In the previous installment, readers were presented with a list (and brief review) of 11 of our most-prominent metals markets, as well as one mineral (graphite) which doesn’t technically qualify for this ranking. From that original list, some of the stronger metals markets were identified, along with the fundamentals behind that strength.
This leaves one task remaining: producing the Top-3 metals ranking which was promised in Part I. In reverse order, here is that ranking:
3. Gold
The reasons for purchasing (and holding) gold are almost too numerous to mention. It begins with the strong, universal cultural attachment to gold which has been exhibited by humanity for well over 4,000 years.
The Corporate media continually downplays the value and importance of gold in the Western world, as this interferes with the financial sector’s constant peddling of paper assets – the new competition for gold as an investment vehicle. The disingenuous presentation of gold by Western media is highlighted by simply examining the actions of central banks.
Through the 1990’s and into the early years of this century, Western central banks were dumping vast quantities of gold onto global markets, accompanied by the vacuous rhetoric that gold was now (supposedly) a “barbarous relic”. There was obviously never any substance to this rhetoric.
By 2009; the gold-dumping by Western central banks suddenly and dramatically ground to a halt. There are only two possible explanations for this dramatic – and permanent – policy reversal by Western central banks:
- Western central banks suddenly realized they had been grossly mistaken for starting to dump their gold, in the first place.
- Western central banks have no more gold remaining.
Despite the claims of significant gold reserves by Western governments (and their central banks), 2) is by far the most likely explanation. The claims of large gold reserves by Western governments can be dismissed in two words: “gold leasing”.
Gold leasing is a prima facie fraud. Any banker will tell you that “gold generates no income”. So why would anyone want to borrow an asset which generates no income? There is no legitimate purpose for paying to borrow an asset which generates no income.
The illegitimate purpose for “leasing” gold is so that Western central banks could continue to surreptitiously dump more gold into global markets – while still claiming to own that gold on their balance sheets. Here we need only refer to the confession from the leader of these gold criminals, Sir Alan Greenspan.
…central banks stand ready to lease gold in increasing quantities should the price rise.
Highly respected precious metals analyst James Turk first drew attention to this obvious fraud back in 1999 (A Fraud, By Any Other Name Would Still Smell). Said Turk:
A bullion bank leases Gold from a central bank, but the bullion bank does not let this Gold sit in its vault. With the full knowledge – and usually even with the full cooperation – of the central bank that owns the metal, the leased Gold is sold into the market by the bullion bank. Are you shocked? Well, it is very understandable that you might be because the lessee is selling the asset of the lessor. It is a fraud, but the lessor condones this practice because the deception serves his purpose. As Alan Greenspan so clearly stated in testimony before Congress last year: “Central banks stand ready to lease gold in increasing quantities should the price rise.”
As bad as the fraud may be, there is even more dishonesty in this scheme – the double counting. Gold that is leased by a central bank shows up in two places. It is still reported as an asset of the central bank. But it is also an asset of the person that eventually buys the central bank’s Gold.
Western central banks have been covertly (and illegally) “leasing” thousands and thousands of tonnes of gold – in addition to the 1,000’s of tonnes which they already sold – in order to attempt to permanently suppress the price of gold. Meanwhile, other central banks (mainly in the East) have begun purchasing gold on the open market, in unprecedented amounts.
Why are Western central banks obsessed with suppressing the price of gold? The explanation is simple. Gold (and silver) is the “canary in the coal mine” which (in properly functioning markets) warns us of economic stresses and imbalances. Specifically, a rising gold price is a warning of currency dilution, as well as the consequence of that currency dilution: what the bankers call “inflation”.
Inflation is the permanent loss of purchasing power in our paper fiat currencies, currently illustrated in the form of the explosion in food and housing costs. As the peddlers of this (worthless) paper, Western central banks suppress the price of gold to hide their extreme and reckless dilution of Western currencies – as they pretend that “inflation is too low” in our economies.
The end of gold-dumping by Western central banks and the commencement of purchases by Eastern central banks represents a swing in global gold demand of roughly 1,000 tonnes per year, in a market where annual mine supply is approximately 3,000 tonnes per year. However, this is only one of the positive fundamentals of the gold market.
The chart above is an illustration of the Bernanke helicopter drop: the most reckless, most extreme money-printing binge by any central bank in the entire history of these odious institutions. The hyperbolic curve in the chart above is the mathematical representation of the phrase “out of control”.
