American Austerity

Wed, Nov 5, 2014 - 11:14am

So now the R-republocrats will be in charge again for the next 4-6 years until the D-republocrats get voted back in. This, of course means that austerity reigns and all of America's fiscal issues have been solved, thus the rallying dollar, which means the yen is lower, which means gold and silver are down.

In our totally broken, sham "markets", this is how it works. Don't believe me? Feast your eyes on this. The yen is in candlesticks, gold is in bars:

And lest you think that this is just some overnight phenomenon, here's a chart that covers the past six months. If you're looking for a perfect 1:1 correlation, I think you've found it! Particularly in the blue box that covers everything since July 1:

So, as I've pounded the table the last 4 or 5 podcasts....It just doesn't matter!

  • Technical charts patterns don't matter
  • Potential support points don't matter
  • Demand from China doesn't matter
  • Physical clearance in London doesn't matter

None of it matters! All that matters is that a handful of hedge fund algos are programmed to sell gold with every downtick they "see" in the yen. It makes no difference what the cost of production is. It matters not what the global demand picture is. All that matters is that 50-60 hedge funds are selling paper gold derivatives every time the dollar upticks / yen downticks.

And this will continue until it doesn't. When will that be? It's nearly impossible to say. If I were to hazard a guess, I'd say that the correlation will break sometime before gold gets to $5/ounce.

(Of course, I'm only joking...sort of. Sheesh!)

A moment is coming where The Banks...yes those nasty, evil, soulless Banks...will step in to defend the price. Why? Because they simply will not have the capacity to deliver gold at some point and they won't be able to allow it to go any lower. WHEN they do this, the correlation will finally break, gold will have reached its Final Bottom and a massive, sharp short-covering extravaganza will begin.

However, if you or I think we can predict exactly WHEN this is going to happen, we're crazy. For now, all we can do is watch the fireworks with at least the comfort of knowing why and how things are happening.

The charts say that $1045 gold and $14.65 silver should offer some support. OK, fine. But, if the yen really is going all of the way to 80/120, do you think that gold will actually just arbitrarily stop at $1045? Not likely. Again, gold will reverse (and silver, too) when it finally reaches a breaking point where paper price is driven so low that available physical supply is exhausted and The Bullion Banks no longer have gold to deliver. That could be later today at $1145. That could be next week at $1045 and it could be next month at $945. But that moment is coming. Unfortunately, we'll likely have to endure a few more days of emotional distress before it arrives.

And just a few extra words about silver because what has happened to it over just the past week is almost beyond comprehension. In just the past five days alone, silver is down over $2 or about 15%. With today's low of $15.13, price is now 20-30% below the recognized cost of production for most miners and nearly 50% below what analysts call the "sustaining cost"...that price needed to actually keep the mine running at a break even pace. How can this be? Again, it has everything to do with algorithmic trading and nothing else.

On last week's CoT report, there was just a total of 44 "managed money" (hedge funds) on the short side of the "market". 44! Those 44 funds continue to pile on the naked shorts as they chase momentum, continually driving price lower and lower and lower. These funds do not own physical silver and they have no intention of providing future delivery. They are simply selling paper derivatives and capitalizing in the downward momentum that they themselves have created. You don't need physical silver to short paper silver. All you need is enough paper money in your account to cover the margin requirement.

This is grotesque. This is in direct opposition to the original rationale behind having futures/forwards markets and this absurdly low price is having an horrific impact on mining companies and their employees. Yes, this cycle will break and price will recover but at what cost, both business and human? It is very frustrating and being powerless to change it is very much disheartening.

Finally, after last week's failed chat room experiment, I thought that this week's A2A should just be yours truly in the regular GoToWebinar format. We'll get back to the regular format next week as I've already secured Mr. Turk as a guest. For tomorrow, however, just click here if you'd like to join us:

Hang in there,


About the Author

turd [at] tfmetalsreport [dot] com ()


Nov 5, 2014 - 11:16am


and hanging in there :-)

Nov 5, 2014 - 11:17am



edit: crap.

