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Mid-summer Systemic Collapse Update |
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Written by Administrator
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Wednesday, 20 July 2011 17:58 |
 Gold futures rallied to a record Monday, settling above $1,600/oz and notching a 10th day of gains as concerns about the Euro-zone debt crisis and the lack of agreement on raising the U.S. debt ceiling prompted investors to seek a safe haven in the precious metals. The COMEX gold contract traded as high as $1,607.90/oz, an intraday record for the metal, according to data from FactSet Research. Silver also rallied Monday, with the September contract adding $1.27, or 3.3%, to $40.34/oz.
Peter Schiff, CEO of Europacific Capital, said that "the Dow Jones broke down Monday to less than 7.8 ounces of gold, that's the first time it has been below 8 ounces in this entire bull market. So the Dow is even lower today in terms of gold than it was in March of 2009 when the index was at 6,500. That shows you how much real value is being lost nominally even as the market goes up. That bodes very well for gold as an asset class, as an inflation hedge, that not only is it rising, but it is rising relative to stocks... I think eventually silver north of $200 with gold over $5,000 makes a lot of sense." If the Dow/Gold Ratio fell to the lower trend line of 5, then a 12,000 Dow would imply $2400/oz gold. If it fell to the all-time low of 1, then that would imply $12,000/oz gold. Obviously, if inflation drives the Dow higher, gold would likewise have a higher ceiling in terms of this ratio.
The Hong Kong Mercantile Exchange (HKMEx), China's international commodity marketplace, is starting its Dollar-denominated silver futures contract this Friday, July 22nd, following the successful introduction of its gold futures two months ago. This officially breaks the Anglo American monopoly on silver, as this will be the first time that Asians can buy and take future delivery of silver in Asia. No longer can the CME single-handedly manipulate the market by raising margins close to 100% in 8 days, as they did earlier this summer, which precipitated a 30% decline in the silver price. The new contract will trade in units of 1,000 troy ounces and be delivered in Hong Kong. Trading will last for 15 hours every day, Monday to Friday, beginning at 8am and ending at 11pm Hong Kong time, with a 30-minute pre-opening auction starting at 7:30am. Clearing and settlement of contracts will be conducted through the independent clearing house LCH.Clearnet. The exchange also plans to launch Yuan-priced gold and silver futures to capitalise on growing investor demand for China's strengthening currency, with further ambition for products in base metals, energy, and agriculture, HKMEx president Albert Helmig told Reuters earlier this month. This should result in more free-market, less manipulated, prices for silver and commodities.
John Embry, Chief Investment Strategist at the $9 billion strong Sprott Asset Management, said, "We all know the problems in Europe and in the United States, but there was apparently a failed Chinese auction due to the problem with the local debt over there. There has been so much local debt issued in the last few years as part of this expansion and I guess investors are getting a little indigestion. I think that just brings home the point even more strongly that debt will ultimately bring down the fiat currency system because there is far too much of it and we can’t service it anymore. The idea of repaying it has long since been forgotten.... Clearly they've opted in my opinion to go with printing whatever amount of money is necessary to keep this afloat, which will in the end lead to hyperinflation. At that point the debt will be cleaned out in the aftermath. The alternative would be to let it go now by imposing austerity plans in all of the various countries and that would lead to a depression very quickly. I don't think anybody wants that to happen on their watch, so hyperinflation here we come."
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Last Updated ( Wednesday, 20 July 2011 19:04 )
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