Gold is a monetary metal. As such, its price must precisely reflect changes in the supply of money, this is how it acts as a warning system in our markets. Based upon the quintupling of the U.S. money supply from the beginning of 2009 to the end of 2013, the price of gold had to quintuple from $800/oz (where it began to 2009) to $4,000/oz. The fact that the price of gold did not even rise half as far as it had to rise is yet further confirmation of the serial manipulation of this market.
The combined effect of unprecedented gold buying by Eastern central banks, massive gold imports in India, massive (and rising) gold-buying by China, along with conventional jewelry and investment demand is an annual supply deficit in the gold market somewhere in excess of 1,000 tonnes per year.
This is obviously unsustainable. The only reason that a supply default has not already taken place in the gold market are the massive stockpiles of gold which humanity has accumulated over 4,000+ years.
Those stockpiles are finite. The fact that Western central banks have ceased all legal gold-dumping activities and now engage in only (illegal) “gold leasing” is one indication of the strain which these institutions are experiencing in attempting to maintain their suppression of the price of gold.
Then we have the bankers’ “paper gold” markets. In March 2010; Jeffrey Christian, head of the CPM Group, blurted out the bankers’ dirty-little-secret in the gold market. For each ounce of gold that actually trades in the bankers’ “gold” markets, there is 100 times that quantity of paper trading – paper that is called “gold”.
For each ounce of gold that actually trades in the bankers' "gold" markets, there is 100 times that quantity of paper trading.
-- Jeffrey Christian, CPM Group
What the bankers call the gold market is a paper market, where practically no gold trades at all. It is through flooding global markets with paper-called-gold that the bankers have been able to pretend that the gold market is fully supplied. Put an end to this paper fraud by Western bullion banks and this totally fraudulent market would implode – instantaneously.
The only reason why this massive fraud has endured for as many years as it has is that the Corporate media is complicit with these financial institutions. Not only does the mainstream media suppress the truth about what is really going on in the paper-called-gold market, it enthusiastically participates in the bankers’ frauds – referring to all the paper-trading of the bullion banks as “gold trading”.
Our so-called regulators are equally complicit in this gold market fraud. Jeffrey Christian’s confession that the “gold market” was a gigantic fraud perpetrated by the bullion banks occurred in official testimony at a hearing of the Commodity Futures Trading Commission (CFTC). What did the CFTC do when it was told by an expert in the “gold market” that this market was nothing more than a massive fraud? It did nothing.
The day after this massive fraud is fully, publicly exposed, the “gold market” created by Western bullion banks will cease to exist. All that will remain is the physical gold market, with a 1,000+ tonne per year annual supply deficit, and no inventories to supply that market.
Obviously it is impossible to predict precisely when this gigantic, institutionalized fraud in the gold market will finally come to an end. When this happens, we will witness the second largest price correction in the history of commodity markets. For that reason, gold makes it into the Top-3 metals ranking for 2017.
For investors, there are two ways to take advantage of this tremendous investment opportunity. Obviously, people can choose to invest directly in gold (real, physical bullion). The other alternative is to invest in the companies which are producing and/or exploring for gold. The advantage with buying into gold mining companies is that commodity producers provide natural leverage on the commodity they produce – offering additional upside in a rising market.
Some of the gold mining companies which investors may wish to consider are Alexandria Minerals Corp. (TSX: V. AZX, OTCQB: ALXDF, Forum) Asante Gold Corporation (CSE: ASE, OTCQB: ASGOF, Forum) , California Gold Mining Inc. (TSX: V.CGM, OTCQB: CFGMF, Forum), Falco Resources Ltd. (TSX: V. FPC, OTCQB: FPRGF, Forum), Golden Predator Corp. (TSX: V. GPY, OTCQB: NTGSF, Forum), GoldMining Inc. (TSX: V.GOLD, OTCQB: GLDLF, Forum), Marlin Gold Mining Ltd. (TSX: V.MLN, OTCQB: MLNGF, Forum), and Minnova Corp. (TSX: V. MCI, OTCQB: AGRDF, Forum).
Coming up in Ranking the metals 2017, Part III: the #2 metal in this 2017 ranking.
FULL DISCLOSURE: Alexandria Minerals Corp. Asante Gold Corporation, California Gold Mining Inc., Falco Resources Ltd., Golden Predator Corp., GoldMining Inc., Marling Gold Mining Ltd., and Minnova Corp. are all paid clients of Stockhouse Publishing.