PRECIOUS METALS NOW LOOK BETTER THAN EVER: U.S. Government Debt Surges $450 Billion In August

SRSrocco on August 29, 2019

Without this $450 billion in new debt, the entire U.S. Government and economy would have begun to shut down and collapse.  Furthermore, the U.S. Treasury is finding decent demand for this new debt because an increasing amount of Foreign Treasuries and Bonds have a negative interest rate.  So, investors around the world would rather buy U.S. Treasuries and Bonds at a small positive rate than lose money, holding their bonds at negative rates.  Of course, this cozy situation won’t last as the Fed will likely be forced to lower rates back to zero and then into negative territory when the U.S. economy rolls over into a recession.

However, here’s an important question.  How much does $814 billion of new U.S. Treasury debt look like if we compare it to the value of global gold and silver production in 2019? According to S&P Global Market Intelligence (gold) and my estimate (silver), global gold production will reach 110 million oz (Moz) this year, while world silver production will likely fall to 850 Moz:

If we multiply the annual production figure for gold by $1,500 and silver by $18, the total value equals approximately $180 billion:

So, the U.S. Treasury will have issued another $814 billion in debt in within six months versus the $180 billion value of global gold and silver mine supply for 2019.  And, this is only one central bank issuing more debt.  Thus, the more debt that is added to central banks balance sheets, the more interest rates have to fall.

Why?  Well, for starters, the central banks can’t keep the lights or fund the government if the interest expense they are paying on all this debt continues higher.  Which means, the next best option is to get the Bondholders to fund some of the central bank deficits.  This is very bullish for gold and silver going forward because the notion that precious metals don’t provide a RETURN or YIELD becomes meaningless when bondholders are charged an interest to lend governments money.

Well, while financial events do not normally involve sounds, the haunting spectre of seeing over 65% of all bonds issued around the world paying a negative return evokes memories of a “bad moon rising” of which ancient folk lore of the lunar omen has filtered down through generation after generation. The problem here in 2019 is that NO generation has EVER encountered a financial instrument paying a negative yield because if you buy one, you have to pay the issuer to hold it. This absolute insanity is the nuclear torpedo  that is heading for the starboard side of the Good Ship “Modern Monetary Theory” as she steams headlong into the abyss becoming rapidly known as the “Japanification” of all things financial.

So today, we not only have the Great American Military Machine kept alive by life support mechanisms designed to keep the U.S. dollar strong and in demand as the world’s reserve currency, we have the major global economic regions all run by governments that have a coordinated and comingled comittment to total currency debasement and the complete annihilation of the purchasing power of their respective currencies. Saving money is archaic and reckless; debt management is avant-garde and prudent. The beguiling dying moan of the swan is the sound reverberating through the walls of central banks and houses of parliament or congress because the global financial system is drowning, choking, asphyxiating on its regurgitant debtload and there is absolutely nothing that anyone can do to prevent its mortal demise. And you wonder why gold just hit a six-year high?

The gold miners smell better times ahead and for those of you too young (or too old) to remember the gold old days of 2002-2011, the HUI-to-gold ration peaked in the .55-.60 range in the 2006-2008 period, and that was with gold bullion under $1,000. Today at $1,548, the ratio is one quarter of that level, having risen since the late 2015 lows at .091 to the current .15 level. The point I make is that the gold miners that choose to live or die by the sword of unhedged production carry enormous leverage to rising gold (and silver) prices. Secondly, the gold miners as represented by the HUI, are leading, not lagging, indicators for gold and silver prices and are confirming indicators for the major trend in gold.

Silver is a Stallion!!

Toodles!

Dennis Gartman…

“Turning to gold, a much-needed correction has taken place since yesterday and seems also already to have run its course as spot gold traded to $1550/oz for a short while earlier this week and for an even shorter while fell nearly to $1525 before finding support. We said here yesterday that the inevitable correction or consolidation would be ephemeral in nature and it appears for the moment at least that we were correct.

