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Howard Ruff on Buying Gold And Silver
November 19, 2010 
Issue 86
SGS Notes: Whew! What a week in the precious metals world... today some volatile action as many predicted would happen... Those 'in the know' expected to see JP Morgan sell lots of naked short contracts on silver today to drive the price down under $25 spot, in an attempt to close the day out before the weekend at a low point...

Let's see what actually happened today:

We can see a sharp drop of almost $1.00 from 4:00-10:00 a.m. EST... and then a rally back to previous position...

The past month has seen several of these. Look at this custom chart depicting silver spot prices from October 19 - November 19, 2010. In regard to the gold/silver ratio, October started with a ratio of 60:1, and ended at 54:1. Today's closing ratio ended around 50:1. It still has a long way to go to get back to the historic ratio of 16:1. At today's gold price, that would mean silver should be at almost $85 per ounce.

In an interview this week on Alex Jones' radio show, the international journalist Max Keiser suggested a mechanism for bringing down the 'House of Morgan': Every American should just buy some real silver. The relevant excerpt from the interview is three minutes long and you can listen to it here:

Listen to Max Keiser on Alex Jones here

 

Howard Ruff on Buying Gold & Silver

Gold and silver are perfect pure inflation hedges. Strictly seen as an investment, as the dollar shrinks in value, gold will be worth thousands of dollars an ounce and silver will be worth hundreds of dollars an ounce. Glenn Beck, one of my favorite talk show hosts, said he is “not buying gold as an investment, although it will be a good investment, but as insurance.” He doesn’t tell us what he is insuring against, but I’ll tell you. He’s insuring against the plummeting loss of purchasing power of all dollar-denominated investments (price inflation), even the possible collapse of the dollar.

In these current circumstances, not buying gold or silver is one of the dumbest money decisions you can make in 2010-2011. Here are just a few reasons why this is so:

1. Obamanomics: Socialist states always inflate the paper currency. Obama, Congress, and the Federal Reserve are diluting value of dollars like never before by creating more of them. Accommodating Obama and Congress, the Fed has manufactured trillions of dollars out of nothing at by far the fastest pace in history, and it’s accelerating. Currencies are supposed to be a “means of exchange and a store of value.” The dollar is still a means of exchange, but due to inflation, it is no longer a store of value.

The government has given trillions to the big banks, which will loan the dollars into circulation or give them to politicians to spend into circulation. This money expansion currently dwarfs several times over the monetary explosion that led to the Carter-driven metals bull market in the ‘70s. I can’t overstate what is happening. Economists may call this monetary-expansion process “inflation” but it really should be called “dilution”—dilution of the money supply and consequently its value. Inevitably, sooner or later, consumer prices rise and laymen then mistakenly call that “inflation.” Calling rising prices inflation is like calling falling trees hurricanes. When will the public catch on? Price inflation and gold prices are the chief measurements of public awareness. Sooner or later, awareness becomes a critical mass, the public catches on, and the metals go through the stratosphere.

2. Real money: Gold and silver (especially silver) have been real money over and over again, in all ages of time and on all continents. Ever since Gutenberg invented the printing press 400 years ago, the world has been littered with worthless dead paper currencies every seventy-five to eighty years, due to runaway money printing when the people discover they can vote themselves benefits from the public treasury. Every time the dominant currency has been inflated, gold and silver coins have become hugely profitable investments, and sometimes the only surviving currency!

Throughout history, each time a paper currency finally caved in to inflation, gold and silver (especially silver) became the only universally acceptable coin of the realm. Gold and silver as a means of exchange and a store of value have always survived. They have always been symbols of wealth, far more precious in our consciousness than any mere paper.

During periods of hyperinflation, there always comes a time when people refuse to accept more and more counterfeit, inflated money or base-metal coins in return for their hard-produced goods and services. At that point, society instinctively turns to gold and silver. It has happened over and over again, and as George Santayana said, “Those who cannot remember the past are condemned to repeat it.”

3. It’s early in the game: Gold and silver are early in an historic bull market (in fact, as this is written, it’s only a Golden Calf), making this a low-risk investment with an awesome upside for the long-term investor. Especially silver. This gold and silver bull market will dwarf the last great one in 1973-80, when fortunes were made by relatively small amounts of money invested by amateur investors (many of them my readers). All of the factors that created the last bull market are here again, only amplified several times.

4. Supply and demand: Both metals are far rarer than most people know. All the gold ever mined since the dawn of history, including that in Central banks, gold fillings, and sunken shipwrecks in the Caribbean, etc. would cover a football field about four-feet deep. It would make a cube about the size of a typical 8-room house. Demand is now leaping past new supplies.

Likewise, most of the easy silver has been mined over the centuries, even with primitive methods. For example, during the Roman millennium, they used silver coins for currency and exhausted the Spanish silver mines.

Now that prices are high enough to make gold and silver mining profitable again, it will take as much as seven to ten years to develop new mines, and stagnant supply and rising demand have made higher prices inevitable for the imminent future.

