Gold and silver bugs always seem to be in the habit of crying wolf whether prices are up or down. Sorting the wheat from the chaff is the order of the day. Many metal bugs are always doing and saying things that lead me to believe they don’t really grasp what is going on but their primary mantra seems to be “keep stacking” which definitely makes sense IMO.
I keep my ear to the ground regarding metals and have noticed a few trends which may have escaped your attention. A (very short) recent article on Casey Research relates to capital controls. We’ve all heard the recent increased banter about banning cash and further implantation of capital controls. In the article, the editor of The Casey Report E.B. Tucker reports that he buys metals at local jewelry shops and recently noticed a new sign limiting cash purchases to $6000 every 48 hours. http://www.internationalman.com/latest-news/this-is-the-only-way-to-buy-gold-without-the-government-tracking-you
As with most things “Casey”, I suspect more than a little hyperbole and fear mongering and his this article raises more questions than it answers for me. However, I believe that if/as capital controls are imposed on us it will be done “softly” at first in the same manner the article points out. Such controls will eliminate the ability to buy assets anonymously and if that is important to you, you should be sitting up and taking notice.
Another trend that may affect you in your wealth preservation endeavors is the increasing “shortages” and skyrocketing premiums that seem to become deeper and higher with each price dip. Some of the shortages can be explained by end of year tooling changes by sovereign mints but many private mints including Sunshine Minting which supplies finished silver planchetts to the US Mint, have reported difficulty in sourcing bulk silver to keep up with ever increasing demand. Interestingly, the drops in spot prices are causing significant increases in demand which runs counter to traditional herd movements. Sunshine Minting also noted in an interview last year that many of the bars they are buying to mint rounds and planchetts are ancient which indicates to them that their sources are scraping the bottom of the barrel to supply the private minters.
Personally I worry about this trend. I’m not sure how much metal is enough metal but I’m certain I have not reached what constitutes “enough” for my tastes. One of the things metal bugs dredge up year after year is the so far mythical, “price disconnect” from spot. This is just a fancy way of saying “increased premiums”. These increased premiums are a reality with every significant dip in price but they seem to be steeper and longer lasting in recent dips. This simply means we pay a higher price despite lower spot prices.
When I first started buying junk silver I could obtain it in just about any quantity at or even below spot prices. Junk silver is the term for former circulating US coinage. Old silver dollars had 30%-110% premiums for a couple of years and supplies of all other denominations from halves to 35% silver war nickels have been drying up significantly over the last year causing premiums to exceed 30% and stay there. I could actually make a killing selling my junk silver on the new premiums alone but I doubt that I’d be able to buy it back no matter how low spot prices go.
Steve St. Angelo of the SRSrocco Report has an excellent short article on the supply deficit in gold and I assume things are similar for silver. https://srsroccoreport.com/2012-2015-u-s-gold-supply-deficit-one-hell-of-a-lot-of-gold
From SRSrocco Report:
“The U.S. suffered another sizable gold supply deficit in 2015. Matter a fact, the deficit was 50% larger than in 2014. In 2015, total U.S.gold demand was 118 metric tons (mt) higher than total supply versus 77 mt in 2014.”
Sovereign silver coin, along with silver round and bar sales has been setting new records almost every month regardless of spot price movements. What this means for those of us still in the buying mood is that we should consider increasing the frequency and quantities of metals purchased going forward to avoid increasing shortages and consequent premium increases that supply deficits all but guarantee going forward.
Finally, the issue of counterfeit metals is always a concern and the Chinese (and others) are perfecting the art more with each passing day. Years ago I heard that they were counterfeiting the Englehard Silver Prospector rounds and I’ve avoided them like the plague ever since. Modern fakes are fooling plenty of experts but I suspect most of this is due to inattention to detail right now. Most of the fakes seem to be limited to generic bullion products like rounds and bars but certain sovereign coins are being faked as well. These are usually restricted to key dates/mint marks on collectible coins on the sovereign side of things. Even five and ten ounce gold bars are being discovered in Manhattan that are tungsten filled.
Coin World put out an excellent (and short) article yesterday on Chinese counterfeit bullion products that is worth a read: http://www.coinworld.com/news/precious-metals/2016/02/chinese-counterfeiters-target-silver-bullion-products.html#
The deeper this Fourth Turning crisis gets, the more important it is to remain aware. The threat of capital controls could begin limiting your ability to protect yourself anonymously. Bullion shortages across all product ranges will likely increase your out of pocket costs for bullion despite lower spot prices and supply deficits indicate that simply obtaining physical metals is going to get more expensive and difficult going forward. On top of that, the scumbags in search of easy money are getting better at separating you from your money.
If you are a believer in protecting your wealth with metal I suggest that you begin accelerating that process as much as you can before shortages become chronic or acute. Buy from reputable local dealers to maintain anonymity and to help protect you from counterfeits. In addition, be knowledgeable about the various products you buy and how to spot potential fakes. Tools such as The Fisch (https://www.thefisch.com/), among others are available and could prevent you from getting ripped off.