Even more impressive has been silver’s strength. Indeed, silver’s taken the lead from gold as the Gold/Silver Ratio stabilized last week at or near to 88:1 but is now trading just a bit below 83.1. Indeed, for a few brief moments yesterday morning this ratio actually traded down toward 82.5:1!…We needed to see the GSR break down through 86:1 to truly feel comfortable. It’s done so and it is so this morning as it trades down to 83.15:1 and is heading to the 60’s or lower.”

Now gold is the high yield alternative at 0%

Jim Bianco? @biancoresearch 14h14 hours ago
For 5,000 yrs gold’s problem was it had no yield. Welcome to “the upside down” of negative rates. Now gold is the high yield alternative at 0%. I expect more negative debt ahead and this relationship to hold. Hence, high gold prices. So reach for yield. Reach for gold at 0%! https://twitter.com/rhema3117/status/116718975061828403 2

We see no reason to liquidate positions like some have done as the events of the world are not slowing down but are speeding up. In fact, we see more reasons to be adding more physical precious metals as the world’s debt instruments start to do their counter party risk to everyone not paying attention. 

The Commitment of Traders Report

Silver

*The large specs increased their long positions by 7,501 contracts and decreased their shorts by 5,637 contracts.

*The commercials decreased their longs by 5,288 contracts and increased their shorts by 5,530 contracts.

*The small specs decreased their longs by 5,072 contracts and reduced their shorts by 2,752 contracts.

The commercials are net short 81,681 contracts.

Gold

*The large specs increased their long positions by 10,315 contracts and increased their shorts by 13,470 contracts.

*The commercials increased their long positions by 15,458 contracts and increased their shorts by 13,014 contracts.

*The small specs increased their longs by 6,556 contracts and increased their shorts by 5,845 contracts. 

The commercials are net short 333,806 contracts.

The JPM crowd is as short as can be in silver. Can’t recall the gold long and shorts going up so similarly in all three categories as in this report.

Speaking of James Mc…

Resilient silver”- how weird is THAT?

Bill,

When talking about silver the past 8 years the one description you would have never considered is “resilient.” That, however, is the perfect description for the silver market in 2019. Yesterday’s selloff could have provoked further selling, and the usual “consolidation” pattern. Instead silver immediately roared back and is now nearer to its recent highs. Impressive too that it’s not only happening on a Friday, but on Sep silver first notice day, and a Friday ahead of a long holiday weekend. Call sellers still buying their way out? Short sellers with no stomach for a 3 day weekend? Short sellers scrambling to not be obligated to deliver physical? All three? Whatever it is there is MAJOR cartel rule violation going on. The fact of the matter is if the cartel could be preventing this unruliness from occurring they would damn well be doing it.

You have often said in the past, “where there’s smoke, there’s fire”. Silver is giving off billowing clouds of smoke right now. Today’s silver volume is way on the light side, less than 70k as of 10:45 am. In light trading environments like this the cartel has always pushed silver around anyway they saw fit. Today should have been the classic coma routine. Maybe Hurricane Dorian’s threat to Florida is an apt metaphor for the short seller’s plight on this 3 day weekend. 

If next week shapes up to be the kickoff to the bullish precious metal season the cartel will need to deploy their cannons to stop it. Possible, but as of late their appetite for destruction has greatly dimmed. Tea leaves say the cartel retreat should continue, with increasing unruliness and volatility. 

I wouldn’t be surprised to see $3,000 gold: David Rosenberg

Interest rates will keep going down and gold will keep going up in what Gluskin Sheff’s chief economist calls a ‘bona fide and durable gold rally’

Feels like we’re going higher after this little correction. JMHO

Maybe we’ll tank on Tuesday, but somehow I don’t think so.

Sorry you feel it necessary to leave because R6 asked you to be less cryptic.

We played that game with a guy/handle by the name of Frostbite and it got really old, although he didn’t so much try to give his direction of the pm markets.

Regardless, while I remember you from the old days, I don’t think it’s a lot to ask to give straight talk about where you might think pm markets are going. Other than that, you can post where other folks think pm markets might be going, right? 🙂

We’re all too old to play games, so if you gotta go, you gotta go. Come back when you want to join the team.