Nov 5, 2014 - 11:24am

Yen and Rubles...

We are also tracking the Ruble pretty closely.... part of me thinks that hitting gold/silver/oil is part of striking back against Russia too.

Nov 5, 2014 - 11:24am

Lest anyone forget;

Lest anyone forget;

We are at War

A Financial War

A, "take-no-prisoners War"
A, "Scorched-Earth-Policy War"

An "End-Game War", ostensibly between psychopaths totally devoid of your human morals or empathy.

IF things don't appear to make sense to your left brained logical the previous five statements.

Hold your positions while the battle rages on.................................

Nov 5, 2014 - 11:30am

SLW is up today...

A tiny bit of green in a sea of red. Sign of a turn around?

Nov 5, 2014 - 11:31am

collective LCS reports anyone?

Whether or not we have a Comex default in 2014 is irrelevant. Metals prices are dropping.

It would seem that Mr Fix (and others) has been calling it right all along ...metals could go to zero.

Of course, the laws of supply and demand, while being stretched to their limits currently, will reassert themselves as prices continue to be pressed down. Coins, sterling, and minted bars & rounds will fly off the shelves. There will be shortages (unless, of course, the markets are set free and allowed to trade on supply and demand ...Naaaaahhh!...) , there will be shortages at some point as the "wise ones" who threw in the towel in the past few years and have been keeping an eye on the price, cannot resist jumping back into this "asset class" and restocking their safe. What price will that be? sub $10 for AG and sub 700 for AU? Who knows?

Thus, I suggest that we start a forum called "The LCS Report" and that anytime, anyone of the thousand or so readers here, all over the world, go into our local coin shop, or wherever you buy your physical, that we query the employees or owner about sales, purchases, and supply shortages. We can quantify our local report, compile them into a bigger picture, and keep a data-driven "indicator" of retail level metal shortages that may be approaching.

Then, as we reach a consensus on metal supplies, as we see them drop to a critical level, we can all panic together (group mania) and speed down to the LCS shops and use our dry powder to purchase the remaining metal the lowest price anyone is going to get before the retail metal is all gone.

I am willing to set up the forum and work on quantifying the reports in a spreadsheet. Anyone else game to help out? We can communicate via PM.

Nov 5, 2014 - 11:32am
Nov 5, 2014 - 11:35am

Dr. Jerome

I like your idea. Near as I can tell, premiums are no higher now than when silver was $35 an ounce. I can't believe that there is any kind of a shortage until I see premiums rising at least a bit.

Nov 5, 2014 - 11:41am


Could be more of a symptom than a cause. A declining Yen is borrowed and geared up to buy US treasuries thus strengthening the dollar - and of course covertly replacing QE.

PM prices are collateral damage, to be profited from of course...

Nov 5, 2014 - 11:43am

Anyone For Sticky Paper????

I've Got Plenty Of Sticky's but No PM's Who Would Have Ever Thought Those Little Pieces Of Yellow Paper Would Be Worth A Lot Of PM's.???

DeaconBenjamin Doctor J
Nov 5, 2014 - 11:50am

LCS Report

No sovereign silver ounces (ASE, Maple, Philharmonic, etc.). 8 cull silver dollars on display. A half dozen 1 oz silver bars I've never seen before. 8 plastic wrapped 10 oz bars. Proprietor said business real slow both buying and selling.

Nov 5, 2014 - 11:50am

North American consumer

Recently, I have see a TV ad for the Lincoln SUV, which make me gag, and further inspires my lack of confidence in the North American consumer to actually think beyond "duuuh".

Apparently, according to Matt McC(?), a truly lousy actor IMO, "you must go back before you can go forward, and that there are even those who say that this is not so, however it is necessary"(paraphrased). Don't worry, there's even more to this bumbling monologue.

Not one word about the qualities of the vehicle itself.

Just mindless mumbling, supposedly sounding "deep" enough to lull the NA consumer into believing that they are very, very intelligent if they buy a Lincoln SUV.


