Silver Doctors

Perhaps the reason for the late afternoon vault in gold and silver back above $1600 and $40 respectively is this doozy from Philadelphia Federal Reserve President Charles Plosser, who stated that “the Fed is actively preparing for the possibility that US could default.”
While we continue to believe there will be a last second agreement to extend the status-quo, Plosser’s statement is likely to jolt the bond market out of bed.
From Reuters:

The Federal Reserve is actively preparing for the possibility that the United States could default as a deadline for raising the government’s $14.3 trillion borrowing limit looms, a top Fed policymaker said on Wednesday.

Philadelphia Federal Reserve Bank President Charles Plosser said the Fed has for the past few months been working closely with Treasury, ironing out what to do if the world’s biggest economy runs out of cash on August 2.

“We are in contingency planning mode,” Plosser told Reuters in an interview at the regional central bank’s headquarters in Philadelphia. “We are all engaged … It’s a very active process.”

Plosser said his “gut feeling” was that President Barack Obama and Congress will come to an agreement to increase the Treasury’s borrowing authority in time to avert a default on government obligations.
Read more:

Well, that didn’t take long.
The t1/2 of cartel raids is now less than 24 hours, and rapidly approaching 0.

MARKET IS OPEN (Will close in 1 hr. 7 mins.)
		Metals	Date	Time (EST)	Bid	Ask			Low	High
		GOLD	07/20/2011	16:09	1600.50	1601.50			1580.20	1602.80
		SILVER	07/20/2011	16:09	40.08	40.18			38.13	40.24

Will the gold and silver train leave you behind?

Jim Sinclair, the precious metals king, has just sent out an email to subscribers advising that as there has been no solution for the CAUSE of the economic collapse ($1 Trillion + in worthless OTC derivatives), the downward spiral will continue unabated, whether or not a debt limit increase is passed.
Also of interest, Sinclair states that once gold passes $1764, gold will undergo a phase transition from an orderly, linear ascent, to a parabolic, exponential phase. 
All-Aboard!  This train is leaving the station!

Click here to subscribe to Jim Sinclair’s free email updates:

Ron Paul tells Congress the cold hard truth.

Blythe, take note. Sprott’s PHYS has just served notice of intents to remove another 5 tonnes of physical gold from the market. 

Sprott Physical Gold Trust Announces Completion of Its Follow-on Offering of Trust Units
TORONTO, July 20, 2011 /CNW/ – Sprott Physical Gold Trust (the “Trust”) (NYSE: PHYS / TSX: PHY.U), a trust created to invest and hold substantially all of its assets in physical gold bullion and managed by Sprott Asset Management LP, today announced that it has completed its follow-on offering of 19,000,000 Units at US$14.00 per Unit for gross proceeds of US$266,000,000 (the “Offering”).
The Trust will use the net proceeds of this Offering to acquire physical gold bullion in accordance with the Trust’s objective and subject to the Trust’s investment and operating restrictions described in the prospectus related to this Offering.  The net proceeds of the Offering per Unit are greater than 100% of the most recently calculated net asset value per Unit of the Trust prior to pricing of the Offering, as required under the trust agreement governing the Trust.

The Units are listed on the NYSE Arca and the Toronto Stock Exchange under the symbols “PHYS” and “PHY.U”, respectively. The Offering was made simultaneously in the United States and Canada by underwriters led by Morgan Stanley and RBC Capital Markets in the United States and RBC Capital Markets and Morgan Stanley in Canada.

This news release does not constitute an offer to sell or a solicitation of an offer to buy the Units, nor shall there be any sale of the Units in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Yesterday we reported that John Embry is calling for silver to reach triple digits before this thing is over (and also stated our beliefs for much higher silver prices long term). 
Today, Peter Schiff gave another triple digit call for silver, stating that silver north of $200 makes alot of sense.
Schiff also points out that the DOW is lower today priced in gold than it was in the March 2009 lows near 6,500!
“We held some key lows, especially in silver where silver held up and never got down to $30.  That used to be the resistance before it broke up and moved up to $50.  $50 is now the over head resistance and we will take that out before the end of the year.  Who knows how much higher gold is going to be by then.  I think eventually silver north of $200 with gold over $5,000 makes a lot of sense.
Click here for more:

Foo writes:

Could you please explain the impact of a US Dollar collapse on the Asian countries? From my point of view, due to the exchange rate risk, silver or other precious metals may not be a good investment for Asian people. Could you please share your opinions on my questions?
Hi Doc,
I am from Singapore. I know that when the US keeps printing money, the US dollar will keep depreciating against other currencies, like the Singapore Dollar, and also precious metals will increase in value. For example, Silver buyers in the US achieved 100% return when silver rose from USD20 to USD40. But due to the strengthening of SGD against the USD, Singapore silver buyers only got (40*1.21/(20*1.4) = 73% return.

So, Doc. Could you please explain the impact of US Dollar collapse on the Asian countries? From my point of view, due to the exchange rate risk, silver or other precious metals may not be a good investment for Asian people. Could you please share your opinions on my questions?

Foo:
Great questions!
We share your beliefs that the collapse of the US dollar is inevitable and that silver is likely to surge to $100 and beyond in the coming years.

However, silver’s 10 year bull run has not been entirely the result of dollar debasement.  Silver has exceedingly strong supply and demand fundamentals, even without systemic currency issues with the dollar that could eventually send silver parabolic.
There is a world-wide shortage of physical silver at current manipulated prices.  This is a primary driver of the increase in silver price. 
I won’t go into further details here regarding the industry consumption statistics and rest of the bullish supply/demand figures for silver, as an in-depth analysis can be conducted for yourself by reading The Silver Bullet and The Silver Shield by our friends at Dont-Tread-On.Me.

The other primary driver of gold and silver prices is fiat currency debasement by all nations.
ALL FIAT currencies have been in serious bear markets vs. both gold and silver over the past 10 years.
The SGD is a fiat currency just like the dollar, yen, euro, renminbi, etc.  Even the CHF hasn’t been backed by gold since 1999 (thanks to an IMF mandate).
While the US dollar may win the race to the bottom, all fiat currencies will undergo a MAJOR PARADIGM CHANGE when the US dollar reserve currency system collapses and takes all fiat currencies down with it. 

Lets take a look at the price of silver in Singapore dollars (SGD) over the past 10 years. (this was the only decent long term chart of silver vs. SGD that I could find, and wasn’t able to insert it into this post)

Notice the SGD’s deterioration vs. silver over the past decade from ~8SGD/oz in 2002 to 60SGD/oz in May of 2011! 
You say that silver or gold may not be a good investment for Asian people, yet in your own currency silver is up 650% in 9 years!
Take a look at long term (10 year) charts of various Asian currencies vs. gold or silver.
Let me know if you find one that has gained vs. either gold or silver over the past 10 years.
There is an old saying that is simple, yet true: The trend is your friend.  Until the secular bull market has exhausted itself in gold and silver, continue to accumulate on dips.  Take a long term perspective, and position yourself accordingly.

Friday, the HKMEx launches silver futures in Hong Kong, providing Chinese investors with opportunities to purchase physical silver in 1,000 oz lots.  This has the potential to increase access to physical silver to millions of Chinese, which could result in another long-term driver for higher silver prices to establish market equilibrium with supply. (assuming that the HKMEx is not an extension of the cartel, which is a possibility).

In summary Foo, silver and gold provide excellent protection from fiat currency debasement in all nations, and will also provide protection from the widespread contagion that will quickly develop from a collapse of the US dollar.  The collapse of the US dollar will take down the entire system as we know it.
In short, yes, we would strongly recommend that Asians exchange their fiat currencies for silver.

-Doc

The Euro debt problems pale in comparison to the debt issues of the US. 
US state debt issues have been ignored by the MSM and ratings firms for as long as possible.  It appears it is now no longer possible.

