Gold supplies took a nosedive as demand increased in the final quarter of 2015, according to the latest GFMS Gold Survey by Thompson Reuters.
Total gold supply dropped 7% in Q4 of 2015, driven down by a 4% decline in mining production. It was the largest decline in mine output since 2008, according to the report:
We expect this trend to continue in 2016, due to lower production at more mature operations and a lack of new mines coming on stream. We currently forecast global mine output to shrink in 2016, marking the first annual decline since 2008 and the largest in percentage terms since 2004.”
This article was written by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
In Part 1 of Maximizing Your Metals Holdings Using the Gold-Silver Price Ratio, we briefly went over what the gold-silver ratio is, and how it tends to fluctuate up and down over time.
Generally speaking, the ratio tends to rise (gold becomes more valuable versus silver) during metals bear markets, and it tends to fall (gold becomes less valuable versus silver) during bull markets. This is due to the fact that silver is more volatile. As mentioned at the end of part I, by focusing on this ratio, and exchanging and trading holdings of one metal for the other at key points, investors can actually maximize gold holdings.
(A quick disclaimer – SchiffGold does not recommend the trading strategy explained in this two-part article. Some sophisticated traders of gold and silver do employ it to increase their gold holdings. I’m writing about this, because SchiffGold believes gold investors should be aware of the long-term relationship between gold and silver and the implications of this price ratio. You can read more in our free special report – The Powerful Case for Silver.)
A basic but dependable way to implement this strategy is to pinpoint generally the levels at which gold is overvalued versus silver and vice versa.
Peter Schiff recently appeared on Newmax Prime with J.D. Hayworth and tackled the issue of falling oil prices and crashing stock markets, saying there is no causal relationship between the two. In fact, both are crashing for the same reason:
Wall Street is just trying to blame the carnage in the stock market on oil prices. But that’s not really why stocks are going down. The reality is oil prices and stocks are both going down for the same reason, and it’s because the Federal Reserve is threatening to raise interest rates and the dollar has moved higher. Stocks and the oil price are adjusting down to reflect the higher interest rate and stronger dollar that everybody thinks is coming. But I think they’re wrong, because I think the US economy has already reentered recession. I think the current recession we are in is going to be worse than the one we left in 2009, and I think the Fed is going to be back to its old tricks of 0% interest rates and another round of quantitative easing.”
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In a recent interview published at the Daily Bell, Anthony Wile engaged in a wide-ranging discussion with economist and investment expert Marc Faber.
Wile and Faber hit on a wide range of subjects from oil markets, to agricultural lands, to the future price of gold.
Faber said we shouldn’t follow the media lead and blame China for all of the current problems, echoing what Peter Schiff has said. Ultimately it all comes down to central bank and government actions – policies Faber views as unsustainable.
But what exactly does the future hold? Faber said there is no way to precisely tell, but it isn’t good:
It’s difficult to make predictions but it’s impossible to make any accurate prediction when you have interventions. We have a lot of interventions, and in the whole history of mankind, which is documented say starting 5,000 years ago up to today, interest rates have never, ever been this low. Never. And this is an experiment the professors and academics who never worked a day in their lives in a real job have undertaken. Nobody knows the precise outcome. I can only say the outcome will be negative.”
In his most recent gold videocast, Peter Schiff said he thinks the recent Fed rate hike was the end, not the beginning of the tightening cycle. The next move will be a drop back to zero and another round of quantitative easing. When that happens, investors who have been selling gold believing the economy is on the rebound will have to reverse their bets and begin buying as gold rallies.
It’s looking more and more like Peter was right, and now some of the mainstream folks are starting to catch on. A recent Bloomberg article proclaimed “gold is back in fashion.” The reason? People are beginning to recognize the shakiness of the economy. As a result, they are turning back to gold as a safe haven:
The $15 trillion rout in global equity markets since May is reawakening the lure of gold for investors seeking safety.”
The downturn in the US stock market is a problem made in America by the Federal Reserve, argued Peter Schiff on the Daily Ledger. The only question now is when will the Fed restart quantitative easing to ensure the Democrats and Hillary Clinton don’t face the same problem Republicans encountered at the end of Bush’s presidency – a lost election thanks to a crumbling economy. Peter thinks they might wait until the US is “officially” in a recession, which could be as long as 7 months from now.
This article was written by Addison Quale, SchiffGold Precious Metals Specialist. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
Perhaps you’re already familiar with the investment strategy based upon the gold-silver price ratio. For those who are not, allow me to explain a bit about how focusing on this ratio can actually help you maximize your gold holdings.
(A quick disclaimer – SchiffGold does not recommend the trading strategy explained in this two-part article. Some sophisticated traders of gold and silver do employ it to increase their gold holdings. I’m writing about this, because SchiffGold believes gold investors should be aware of the long-term relationship between gold and silver and the implications of this price ratio. You can read more in our free special report – The Powerful Case for Silver.)
The strategy is pretty straightforward once you understand the gold-silver price ratio. The ratio is exactly what it sounds like: the price of gold divided by the price of silver. As of the writing of this article, gold sits at $1098 and silver checks in at $14.17. Dividing, we arrive at a gold-silver ratio of 77.49 ounces of silver to one ounce of gold. SchiffGold tracks the live gold-silver price ratio here.
So what’s the significance? Well, this price ratio is not constant.
On Wednesday, the founder of the world’s largest hedge fund appeared on CNBC and made exactly the same prediction Peter Schiff has been making for months – the Federal Reserve’s next moves will be taking rates back to zero and launching another round of quantitative easing.
It’s important to remember that Ray Dalio doesn’t share Peter’s economic point of view. He is a classic Keynesian who believes the Fed has done an excellent job. He even claimed that “QE saved the economy.” He and Peter probably agree on very little. But Dalio’s remarks bear consideration because he represents the conventional wisdom of today. He believes in central bank intervention and he recognizes that the current state of the US economy demands more of it. To use Peter’s analogy, Dalio wants the drug addict to get more of his favorite drug, and he believes the Fed will deliver.
In his most recent Liberty Report, Ron Paul declared that the economic calamity anticipated by many free market advocates is now at hand.
Paul focused in on the obsession people like Paul Krugman have with deflation, pointing out that it isn’t the problem; it is merely the symptom of an economy trying to correct itself. Unfortunately, the Federal Reserve and government central planners seem intent on continuing the very policies that created the underlying problems in the first place:
Concentrating only on deflation and ignoring the unlawful, dangerous powers of the Fed to inflate and regulate will always result in a steady weakening of the economy – the economy which today is facing total collapse. Deflationary pressures do exist. Some debt and malinvestements are being liquidated. But the correction is constantly impeded by the Federal Reserve’s monetary policy and congressional spending.”
