Gold and Silver Current Thoughts 7-5-2015 (Greece edition)

From the Trading Desk

Despite the long weekend coming up in the US in celebration of July 4^th, gold traded with decent volume today on the Comex electronic exchange.  Better than expected US employment figures contributed to gold trending lower for the third day in a row.  Surprisingly, Greece defaulting on its payment to the International Monetary Fund has done no favors at all for the yellow metal.  The world as a whole appears to be largely disenchanted with the safe haven allure of gold.  Interestingly enough though, coin and bar physical demand, especially in the US, has risen materially in the past month.  US Mint data showed that gold coin sales in the month of June totaled 97,000 ounces, a huge increase from the May sales figures of just 31,000 ounces.  Silver coin sales in June were 4.84 million ounces.  This more than doubled the May number of just 2.024 million ounces.

Gold and silver sales have indeed been higher as I have told clients for some time to “buy the dip.” They also know full well that I think we are going to fall further in prices. This is where dollar cost averaging into an allocation in metals makes the most sense. You get an overall better price as the metals decline than if you were to buy your entire allotment today, assuming of course that we do get a further decline.

The story of the day of course is Greece. What’s going to happen with the vote? While many in the U.S. will be enjoying the US Women’s soccer team hopefully beat Japan this afternoon, those in Greece are voting for their very livelihood. Well, at least the livelihood of those who have money at some of the Greece banks. When governments need money, where do they turn? They turn to where the money is! This is how they “recapitalize” the system.

Greek banks prepare plan to raid deposits to avert collapse

Depositors can withdraw only €60 a day from bank ATM cash machines, while requests to transfer funds abroad have to be approved by a special finance ministry committee in co-operation with the Greek central bank.

But the Greeks should have seen this coming. They have been here before, as recently as 2013 when they implemented a “bail-in” on their citizens at the Bank of Cyprus and Laiki Bank. See; “The Economist explains; What is a bail-in?” From the article;

The seeming success of the Cyprus deal led Jeroen Dijsselbloem, the Dutch head of the Eurogroup of finance ministers, to suggest that it might serve as a template for future rescues (though, after hours of falling share prices, he retracted, stating that “Cyprus is a specific case with exceptional challenges”).

I love freudian slips. This is EXACTLY the plan for the future for those countries that may have issues. This is what I am addressing in my book “Illusions of Wealth.” It is also what I am addressing in a book to be released after that one that I have been working on 9 years now called “We the Serfs!” I am simply trying to “preempt” any attempts by our government and the central banks they are in collusion with so they can’t do that to us here. This isn’t some sort of conspiracy either. I present the facts and am saving my conspiracies for a 4th fictional book.

Regarding gold, you won’t find me using the word manipulation (another conspiracy thrown around) over and over like some gold bug sites. In fact, I have only written one article with the word manipulation in it December 12th before the Greece bail-in; Thoughts On Gold Price Manipulation (the price of gold then was $1,709 then and I said don’t be surprised if they take the price under $1,531.

In that article I talk about the big players in precious metals derivatives being banks like JP Morgan (mentioned in many conspiracies surrounding silver price manipulation, but without proof). I offer simply the data from the government that shows they are a big player in the markets but can’t prove anything. I did however allude back then to the following;

While I do believe Europe and Japan will crack before the U.S., all currencies are buying you less gold and will continue to do so over time. This is mainly because all currencies are backed by governments that can’t balance a checkbook because of unlimited ability to print money by their Central Bank. What happens when you can’t print money? Just look at Greece. They are the poster child of governments who can’t balance their books. Thank God for Central Banks! (just kidding)…

Greece in 2013 had the bail-in and depositors could have bought gold after that time and be sitting on a pile of real wealth rather than some illusion of wealth. They could have given their thumbs down to the central banks that would steal their wealth right from under them. Instead, many are experiencing deja-vu and are being threatened to have more of their wealth confiscated unless they vote a certain way to keep the bankers solvent. ”

It was actually the Greek god Plato who said;

First, why we consider it shameful to yield too quickly: the passage of time in itself provides a good test in these matters. Second, why we also consider it shameful for a man to be seduced by money or political power, either because he cringes at ill-treatment and will not endure it or because, once he has tasted the benefits of wealth and power, he will not rise above them.

These are the 2 sides of the proverbial coin. Some may call it good vs. evil. For my 3rd book “We the Serfs!” I describe it as the “People” who are becoming “Serfs” vs. the government (Leviathan) that “We” created. The Bible in Job 41 says the following about Leviathan (defined as “a thing that is very large or powerful;”

From the manipulation article;

Governments will always do what they do best; spend your hard earned money and the money the Central Banks create so they can go further in debt making slaves of us all.

But that’s the future….

For now, I also wrote in that manipulation article that I was (and still am) dollar bullish;

The data tells us the U.S. dollar is still perceived as the last bastion of safety until the Banks screw that perception up.

We know throughout the history of mankind that governments always screw things up. For this reason alone it makes sense to own gold because it indeed does have a place in a diversified portfolio.

I’ll probably write an addendum to this later today or early Monday morning after the Greece vote. We may have a 2nd day of fireworks! Go team USA (women’s soccer)!!