Moody’s Now Threatening Downgrade on 5 U.S. States By Alexander Schachtel
July 19 2011
Ratings agency Moody’s (NYSE:MCO), which in recent weeks has warned that it will downgrade its AAA on the debt of the United States Federal Government, has now issued a new slate of threats to individual states. Today the “investor’s service” released a statement announcing that it has placed five states, Maryland, New Mexico, South Carolina, Tennessee, and the Commonwealth of Virginia, on review for possible downgrade from their current AAA bond ratings.
The agency cites the states’ high federal employment and medicaid exposure as reasons for the review, which will affect a total $24 billion of rated debt.
Hot Feature: 3 Reasons the US Economic Recovery will be Different from Japan.
“While all states are indirectly linked to the U.S. government to some degree, we have identified the five Aaa-rated states that are most vulnerable to changes in the U.S. government rating,” said Nicholas Samuels, a Vice President in Moody’s State Ratings Team. These five states have above average exposure to several sovereign risk factors that Moody’s outlined in a July 13 special comment, “Implications of a U.S. Rating Action for Aaa-Rated U.S. Municipal Credits.” The risk factors are macroeconomic sensitivity, capital markets reliance, and dependence on federal revenues, offset by financial resources available to counteract those risks.”
Moody’s has said that in the event that Washington does not come to agreement on a plan to raise the debt ceiling and enact spending cuts to reduce the deficit, a downgrade of its ratings on federal treasury bonds is highly likely. That downgrade would in turn trigger likely downgrades for the states listed above, and a possible review of an additional ten AAA rated states, “should the sovereign rating be lowered and move by more than one notch.”
Read more:

We said yesterday that the cartel would need to smash silver to prevent a short squeeze and a quick run to the mid $40′s.  Blythe didn’t fail to meet expectations, smashing silver from $41 to $38.51 in a 2 wave take-down. A 3rd mini-take down by the LBMA is also visible on the chart during the overnight hours. Don’t get too upset, because this is actually decent action from a long term prospective, and also provides us with one more chance to accumulate silver in the $30′s.

The action in silver can be summed up: BTFD!
Silver has traded as low as $38.41 this morning, and has the potential to correct further to the $37.50-$38 range, which is substantial support.  A move below $37.50 would indicate silver is back in an even broader range trade from $32-$41, and this is unlikely after silver’s recent strong breakout above the consolidation zone.

We expected gold to retest the previous all-time nominal high of $1577 as Congress agreed to a solution on the debt limit, so price action in gold is no surprise as well.  Gold’s 2 stage drive-by shooting by the cartel yesterday is just as clear as silver’s on the 3-day price chart.  Clearly, a 2nd consecutive close above $1600 was completely unacceptable to Blythe and friends.
The real question now becomes whether support at $1577 will hold, sending gold quickly back above $1600 and off to the races, or if gold corrects further.  Should support at $1577 not hold, look for gold to work down towards $1555. 
In the long term this is just semantics, as gold is headed MUCH HIGHER from here, and likely soon.

The Republican controlled U.S. House, defying a veto threat, voted last night (234-190) to slice federal spending by $6 trillion and require a constitutional amendment for a balanced budget to be sent to the states in exchange for averting a threatened Aug. 2 government default.
Treasury Secretary Timothy Geithner has said the government will run out of options to prevent a default by August 2 – in 13 days time.
Standard & Poor’s Ratings Services and Moody’s Investors Service have said they are likely to downgrade the U.S.’s credit rating if Congress doesn’t act.
An increase in the $14.3 trillion U.S. debt ceiling is inevitable and is a question of when rather than if.
The Bloomberg Chart of the Day shows how gold in dollars is correlated with increases in the U.S.’s debt limit, particularly in the last 10 years.

From Goldcore:
Gold is flat in U.S. dollars and New Zealand dollars but marginally lower in most currencies today as increased risk appetite has seen risk assets rally despite poor fundamentals. Most Asian indices were higher, except the Chinese and Indian markets, and European indices have also risen.
Gold is trading at USD 1,587.00, EUR 1,116.1, GBP 983.50 and CHF 1,302.10 per ounce.

Bloomberg Chart of the Day from Korea Investment
Respite has also been seen in Eurozone debt markets with bond yields falling. Rumours of ECB intervention through peripheral bond buying have helped steady things but the ECB has not given any indication that it is supporting vulnerable European sovereign debt markets.
For now markets appear more interested in Apple’s massive profits than Uncle Sam’s massive debts.