In 1980 the historic ‘70s gold bull market finally topped out at $850. After adjusting for inflation, to merely equal what it did in 1980, gold would have to go (only) to $2,300, and silver topped out at $50 in 1980. After adjusting for inflation since then, to merely make a new high, silver would have to go over $125 and gold to $2,300!

Why might the metals go even higher? Most compelling is the fact that the biggest single factor that drives gold and silver is monetary inflation, and that’s already several times greater now than it was during the great gold-and-silver bull market of the ‘70s. In fact, gold and silver have been rising in response to money creation since 2000. Add to that the silver supply/demand phenomenon, and that means far higher prices—unless they repealed the law of supply and demand when I wasn’t looking.

These are just a few of the reasons why ignoring gold or silver will cost you a fortune in missed opportunities. In the worst case, gold is headed towards at least $2,500 an ounce (currently over $1,000, up from $280 so far), and silver is headed for at least $100 (currently more than $19, up from $4). And the best by far is still ahead. Long term gold and silver investors should make as much as ten times their money—and maybe a lot more—before we get a sudden rush of brains to the head and create a sound, gold-backed currency.


Other Articles of Interest

Ted Butler & Chris Martensen
Discuss the End of the
Silver Price Manipulation

$53,957 in Circulation for Every Ounce of Gold

Delta-Hedging to Cause Gold Price to Explode


 


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SGS has received several inquiries of late regarding our volume discount program. Our volume discounts apply only to non-numismatic rounds and begin with quantities of 200 ounces or more as follows:

200 -500 oz - $1.00 / oz discount
501 - 1000 oz - $1.50 / oz discount
1001 or more - $2.00 / oz discount

Volume orders will need to be placed by phone at present. We welcome individuals to enlist acquaintances to join them in a group order to take advantage of these discounts.

 

Quote of the Week

"The major monetary metal in history is silver, not gold.”

– Nobel Laureate Milton Friedman



 

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This Week's Video

David Morgan and James Turk on the Silver Price and CFTC

 

Special Thanksgiving
Greetings

This Week's Ups, Downs And Gold Standard Discussions
November 12, 2010 
Issue 85

S&GS Notes: We apologize for the newsletter coming out a few days late this week... we had a family medical emergency on Friday, which is now mostly resolved...

This week's precious metals news has revolved greatly around Tuesday's rapid rise of gold (to $1421. high) and silver prices (to $29.24) and subsequent abrupt plunge the same day (silver to $26.50 and gold to $1345) coupled with a lot of discussions regarding the potential for world currency(ies) returning to a gold or silver standard. The effects of QE2 is still being discussed as well, but since we covered that pretty thoroughly last week, we're going to talk this week mostly about this volatility we're all watching, and under "Other Articles" we'll provide some links to articles on the issue of precious metals as a currency standard...


BLATANT MARKET MANIPULATION IS EMBARRASSING THE "NEW" CFTC
Bix Weir

November 9, 2010

U.S. Commodity Futures Trading Commissioners
3 Lafayette Centre
1155 21st St. NW
Washington, DC 20581

 

CFTC Commissioners:

The blatant market manipulation of Silver on the COMEX has gotten to a point where even a non-believer in market manipulation can easily detect the illegal maneuvers. The latest side show in this decades long con job is simply EMBARRASSING to your organization and our country.

WE EVEN KNOW WHEN IT'S GOING TO HAPPEN!!!

Case in point: On November 3rd I sent out an alert to people who follow my newsletter warning them that the CFTC has decided to allow the Banking Cabal one more shot at rigging the Silver market before they end the practice of "officially sanctioned" manipulation. Here's the alert:

******

November 3, 2010: Is the CFTC Letting it's Guard Down for the FINAL MANIPULATION?

Watching the current "mini-smash" of gold and silver right before the announcement of QE2 comes as no surprise to most of us OLD TIMERS in the manipulation markets BUT I found it very interesting to read CFTC Commissioner Dunn's latest statement:

(Kitco News) -- Under Dodd-Frank reform legislation, the Commodity Futures Trading Commission must start to increase regulation of swaps and other ways to lower risk. But CFTC Commissioner Michael Dunn is concerned over funding, especially since the CFTC is already operating on only a percentage of its full budget. "If we don't get fully funded, we still have to fulfill the mandate," he said on a panel at the Futures Industry Association Expo. If the commission doesn't get the funding, that means that some self-regulating organizations take some of the work, or the agency becomes "extremely restrictive on what we do." His concern is that requests to the CFTC will have to "go in a queue" and people will have to wait longer to see actions occur. He said one-third of the staff is working on writing regulations, which means they've had to cut back on surveillance and oversight. Another panelist said it is likely all federal budgets will be cut in the future, so some regulations might go to self-regulating organizations. Either that or Dodd-Frank might need to be retooled in some way. END

WOW! Talk about ANNOUNCING to the Banking Cabal that they can go ahead and play their games for a little while longer because THE CFTC IS TOO BUSY TO POLICE THE MARKET AT THE MOMENT!!!