Nov 5, 2014 - 11:56am

A peaceful place to stack

I've turned a corner. While the inner judge, intolerant of injustice and economics that 'defy gravity' can still be motivated to new heights of outrage, I'm no longer perpetually in a state of angry rage. Not that I ever was always angry, it was just very very close to the surface.

The truth is today, as with every other day in recent memory, that the thieves are in charge of the treasury. Our moral, just and economically sound treasury has been stolen and is being frittered away while we are made to watch. You'd have to be inhuman or asleep not to be affected by it.

But we can buy and hold tangible assets, assets that for thousands of years have protected mankind from the worst ravages of the looters and robber barons. We can also smile at folks we pass on the street, wave to our neighbors as we leave the house and do something nice for someone else. These are the things that will see us through the dark times ahead.

Here in the US you may have voted yesterday, I hope you did...but whether you did or not, vote again today - by buying silver or gold. They're both on sale, so you'll part with fewer FRNs than you would have yesterday, but more importantly you'll be taking a stand.


Nov 5, 2014 - 12:01pm


Lurker, knowing and tracking average premiums could be very useful.

a $1 premium when AG is at $40 = 2.5%

A $0.59 premium with AG at 16 = 3.7%

I suspect the dealers look at money flow and percentages rather than the dollar premium they add to spot. the buyback price is an interesting indicator also...

Deacon, What does slow business mean? No sellers may mean people have already sold their metal, and those like us are not about to. No buyers may mean that TPTB have effectively persuaded people not to buy? They are not making much money if business is slow.

Variables to consider

  • percentage of sellers to buyers
  • premiums
  • availability from LCS suppliers
  • stock on hand

I wouldn't want to make things too unwieldy. And we'd need a certain level of participation from readers to have a valid or reliable data set. Still conceptualizing over here... I better go grade more essays.

Nov 5, 2014 - 12:01pm

New World Gold Corp

The mining shares are in a sea of red today but the HUI has clawed back 4 points. In an earlier post I shared an interest in a penny stock, New World Gold Corp. Today they reported revenue up 30% with 7.6 million dollars. Profits are up 53% with 2.4 million dollars. Presently the stock is up 26% with 166 million shares traded at 11:56 a.m. It is a mining company working within Ecuador and Peru. Most of the revenue comes from milling for other smaller mining companies. They get paid a fee plus a percentage of the gold milled.

I sold a few miners for profits over the summer fortunately. All my other mining stocks are in the red big time. New World Gold Corp (NWGC) is at least making me smile while the carnage in gold and silver continues.

Thanks Turd and everyone for all your posts.

Nov 5, 2014 - 12:03pm

Try this...

much better...

Nov 5, 2014 - 12:12pm

What is the Yen at 80/120?

Second time you've mentioned this. Does it mean 120 Yen to the dollar? In which case 1 Yen is o.8333 cents (1/120).

We Canadians, having to deal with CAD/US fluctuations are more attuned to this inverse relationship.

Nov 5, 2014 - 12:13pm

Stronger dollar isn't so bad, is it?

As Dr. J recently pointed out, a stronger dollar would be a welcome relief. Especially since I keep score in ounces. I'm already paying 75% for a gallon of gas compared to what I did this summer. I suspect that as fuel costs trickle into the economy, the prices of other things will go down as well. Transportation is a very competitive business. The key here is to keep stacking. Get as much as you can for as cheap as you can.

We knew this was coming. It's the deflationary round before the real fun begins. It happens in every instance of money printing in history. Most notably was Germany, and it is happening again. The challenge is to ride it out. It's all about ratios at this point, not dollars. Take advantage of the cheaper prices and spend it while it still will buy something. Keep an eye out for going out of business sales at the local retail clothing stores, home improvement store, computer store, grocer, etc. if you really want to stretch that buck. I know I'll be watching a particular coin shop very carefully.

Prepare accordingly.

Nov 5, 2014 - 12:15pm


On Kitco in Canadian $ the price for a silver maple is $20.49. With spot at $15.64 US, plus 15% currency exchange ($17.98) I think that works out to a $2.51 premium...pretty close to 10%. I have to say that is pretty much normal from my experience. All of these raids just re-affirm my commitment to stacking. Something is definitely going on behind the scenes, and tptb are for sure worried about the power / role of precious metals. I still like my stack better than my segregated funds. At least I could spend some if I was so inclined...which I am not. Keep the faith...keep stacking and prepping. Thanks Turd.