Best, Buygold

The last time I met with somebody that talked like “The Coin GUY” he was from Massachusetts and that had decided to Grace those in his company  with his presence while he wore a 3 piece Suit on board a ship  just after returning from abroad .  quote 11:43

“Oh…and I almost forgot…the reason I wanted to thank you is that after reading your commentary this morning….you’ve allowed me to understand just how depraved this society has become.”  He is so above it all from his lofty perch that he describes as “depraved” what Hillary  described as “DEPLORABLES”… Reminds me of a quote attributed  General De GAULE while making love to his wife she exclaimed Mon Dieu!,Mon Dieu!,to which he replied “my dear just call me Charles at home !

G&S feel like they want to spring out of this little correction…

Best of all. the. Trannie index is 112 pts off its. high…

a little different but the banksters aren’t backing off.

https://cftc.gov/dea/futures/deacmxlf.htm

making a nice little come back going into the last hour.  what’s

not to like?

USD is up almost 1/2%, but rates are modestly lower. I guess the buck isn’t “screaming” higher but to the Captain’s point, negative rates can’t be ruled out here in the good ol’ USA – maybe that’s what gold is smelling, which is why I’m not so worried about a Labor Day love fest between Trump and China. We’ve seen that news help the SM but not really hurt pm’s.

Be an interesting last hour. Market closes have been good to us lately, nice change of pace from the last 7 years.

Yeah, that was it! Lived in a dumpster. 🙂

A repeat. of the 70s?? WE’d. be lucky. to get off so easily. after all these years of printing our way to prosperity. to support the changeover of the developed nations into welfare states…

Lets face the music. and dance–Fred. Astaire

It’s screaming higher now.

But from a gold holders perspective, and a view supported by Martin Armstrong, this is what you want to see.

Why?

Because it means the safe haven trade into the US is accelerating as the rest of the world collapses. This of course means more currency debasement is to be expected. And with falling rates in the US having no effect domestically as well (the US is the cleanest dirty shirt), pushing on the proverbial string, negative rates cannot be counted out here too, which is a prescription for screaming PM prices eventually.

It’s just a matter of time.

All fiat currency/free money regimes fail.

People think this is not possible with the exchange rate mechanisms in place (its a global affair), but they are wrong.

This will be evident in skyrocketing prices of real goods in good time.

Cheers

Plunge Protection Team saves the world (from a 5% dip) once again.

For Second Week In A Row, Fed Buys Treasuries

After 250 weeks without a purchase of Treasuries (since Oct. 2014), for the second week in a row, the Federal Reserve bought Treasuries…

Sunday…gold would. really be slammed…I just. got home and sold my GUSH…still made $12.5K….and. will. definitely keep playing this. ETF…on the other hand if the. tariffs go into effect and there is no. new. nicey dialogue from Trump or. China, than stocks could tank,  yields fall and gold pop. an ole $30 Monday nite….I. got. a.  bad feeling. about gold…but. will hold all positions…cause in a bull mkt, surprises are to the upside

OK, I’ll guess that that one particular poster that you referred to was named Frostbite.

I have not gone back and re-read Richard’s post, but I remember him asking you to be less cryptic. Meaning, he wants to understand what you are trying to say. I cannot speak for anyone else, but it seems to me that he and many of us here are interested in many varying opinions. There are some posters that I may skip over, or skim quickly. But generally no one is discouraged from posting, unless they overload the forum with obviously ridiculous propaganda or meaningless drivel or continuously attack other posters. (Actually, meaningless drivel has been tolerated if it had some wisdom or was entertaining. Thinking of a couple of former posters, one in particular :-))
I don’t think Richard’s post merited your reaction and response.
If I interpreted your response incorrectly, my apologies

Just noticed the USD had a huge breakout. Not really hurting us yet, I guess because rates are the only thing that matter these days, but still a stunning short squeeze in the currency markets.

Have to see what the news is this time. Crazy.