****

Well. What do you think happened in the silver market today? Let's take a quick look:

When JPM/HSBC Don't Like The Results, The CME Just Changes The Rules: Full Revised Silver Margin Schedule


 

 

 


Other Articles of Interest

Germany Unwittingly Adopts A Silver Standard Due to Soaring Price
Toni Straka of The Prudent Investor

 

Zoellick seeks gold
standard debat
e
Financial Times


Going Back To A Gold Standard?
Adrian Ash

Silver Could Spike to $50 Based on Short Positions That Need To Be Bought Back

Three's Company Silver
Margin Change


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SGS Volume Discounts

SGS has received several inquiries of late regarding our volume discount program. Our volume discounts apply only to non-numismatic rounds and begin with quantities of 200 ounces or more as follows:

200 -500 oz - $1.00 / oz discount
501 - 1000 oz - $1.50 / oz discount
1001 or more - $2.00 / oz discount

Volume orders will need to be placed by phone at present. We welcome individuals to enlist acquaintances to join them in a group order to take advantage of these discounts.

 



 

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This Week's Video

 

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Quantifying Quantitative Easing ~ David Morgan
November 5, 2010 
Issue 84

S&GS Notes: Talking about Quantitative Easing in today's newsletter…it's all over the news.

There's been QE, QE1, and now the Fed has announced their plan to embark on QE2. With that announcement we've seen the prices of gold and silver rise dramatically in just hours/days… What exactly is QE? Why does it have this affect on silver and gold? What other affects will we see in other markets? I'm no expert on these things… I read, I listen, I learn… here's what the 'Guys That Know' have to say….

Why should you care about this? Well, for starters, it has a tremendous impact on your silver/gold investment...and it will have a BIG IMPACT on your budget in the coming months, food prices, and the prices of other basic necessities.

And… regardless of what you think of Glenn Beck… don't miss his 2-part Video on the subject of QE… explained as only Glenn can do it...

Quantifying Quantitative Easing

From David Morgan…

Many investors are struggling to understand the ramifications of the recently announced QE2 plan. Quantitative easing, or more simply known as money printing, is a dilution transaction similar to issuing more shares for a stock. The dilution has two primary affects: a decrease in the value of the initial shares and a redistribution of wealth from the original owners to the new owners.

The most significant difference between stock dilution and currency dilution is of course that publicly traded companies tend to use the funds raised through dilution to add value by investing those funds - whereas governments don't add value by diluting a currency.

In this case, $900 billion will be diluted to purchase US treasuries so the primary benefactor of the quantitative easing will be the US federal government and the financial institutions selling that debt. However, capital flows can rarely be controlled and the newly created money will find its way into other markets and asset classes.

Interestingly, the $100 billion per month figure that has been mentioned as the target rate for QE is almost exactly what is needed to rollover maturing treasuries coming due - so it could be argued that the plan is to effectively finance the US Federal debt which would eventually lead to a complete monetization of the treasury market. Supporting this argument is the recent projection made by ZeroHedge that the Federal Reserve will own more treasuries than China by the end of November.

If the QE2 funds went into the currency market, its value would fall in half. However, $900 billion is roughly 6 percent of US Federal Debt. Inflation is defined by the growth in the money supply. If using M2, the QE2 plan would dilute the money supply by 10 percent. $900 billion represents 36% of the world's gold supply, so an equivalent move upward in price could be seen if the money finds its way into the gold market. QE2 is 37 times the size of the world's estimated silver supply so a flow of capital into the silver market could be explosive.

A dollar on November 1st is now worth 92 cents if measured in treasuries or 91 cents if measured with the money supply. It can be seen that inflation as measured by the growth in money supply is projected to increase by 10 to 20 percent on an annualized basis.

The result will be a double digit real negative interest rate and a carry trade opportunity to sell treasuries and other US dollar secured paper at a cost of near 0 percent while accumulating real assets such as precious metals and other resources that cannot be diluted.

Glenn Beck Explains Quantitative Easing
Part I & II

 


Other Articles of Interest

Not A Good Time To
Be Short Silver

Tradeplacer.com

Why The Price Of Gold
Soared After the QE Announcement

Bill Bonner, Daily Reckoning

How High Would Gold & Silver Prices Go if GS, JPM and HSBC Were Barred from Participation in Gold/Silver Markets?
JS Kim - SmartKnowledge

Gold Jumps $50 in 21 Hours As Fed Prints Money
Adrian Ash

Silver Blasts Through
To 30 Year High

Mad Hedge Fund Trader



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SGS Volume Discounts

SGS has received several inquiries of late regarding our volume discount program. Our volume discounts apply only to non-numismatic rounds and begin with quantities of 200 ounces or more as follows:

200 -500 oz - $1.00 / oz discount
501 - 1000 oz - $1.50 / oz discount
1001 or more - $2.00 / oz discount

Volume orders will need to be placed by phone at present. We welcome individuals to enlist acquaintances to join them in a group order to take advantage of these discounts.

 



 

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"I doubt we will ever see sub $1300 gold again for the duration of this secular bull. Now that the HUI and silver have broken to new all time highs we have a rare condition in that the entire precious metal sector is trading in a vacuum with no real overhead resistance. This is the only sector in the world in this position. That is the recipe for an incredible move higher in a short period of time as funds begin to chase the out-performance in the precious metal sector."

Toby Connor
Goldscents


 

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