Cross Currency Rates
The Republican controlled U.S. House, defying a veto threat, voted last night (234-190) to slice federal spending by $6 trillion and require a constitutional amendment for a balanced budget to be sent to the states in exchange for averting a threatened Aug. 2 government default.
Treasury Secretary Timothy Geithner has said the government will run out of options to prevent a default by August 2 – in 13 days time.
Standard & Poor’s Ratings Services and Moody’s Investors Service have said they are likely to downgrade the U.S.’s credit rating if Congress doesn’t act.
An increase in the $14.3 trillion U.S. debt ceiling is inevitable and is a question of when rather than if.
The Bloomberg Chart of the Day (see above) shows how gold in dollars is correlated with increases in the U.S.’s debt limit, particularly in the last 10 years.

Bloomberg Composite Gold Inflation Adjusted Spot Price – 1970-2011
Julia Yoo, a Seoul-based analyst at Korea Investment told Bloomberg that “gold’s rally is quite explosive.”
“Increasing the debt limit means you print more dollars, which will weaken the dollar and consequently lift the gold price,” adding to gains this year that were driven by demand from countries including China.”
Gold is 12% higher in dollar terms so far in 2011 and is the best performing currency in the world in the last 12 months.
Gold has risen 33% against the U.S. dollar over the past year, outpacing all of the more than 150 currencies tracked by Bloomberg.

United States Debt Ceiling 1940-2011
However, over the long term gold remains undervalued or at worst fairly valued.
Admittedly, gold has risen by nearly 6.5 times in the last 11 years.
However, in the last bull market in the 1970’s, gold rose 24 times from $35/oz to over $850/oz in 9 years.  Gold remains well below its 1980 record high of $2,400/oz when adjusted for inflation.
The macroeconomic conditions today are even more conducive to gold than they were in the 1970’s.
Most industrial nations such as the US, Japan, Germany etc were creditor nations in the 1970’s.
Today they are debtor nations with the US the largest debtor nation the world has ever seen. The fiscal situation in the US is appalling and deteriorating – with a National Debt of nearly $14.5 trillion and unfunded government liabilities of between $60 trillion and $100 trillion.
As long ago as 2003 we said that this inflation adjusted high price from 1980 would likely be reached and surpassed. We said that at that stage gold could be in a bubble and it would be time to reduce allocations while keeping a core financial insurance holding in gold.
In 2005, we said that the growing property bubbles in the UK, the U.S. and the massive debt levels in the western world (household, mortgage debt and in the banking system) would likely lead to a deterioration in government balance sheets and sovereign debt crises which in turn could lead to currency crises.
We are entering the late intermediate to final stage of this process and the real risk of a currency crises in any one of the major fiat currencies rises by the day.
SILVER
Silver is trading at $38.57/oz, €27.11/oz and £23.89/oz.
PLATINUM GROUP METALS 
Platinum is trading at $1,764.00/oz, palladium at $786/oz and rhodium at $1,900/oz.

NEWS
(Reuters)
Gold inches up on light buying; Europe debt fears persist

(Bloomberg)
Record Gold Price Fails to Deter Buying in India, Jeweler Says

(Emeriates 24/7)
Retail gold buyers in UAE spot booking purchases to beat price rises
(Star News India)
More gold found in Sathya Sai Baba’s cupboards
COMMENTARY
(Market Watch)
How to Make Sense of the Gold-to-Silver Ratio – Silver Catching Up to Do – Myra Saefong
(Mineweb)
Gold price floor to remain above $1000 for at least the next decade -Jeff Christian
(The Gold Report)
Matt Badiali: The Case for Gold Price Manipulation
(ZeroHedge)
Exposing China’s Mysterious Multi-Trillion Shadow Banking System
(ZeroHedge)
Time For Tim Geithner’s Annual Top-Ticking Op-Ed, In Which We Learn That It Is Time To Panic About America’s Banks
(Got Gold Report)
Gene Arensberg: Are the big gold and silver shorts being overrun?
(The Independent)
Why decline of the euro is good for gold – and for Switzerland
(Commondity Online)
Is Silver Still a Good Investment Option?

*UPDATE-  2nd Consecutive Smash in Progress

We said this morning that if Blythe could not muster up a decent raid today (or margin hike) that silver could potentially spike from here.  
Apparently the cartel had the same thoughts.

