Off And Running
Not only is the new week off to a good start for gold and silver, TurdTalksMetals is off to a good start, too. I, for one, am relieved on both counts.
Before we begin, just a few more words on the new site and this is very important:
The new site is designed for greater access. Greater access to my opinions and, perhaps more importantly, greater access to some of the biggest "names" in metals. As I've stated often, because you've made this site so popular, I now have access to people who I never could have contacted otherwise. The new site will give you a greater level of access to them, too, through conference calls and webinars. I really think it's going to be great fun and well worth the subscription cost. That said, please understand this: Nothing about TFMR will be changing. I'll still be here every day, posting new threads and I'll still offer bi-weekly podcast interviews. There should be no noticeable change. In fact, because of the PR associated with promoting the new site, TFMR should grow and become even more vibrant. Anyway, the main points are these:
- I recognize that only a small percentage of you will likely join the new site.
- That's perfectly fine but the more, the merrier.
- The new site will offer a higher level of interaction and access.
- TFMR will not suffer because of this. It will, instead, grow stronger.
Just a couple of observations today. I played 36 holes of golf yesterday in a heat index of about 110. As you might imagine, I'm a little worn out.
First, very nice action in the metals today, especially in the face of terrible action in European and U.S. equities. That said, look where we are. The metals plunged last week when The Bernank opened his mouth (BIG surprise) but they recovered some today and...lo and behold...they are still rangebound and stuck in the same pattern that has contained them for the past eight weeks. All the wailing and grinding of teeth yet nothing has changed. Why? Why were all the naysayers and AGAs out over the weekend trying to convince you that the metals were doomed? You got me on that one. Gold has been stuck between 1530 and 1630 for nearly 2 months. At this moment, it's 1585...right in the middle. Silver has been stuck primarily between 27 and 29 with occasional forays above 29 and under 27. This afternoon it is 27.60. Yawn.
And, again, please don't misinterpret the post I made back on Saturday. (If you haven't read it yet, please do so. It's very important.) I firmly believe that physical demand is providing a solid floor under paper price. That said, The Cartels have to be salivating at the potential trading profits of dropping price through the expected sell stops under 1525 and 26. I've got to believe that would do anything to break price down and fleece the sheep once more. The problem is that darn physical demand. Can they break paper price down, even for just a few days or weeks, without getting seriously drained of metal? I don't know. All I'm saying though is this: IF this happens, do not be afraid. Instead, be prepared to take advantage of the final "sale" in price.
Next, the growing conflagration in Syria. You know that I'm not one for conspiracy theories regarding military and terrorist actions. However, the "Syria shooting down Turkish jets" thing I find quite odd. There was even a report over the weekend that, to pull this off, the Syrians were using their new Russian SAMs with direct Russian help. What the heck? Are they simply brazenly over-confident that their Russian benefactors will protect them or is something else in play here? And what about the timing of it all? Here we are on June 25...three days before the SWIFT system is closed to anyone transacting business with Iran. Is it just a coincidence that this is happening right now? I don't know but this sure doesn't seem to pass the smell test. ( http://www.zerohedge.com/news/turkey-claims-syria-fired-second-turkish-jet-says-act-wont-go-unpunished-has-invoked-nato-artic)
Lastly, in his latest newsletter, our pal John Butler has written about something that, heretofore has managed to escape our attention. It seems that back on June 4, the Fed, the OCC and the FDIC circulated a memo asking for comment on some proposed changes to the "regulatory capital risk-weighting framework". The big news is this: Perhaps by January 1, 2013, gold bullion will be reclassified as a "zero-risk" asset, similar in stature and safety to U.S. government bonds. Below is a C&P of John's salient points as well as an uploaded copy of the full report and a link to view it and download it yourself:
""Well, on 4th June the Federal Reserve, OCC (Office of the Comptroller of the Currency) and FDIC (Federal Deposit Insurance Corporation) collectively circulated a memo asking for comment on their proposed changes to the regulatory capital risk- weighting framework. Section 11, ‘Other Assets’, specifies that a “zero risk weight” is to be applied to “gold bullion held in the banking organization’s own vaults, or held in another depository institution’s vaults on an allocated basis...” Whoa. There you have it. As it stands now it would appear that, in the near future, banks will not have their regulatory capital ratios penalised for holding gold instead of government bonds as a safe- haven, zero-risk asset.
While the fundamental backdrop for gold is highly favourable and has been for some years, as the supply of money, credit and government bonds has grown dramatically, this technical aspect of the gold market is also clearly bullish. Indeed, as I wrote in The Canary in the Gold Mine, if gold is re-classified as a zero-risk-weighted asset, “the price is likely to soar to a new, all-time high.” I stand by that statement. In about six months we will know whether I am right, or whether I have misread this one.
Given the potential importance for gold, I’m surprised that this announcement has not been widely reported in the financial press, alternative or even mainstream. Perhaps this is due to the fact that, at this point, the re-classification of gold has only been proposed, not implemented. The change is not due to take effect until 1st January 2013.
With interest rates near zero, however, the opportunity cost of sitting on a non-interest-bearing gold position for six months is close to zero. Yes, gold may appear to be in a downtrend and, yes, it might have been unusually volatile of late, but unless the regulators backtrack, I see this as clearly bullish for gold, enabling much catch-up to Treasuries.
It remains to say something about why, perhaps, US regulators are poised to change bank regulatory risk weightings in favour of gold in this way. I do have some ideas about that. However, those will have to wait for a future Amphora Report.""
Alright, that's it for now. I'm going to go take a nap. Have a great rest of your day!