Nov 5, 2014 - 12:19pm

Stronger Dollar

Not bad if part of free markets. But it is not..

Nov 5, 2014 - 12:20pm

LCS Report

I scored the last tube of Maples, No Libertys. A few Buffalos. Said he ordered a Monster Box and most of that is claimed, nobody selling, everybody buying.

Gold he had a few 1/10th, 1/4 oz, 1 oz, about 16 pieces in the case total.

Keep up the great work Dr J, always enjoy your posts.

Raleigh NC

Nov 5, 2014 - 12:23pm

IMO the silver shortage

we want to keep any eye on is the availability of 1000 oz bars

Nov 5, 2014 - 12:23pm

Yes, that's exactly it

80/120 is easier to understand but 83/120 is more accurate.

Most everyone quotes USDJPY and comes up with a target of 120. However, on the Barchart system, the quote is JPYUSD...the inverse. And as you point out, 120 is actually 83.33.

Nov 5, 2014 - 12:25pm


Coin supplies, though interesting anecdotally, will vary day-to-day. It's the eventual shortage of wholesale 1000 oz bars that matters most.

DeaconBenjamin Doctor J
Nov 5, 2014 - 12:32pm

What does slow business mean?

Do you want his definition, or my speculation as to why?

Nov 5, 2014 - 12:33pm

For anyone who hasn't seen

For anyone who hasn't seen the ad benque mentioned, here it is...

Video unavailable

In this one, at least he's honest that he's being paid:

Video unavailable

Here he supposedly is mimicking his True Detective character--but as a car commercial, is beyond bizarre:

"Bull" Matthew McConaughey and the MKC: Official Commercial | Lincoln

If nothing else, we get to see Austin and the surrounding Hill Country in some ads.

Nov 5, 2014 - 12:34pm

Thanks for the laugh Turd

So sick of the BS with metals I'm starting to think maybe I'm the one full of BS when it comes to investing in metals. Having thousands of ounces in silver with break even at $27 an ounce sure is a kick in the ass every morning. I thought I was brilliant but now questioning my resilience. I bought in because I believe in the cause and people representing the cause seem to be good God-fearing individuals doing it for the right reasons. losing thousands and thousands of dollars tells me it's the wrong choice. but I'll hold on because frankly I can't let go of losing those many thousands the price tells me I've lost. And because a little piece of me inside says stay the course!

Nov 5, 2014 - 12:37pm

Re: Thanks for the laugh Turd

Hang in there my friend, trust me, in a few years you will look like a genius :-)

Nov 5, 2014 - 12:39pm

Dave in Denver

They’re Burning The Furniture Now

November 5, 2014Financial Markets

Whenever destroyers appear among men, they start by destroying money, for money is men’s protection and the base of a moral existence. Destroyers seize gold and leave to its owners a counterfeit pile of paper. Francisco’s Money Speech – When Atlas Shrugged

Last night around 12:30 a.m. EST, $1.5 billion of paper gold was dumped into the Comex Globex computer trading system during one of the least liquid periods of trading in any 24 hour period. It was done when there was almost no resistance from the physical market. The two largest physical buying markets in the world were dormant when this hit occurred: India was closed for holiday observance and Shanghai was on its mid-day trading hiatus.

Dumping this enormous load of paper gold onto the market like this can only be done by an entity that has an agenda other than profit motive. Even if a big player wanted to establish or add to a short position to express a bearish view on gold, a position of this size would be carefully set up in order to maximize the price level received for selling-short the gold futures. Instead, a powerful entity who can easily absorb the likely losses dumped this paper gold on the market with the goal of manipulating the price lower.

