINATION paradigm, based on PM quantities, that have NO relation to ANY currency. For a new system to work, “Prices” must be learned to be understood in PM amounts, not “dollars”.

      When that happens, you are right. X asset (land/housing) should be priced in ___ denomination (quantity) of gold/silver. If hyperinflation comes, there will be no such things as “dollars”. The sooner we understand PM in exchangeable quantities and denominations (including representative coinages of identifiable amounts) we will be back on a system of real money, with a real basis, and not fiat currency that is worth something different every day, just so traders can speculate which one they can manipulate to seem relatively more valuable.

      Sometimes I discuss this on my own blog. EpluribusUNO.wordpress.com.

      Very important theory you brought up, IMHO

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