We contacted our bank today about withdrawing a significant amount of cash. Turns out, it isn’t really our cash.
I/S- One of the commenters said the other day that he does not buy gold because there is a 38% tax and they could just declare it illegal ( to which I chuckled). Could you address that for the TBP community?
It is refreshing to see someone broach the subject of Chinese counterfeiting of coins and bullion. We have known for many years that the Chinese were counterfeiting bullion and coins. By now it must be very widespread indeed. Anyone still buying this is a fool. Not only is most of their stash likely fake, it will eventually become widely known that most bullion and coins are fake. Then their pile of glitter will be worthless as no one will touch bullion coins, too hard to know whether it is real or not. Food, whiskey, guns, ammo. When the SHTF that is all that will trade.
Maggie…… You loaned your money to the bank…… which means they don’t have to pay you back!!
Go figure eh?
That’s the beauty of direct deposit… all 1’s and zeros, nothing physical changing hands!!
Bea…that was me.
I said your 1st point on the article the other day but not the 2nd point the other day (I did say it 2-3 weeks ago. I don’t remember the 2d and 3rd points I made the other day.
The subject today is Bullion – if you like gold so much, buy some bullion bars, then when the SHTF you can bring a bar into Walmart or your grocery store and all is fine – NOT. Do you think they will scrape some off the bar with a knife and then weigh it?
My advice – if you like gold, buy the lowest denomination coins.
FYI, Schiff gold has quite small gold strips that are bent off as you need them. You can look it up.
And yes, I do think the gov’t will step in to screw the citizens with gold. They will go to any lengths to preserve their positions.
I don’t really care about the day to day prove swings. Are they manipulated? Sure, of course they are. Just like the price of pretty much everything else. I’m not a trader, and I really don’t care how low they push the price down. I buy metal because of 20 trillion in debt and over 200 trillion in unfunded liabilities. There exists no method of dealing with that that won’t cause massive damage to the economy and the dollar. That’s really all you need to know. You can believe the government is capable of solving these problems in a timely and orderly manner, or you can believe they will handle it like they handle every single other thing. Place your bets….
As far as shortages go, I haven’t seen them and premiums aren’t any higher than they were 6 months ago at least. Last time I was in there he had tubes of eagles for 380. He also had Canadian, Australian, British, and Chinese silver. AGEs in every size, buffalos, gold maples, and gold pandas.
The only thing that had an insane premium was everything Chinese. A month or so ago they were 30, now they are 35. 1/4 oz panda was 400 vs 350 for the 1/4 oz eagles. The owner said very little bullion is making it out of china this year, which is hardly surpassing considering what’s going on there. The same thing happened with Chinese stuff last year, but it was not until late summer that the premiums went through the roof like this.
Buck wants to throw the baby out with the bath water. Someone with even slight wisdom would simply focus their efforts on avoiding fakes. I’ve had some candid discussions about this with the top two guys at a significant bullion dealer. They have multiple ways of spotting fakes, including a fancy scanner (I think it was an x-ray spectrometer), buying only through trusted channels, and simply knowing exactly what the various coins are supposed to look, feel and sound like.
Some tips:
1) Silver is relatively easy to fake but easiest to do in large bars and hardest to do in junk silver type coins. Buy junk silver or directly from a mint like NWT Mint.
2) Gold is harder to fake because of its density, but tungsten can be used to basically replicate the overall density and make fakes that are hard to readily identify. It’s totally different under x-ray however, and all tungsten coin fakes seen sound funny. (You could more readily fake a gold bar with tungsten, but if you have the money to buy gold by the bar, you don’t need my guidance.)
3) Platinum cannot be faked because its density is third highest among all natural elements. The only two denser elements are exceptionally rare (osmium and iridium) and a fake made of those would generally be worth more than the same volume of platinum… so you’re unlikely to ever see such a fake, and if you do, you should keep it happily.
tl;dr: don’t buy bars of “precious metal” at the flea market or on craigslist.
Older US gold coins grade XF, +/-, can be had–when found–for not much more premium that new production US Mint Eagles and fractional Eagles. It’s super-easy to spot counterfeits. However, most counterfeits came from the “Beirut Branch of the Philadelphia Mint” and Lebanese law is good: As long as the gold content matched the original coin, it is legal to coin it.
A 16X lens makes it very easy to spot counterfeit US gold coins, and most coin stores have the little booklet showing the how-to-identify.
I don’t buy bars of any sort. Junk silver or known-source gold. Sovereigns, Mexican gold from two-peso to 50-peso. Rands, Maples, Eagles. US $5s, $10s, $20s.
But I’ve been messing with bullion and rare US coins for fifty years.