John Embry’s piece today on KWN had Embry calling for silver to potentially reach triple digits before this thing is over.
While we highly respect Embry, this is such an understatement it could be considered bearish!  Silver has the potential to reach $100 in the next 12 months without a currency event such as hyperinflation or US dollar collapse. 
Throw in a major currency event in the USD, another 5-10 years of gains, plus a public mania phase at the end of the run before the silver bull exhausts itself, and we are looking at the potential for MUCH HIGHER silver prices long term than $100. (although to be fair, Embry doesn’t qualify his expectations for triple digits, leaving himself open to the $100-$999 range)

To view silver from the perspective of our viewpoint- the King of the precious metals community, Jim Sinclair, is now calling for $12,500 gold.  A return to the historic 16:1 silver/gold ratio at this gold price = $781.25 silver.  Personally, we think its highly unlikely that silver will not overrun this historic AVERAGE ratio. 
We think it is likely that silver will overrun up to 5:1 AT A MINIMUM. 
(We’ll be conservative and not-publish our true thoughts on what the gold/silver ratio has the potential of reaching). 
Silver gurus such as Ted Butler, Izzy Friedman, Jason Hommel, and Bix Weir all expect silver to surpass gold in coming years due to consumption of silver.
Temporary parity while a long-shot, remains a viable possibility.  Plug in your own expected g/s ratios at $12,500 gold- and let us know what you come up with. 

Click here for John Embry’s interview with KWN:

Yesterday we reported that HKMEx silver futures will launch this Friday, 7/22.  As many readers have been inquiring as to whether this will end the silver manipulation, or whether the cartel has ties to this new Asian exchange with the intent on continuing gold and silver manipulation, we decided to republish our investigation of the HKMEx board of directors we published in May when HKMEx gold futures launched. 

As our readers are by now aware, the HKMEx will debut gold futures in US dollars in 32 ounce contracts starting May 18th.  We expect HKMEx to soon follow with silver contracts.  Ever since the announcement was made, speculation among the gold and silver community has been swirling about whether HKMEx is an Asian extension of the banking cartel responsible for suppressing gold and silver on the LBMA/ COMEX, or if in fact the HKMEx presents the ultimate competition- an honest, FREE bullion market.

Instead of speculating, The Doc decided to do a little investigation into the HKMEx board of directors.

Honestly, we found less than we had anticipated.  Amazingly, no one from JP Morgan, HSBC, or Goldman Sachs made the board.  Heck, we couldn’t even find a Rothschild.  We did find two possibly noteworthy figures, and the most suspicious is in fact the HKMEx Executive Director and President. 

First, the list of the entire board.

Of the directors we thought are possibly noteworthy, we’ll begin with the Executive Director and President of the HKMex, Albert Helmig.

Per Mr. Helmig’s LinkedIn Profile (facebook for business types), Mr. Helmig’s past includes:

Past

• CEO at Grey House
• member at National Committee US China Relations
• Vice Chairman, Board of Directors, Executive Ctm. at New York Mercantile Exchange (NYMEX)

• Board Memeber at International Precious Metals Institute
• Principle at The Helmig Corp/Energex
• International Commodity Specialist at Prudential Bache
• Head of Trading and Risk Management- CFO. at Helmig & Co. Inc.
• Commodity and FX Broker at Merrill Lynch

Education

• Philadelphia University

Mr Albert HELMIG

From HKMEx: Mr Albert Helmig is an Executive Director and President of the Hong Kong Mercantile Exchange. He leads the day-to-day operation of the Exchange. Together with an international pool of talented professionals, he works to build China’s global marketplace in one of the region’s most prominent financial hubs, Hong Kong. Mr Helmig is the third generation of his family to work in the commodities trading industry. He has more than 35 years of commodities experience on Wall Street and as a commodities merchant spanning both physical commodities and financial instruments on a global basis. He is a former Vice Chairman of the New York Mercantile Exchange, and he served on the Board of Directors and the Executive Committee for 10 years and was Chairman or Vice Chairman of over 20 committees. Mr Helmig was Founder and Chief Executive of Grey House LLC, a private consulting firm on risk management, price models and industry best practices to clients such as financial institutions, producers, integrated energy companies, government agencies and ministries, think tanks and law firms. He is a frequent contributor at industry forums and to the media. He serves on the Advisory Board of Energy Intelligence Group as well as other corporate boards. Mr Helmig holds degrees in Finance and Economics from Philadelphia University.