To be sure, hoards of “little guys” in the U.S. seem to understand the real truth. The record buying of U.S. minted silver eagles – aka “poor man’s gold – during September and October bears witness to this assertion. As the western Governments force the price lower with phony paper gold and continue to loot all visible sources of physical gold in order to meet delivery requirements, it seems that the “hoi polloi” is fighting back by buying even more physical metal. It’s not just in the U.S. The Canadian Royal Mint reports its silver eagle sales on a lagged basis but unofficial reports suggest that buyers there have been wiping clean the cupboard. And a report surfaced out of Germany about a run on silver coins there by the public (LINK).

One can only wonder what the ultimate end-game agenda is here, because if these prices stick for awhile the majority of gold/silver mines globally will be forced to shut down. Many people believe this move in the metals is directed at the Swiss Gold Initiative vote at the end November. But I believe it’s fait accompli predetermined to fail. I think what’s happening now is a desperate attempt to defer much bigger problems.

If signifying nothing else, yesterday’s election results in the U.S. were a de facto abdication of the Obama Government. You can be certain that the shift in political control will do nothing other than take the country further down the road of ruin, but at least the little guy was able to express his disgust with a President who turned on those who elected him and reneged on every promise upon which he was originally elected.

The political and economic interests who are in control of the west are now exhibiting complete desperation to hold on to their power. And they are employing shock and awe methodologies that can only be described as financial terrorism – the financial markets equivalent of 9/11. This is what we saw when Japan surprised the world last Friday by announcing an even bigger QE money printing program. Not only is the Bank of Japan now monetizing 100% of all Japanese Government debt, it is buying up a not insignificant portion of Japan’s stock market. Shock and awe are what we are seeing with the degree of open fraud being committed by banks and corporations and by the unmitigated falsification of almost every economic report released by the Government. But the country is starting to catch on this and yesterday’s middle class political voice, though helpless in initiating real change – was expressed.

I’ve always said that eventually China – or some consortium of countries led by China – would require that the U.S. open up its NY Fed vaults and Fort Knox and demonstrate to the world that it possessed – and held legal title to – the gold that it reports owning. But I also have always expressed belief that the U.S. would start WW3 before being forced to reveal to the world what it has done with the 8,100 tonnes it supposedly owns. The U.S. is burning furniture now in an attempt to defer its day of reckoning Unfortunately the last gasp will be war.

While I’ve been wrong about the ability of the U.S. to take the price of gold down this far, I have largely correct for over 10 years now about how events would unfold. With gold I’m not wrong on its eventual price – I’m just wrong on the path it takes and the timing of reaching its eventual price destination. Let’s hope I’m dead wrong about the possibility of WW3.

Nov 5, 2014 - 12:48pm

Astrology anyone?

This makes as much sense as anything else, say like fundamentals. Richard Nolle, astrology guy from says gold to rally this Nov 19 to Jan 2,15. He does not mention hand washing at all! Hang in there fellow Turdites.


Donate Shop

Get Your Subscriber Benefits

Exclusive discount for silver purchases, and a private iTunes feed for TF Metals Report podcasts!

Key Economic Events Week of 5/20

5/20 7:00 pm ET CGP speech
5/21 10:00 ET Existing Home Sales
5/22 2:00 ET FOMC minutes
5/23 9:45 ET Markit PMIs
5/24 8:30 ET Durable Goods

Key Economic Events Week of 5/13

TWELVE Goon speeches through the week
5/14 8:30 ET Import Price Index
5/15 8:30 ET Retail Sales and Empire State Manu. Idx.
5/15 9:15 ET Cap. Ute. and Ind. Prod.
5/15 10:00 ET Business Inventories
5/16 10:00 ET Housing Starts and Philly Fed
5/17 10:00 ET Consumer Sentiment

Key Economic Events Week of 5/6

5/9 8:30 ET US Trade Deficit
5/9 8:30 ET Producer Price Index (PPI)
5/9 10:00 ET Wholesale Inventories
5/10 8:30 ET Consumer Price Index (CPI)

Recent Comments

by argentus maximus, 1 hour 24 min ago
by argentus maximus, 6 hours 43 min ago
by Craigo, 9 hours 28 min ago
by scoremore, 10 hours 51 min ago