@Maggie, don’t even let them know you want to withdraw a large amount. Just go in and start pulling out whatever they don’t balk at each week. Hell, move 1/2 the money to a second, third or fourth account and withdraw the daily limit via ATM machine in addition to in person withdrawals. Transfer it to a credit union if they give you any crap. I’ve withdrawn $45,000 in one shot three years ago and as a courtesy and to improve my chances I called ahead and made arrangements to do it a week later. It was no problem at all. Most financial institutions don’t really have much cash on hand. It can help if you go to the institutions largest or main branch. I don’t leave money in my accounts except what is needed to cover outstanding checks. We no longer use debit cards except for gas purchases using cash instead. Our paychecks are withdrawn in cash the same day they are deposited. Never a question except “how would you like that?”.
@Bea, I haven’t been around for a few days so I likely missed the post you’re talking about. These two pages do a decent job of explaining the general tax questions for metals: http://about.ag/taxes.htm and http://about.ag/28percent.htm As far as gold becoming illegal to own, sell or trade or concerns about confiscation go, I suppose those with metals will have to cross that bridge when we get there. Real estate is an option but most people are not buying real estate sized purchases of bullion all at once. Besides, real estate is far too expensive right now IMO and the massive MERS fraud means that vast amounts of residential real estate have clouded titles. I spoke briefly with my GIA Gemologist friend about diamonds as an investment. I’ll be having dinner with her soon for more info but even for her, investing in diamonds is not generally a good idea.
@Buck, hyperbole much? If counterfeiting were as rampant as you assume it is, the entire physical market would crater. Coin shops would go out of business overnight. Fact is that the vast majority of coins, bars and rounds are perfectly fine.
@Kokoda, one ounce and larger gold coins and bars have their place in the market and only an idiot would take an ounce or more of gold to a grocery store to buy food. Buying fractional gold coins in most cases is an extreme rip off when it comes to premiums. I don’t recommend them or those Valcambi type bars like Schiff sells for the same reason. That’s what silver is for.
@Gator, you’ve got the right attitude. I’ve heard that many dealers who were selling Chinese gold were notified that they probably won’t be receiving anymore this year. I believe that this year they have switched to 30 gram coins in an effort to move away from the troy ounce weights. Many believe that will prove to be a mistake.
@IS… exactly what Nick and I have decided to do. Hoping that by opening two other accounts with checks and withdrawing a bit each week from the three, we will have the bulk by April. We think that is the target date.
And we are certainly glad that the silver and gold we bought when I cashed out my IRA sank with the boat. Glad the boat sits at the bottom of our pond here.
And, sitting in a group rolling quarters with my FF pals years ago after pooling fiat to buy junk silver was a very worthwhile effort. I would recommend that as a great weekend activity.
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Be careful about withdrawing lesser amounts of a total exceeding $10,000 – this is called “structuring” by the feds and while it’s a total bullshit law, many people have had serious legal trouble, and some have lost all their money, due to this bullshit. Look it up before you proceed.
Persnickety… we know. Is a crazy world when you can be jailed for “stealing” your own money, but a child molester gets three days for a repeat offense because he is now in a government funded jobs program that pays him $1000 monthly to rehabilitate by coming twice a week to “class” to learn menial labor jobs that require ZERO training.
Is a personal issue, but that is the outcome of the trial for beating a woman with a baseball bat, in case anyone here remembers my rant about the pedophile who is stalking my cousin.
The only real way to identify a gold covered tungsten cored fake bar is to drill into it and assay the material removed.
I’d like to see that done on all those huge inter bank transfer bars that are stockpiled in various vaults (including Fort Knox) just to see how clever the Chinese have actually been over the years.
Assuming only the chinese counterfeit PMs?
Today’s US federal government, the three branches of which are Fraud, Theft and Murder would never be involved in such a thing.
Would they.
“You have to choose [as a voter] between trusting to the natural stability of gold and the natural stability and intelligence of the members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold.”
~ George Bernard Shaw
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Kokoda, you are talking about the valcambi bars, as IS says. (Nice article IS.) I disagree with IS here. Yes, the premiums are high for these items. And yet why do you think that is so as opposed to the larger bars, for example? Because they are much more liquid. Try selling or bartering a kilogram of gold. Good luck. But a gram? No problem. I am a big advocate of small denomination gold, no bigger than 1 ounce coins.
This doesn’t mean that I don’t think junk silver is a bad idea. On the contrary. I agree with IS in that it is likely a good buy. But suppose you have $25k. You want to buy and store that much silver? It is much easier to convert that into gold than silver. Easier to store and preserve also.
The population of India ( who owns more gold that just about anyone) have learned from eons of taking it up the ass to purchase gold in the form of 24K jewelry. If they find themselves in need of some money they have a dealer saw off a section of a bracelet for example to convert to cash.
There is no tax on selling gold in the form of jewelry here and there is no chance the government will declare jewelry illegal to own……so maybe we should take a lesson from those who understand the iron fist of TPTB so very well.
I/S, I agree with your statement silver would be for obtaining food and other items.