The second possibly noteworthy director is Alasdair Morrison. 
Mr. Morrison is currently a senior advisor for Citigroup, and previously was Chairman and CEO of Morgan Stanley Asia.

Mr Alasdair G. MORRISON

Mr Alastair Morrison is an Independent Non-Executive Director of the Hong Kong Mercantile Exchange. He is a British national who has lived and worked in Asia since 1971. He holds a number of non-executive directorships and participates in a number of Government and community organizations. He is currently Senior Advisor of Citigroup Asia Pacific, a leading global financial services company, an Independent Non-Executive Director at MTR Corporation Limited, and is also non-executive Chairman of Kang & Company, Limited, based in Hong Kong, a private equity firm founded in late 2007, with offices in Beijing, Hong Kong and Seoul. Previously, Mr Morrison served as Group Managing Director of the Jardine Matheson Group and subsequently as Chairman and CEO for Morgan Stanley Asia. With his many years in Asia, including living and working in Hong Kong, Australia and the Philippines, Mr Morrison has built extensive regional contacts in the corporate and government communities. He has participated in a number of high level government-sponsored working groups and is an active member of the community in Hong Kong. Mr Morrison was born in Scotland on September 29, 1948, and is a graduate of Eton College and Cambridge University. He attended the Program for Management Development at Harvard Business School in 1983. The rest of the board members are Chinese (1 Indian). Click here to read bio’s of entire HKMex board of directors: So in conclusion, Albert Helmig, the HKMEx Director and President is the one board member that appears to possibly have any significant connection to the cartel.  Keep in mind that everything must run through the Director and President of the Board. Perhaps this is the cartel’s man to keep things under control, while not making cartel influence blatantly obvious by filling the entire board with JPM, Goldman etc. officials? With this knowledge in hand, we welcome our reader’s thoughts on the matter. -The Doc

Greek 2 year bonds are reaching parity with recent annual yields in silver!  Too bad Greek bond holders are likely to never receive those gains.
Bloomberg just reported that the ECB is considering a temporary Greek default.
The countdown to Greek expulsion from the Euro, and Lehman 2.0 is on.

European Central Bank council member Ewald Nowotny suggested the bank may compromise and allow a temporary Greek default as officials scramble to fix a sovereign debt crisis that’s spreading to Italy and Spain before a leaders’ summit in two days.

European Central Bank council member Ewald Nowotny suggested the bank may compromise and allow a temporary Greek default as officials scramble to fix a sovereign debt crisis that’s spreading to Italy and Spain before a leaders’ summit in two days. Nowotny said there’s “a full range of options and definitions, from a clear- cut default, selective default, credit event and so on.”
“This has to be studied in a very serious way,” he said. “There are some proposals that deal with a very short-lived selective default situation that will not have major negative consequences.”

Click  here for more from Bloomberg:

Stewart Thomson is back with a heaping dose of reality for those who tried to sell their gold and gold stocks in anticipation of the “summer doldrums” that never materialized.

Those who sold their gold and gold stocks because of coming “seasonal doldrums” now look totally ridiculous. Can you imagine somebody telling you how they tried to trade the long side of the Dow through the crisis of 1929? In this even larger dollar crisis, if you buy the dollar against gold in size repeatedly, you stand to be financially exterminated. It’s only a matter of time before it really happens. What does it take for the amateur investor to really learn? Obviously, the answer is… more pain.

Remember that 93% of gold analysts were bearish at the recent lows for gold and GDX. They were all wrong.  Investors who sold gold stocks into the lows and bought the dollar are now in some serious trouble. The temptation is to try to buy back in, right now, but after this two week surge in price, what could happen is that price then promptly falls, and they (you?) sell at more losses.
Over time, you learn that the most wealth is built by buying into price areas that you never believed could or would happen. If you focus on trading smaller than you “know” is rational most of the time, the rare occasions when price does decline massively will see you allocating your largest amounts of capital, while most investors are liquidating and booking huge losses. You can’t predict when those times occur with any consistency, but you can respond to them as a professional investor, on the buy.

Click here for more from Stewart Thomson: