Robert Kiyosaki Blog

Financial Education Portal inspired by Robert Kiyosaki


12 Reasons Why Gold Price Will Rebound and Make New Highs in 2014

Investor sentiment towards precious metals is at the lowest level in over a decade. Many analysts believe the bull market is over and are calling for sub-$ 1,000 gold in 2014. Even diehard gold bugs are losing faith, as the correction has been longer and more severe than most had anticipated. So, is it time to throw in the towel? Is the bull market in precious metals really over? In order to answer this question, I thought it would be constructive to re-visit the fundamental drivers of the gold price and determine if anything changed over the past two years to weaken the bullish case. My conclusion is that nearly all of the fundamental factors that have been driving the gold price higher in the past decade have only strengthened in the past two years. Now that the correction has most likely run its course, I expect gold to rebound into the close of the year and bounce sharply higher in 2014. Here are the 12 reasons why… #1 – Rapidly Growing Debt Just one day after President Barack Obama signed into law a bipartisan deal to end the government shutdown and avoid default, the US debt surged a record $ 328 billion, the first day the government was able to borrow money. The U.S. national debt has increased by more than a trillion dollars in the past 12 months. This pushed the total debt above $ 17 trillion for the first time in history. As the debt increases and GDP growth slows, the debt-to-GDP ratio will continue to rise at an accelerating pace. This is simple math and it dictates an ongoing slide in the purchasing power of the dollar and rise in the purchasing power of real assets and particularly monetary metals such as gold and silver. The following charts show the steepening rise in total public debt and the debt-to-GDP ratio of the United States. Many economists view a debt-to-GDP ratio of 100% as the point of no return. It is a slippery slope that is certain to push higher at an accelerated rate in the coming years. Note that alternate calculations of the total debt including unfunded liabilities and off-balance sheet items, puts the number somewhere closer to $ 100 trillion or more than 5 times the official figure. This equates to a debt-to-GDP ratio of over 500%, not the 100% charted below. Takeaway: The total level of debt and the debt-to-GDP ratio have both increased substantially in the past two years. This is bullish for gold, as precious metals have a positive correlation to total debt levels. #2 – Inept Government and Partisan Bickering...

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Gold, Silver and the Debt Ceiling

Commodities / Gold and Silver 2013 To paraphrase William Shakespeare, “the debt ceiling drama is a tale told by idiots, full of sound and political fury, signifying nothing.” We now have a reprieve for three months – the 11th hour deal, complete with payoffs and the usual corruption, will keep the world safe for more ineptitude, deficit spending, administrative hypocrisy and the guarantee of a sequel. All is well! Celebration! Champagne! Cut to a prime-time commercial promoting big government and Obamacare… And back in the real world where people work and support their families, life goes on, few noticed the lack of government “services,” and in three months we will be blessed with another episode of our “Congressional Reality Show.” Gold, Silver, and National Debt Examine the following graph. It is a graph of smoothed* annual gold and silver prices and the official U.S. national debt since 1971 when the dollar lost all gold backing and was “temporarily” allowed to float against all other unbacked debt based currencies. All values start at 1.0 in 1971. The legend does not show which line represents gold, silver, or the national debt. Why? Because it hardly matters! Government spends too much money to perform a few essential services and to buy votes, wars, and welfare, and thereby increases its debt almost every year, while gold and silver prices, on average, match the increases in accumulated national debt. Our 435 representatives, 100 senators, and the administration listened to their corporate backers and chose to increase the debt ceiling, continue spending as usual, not “rock the boat,” and carry on with the serious business of politics and payoffs for another three months. It is safe to say that, on average, gold and silver will continue rising, along with the national debt, as they all have for the past 42 years. Further, like the national debt, both gold and silver (and probably most consumer prices) will increase substantially from here, until some traumatic “reset” occurs. What sort of reset? A “black swan” event that is unpredictable, by definition. Middle East war escalation. Derivative melt-down. A dollar collapse when foreigners say “enough” to the dollar debasement policies pursued by the Fed and the US government. A collapse of the Euro or Yen for any number of reasons. A banker admits that most of the official gold supposedly held in New York, London, and Fort Knox is gone and has been sold to China, India, and Russia. You name the false flag operation. My guess: Gold and silver prices will rise gradually for a while, and then quite rapidly after one of the above “financial icebergs” smashes...

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China and gold

Xinhua, China’s official press agency on Sunday ran an op-ed article which kicked off as follows: “As U.S. politicians of both political parties are still shuffling back and forth between the White House and the Capitol Hill without striking a viable deal to bring normality to the body politic they brag about, it is perhaps a good time for the befuddled world to start considering building a de-Americanized world.” China does have a broad strategy to prepare for this event. She is encouraging the creation of an international market in her own currency through the twin centres of Hong Kong and London, side-lining New York, and she is actively promoting through the Shanghai Cooperation Organisation (SCO) non-dollar trade settlement across the whole of Asia. She has also been covertly building her gold reserves while overtly encouraging her citizens to accumulate gold as well. There can be little doubt from these actions that China is preparing herself for the demise of the dollar, at least as the world’s reserve currency. Central to insuring herself and her citizens against this outcome is gold. China has invested heavily in domestic mine production and is now the largest producer at an estimated 440 tonnes annually, and she is also looking to buy up gold mines elsewhere. Little or none of the domestically mined gold is seen in the market, so it is a reasonable assumption the Government is quietly accumulating all her own production without it becoming publicly available. Recorded demand for gold from China’s private sector has escalated to the point where their demand now accounts for significantly more than the rest of the world’s mine production. The Shanghai Gold Exchange is the mainland monopoly for physical delivery, and Hong Kong acts as a separate interacting hub. Between them in the first eight months of 2013 they have delivered 1,730 tonnes into private hands, or an annualised rate of 2,600 tonnes. The world ex-China mines an estimated 2,260 tonnes, leaving a supply deficit for not only the rest of gold-hungry South-east Asia and India, but the rest of the world as well. It is this fact that gives meat to the suspicion that Western central bank monetary gold is being supplied keep the price down, because ETF sales and diminishing supplies of non-Asian scrap have been wholly insufficient to satisfy this surge in demand. So why is the Chinese Government so keen on gold? The answer most likely involves geo-politics. And here it is worth noting that through the SCO, China and Russia with the support of most of the countries in between them are building an economic bloc with a common...

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Anglo Far East – Flying by Sight Versus Instruments

Flying by Sight Versus Instruments “VFR”Visual Flight rules “IFR” Instrument Flight Rules As sponsor of a GATA presentation in Auckland by the chairman- Chris Powell over the weekend, I had the pleasure of spending time and picking his brain on many subjects. High on the list was the current correction in gold and its seeming long and sustained period of flat or lower prices. There are many measures to gauge the market but one of the best is outright sentiment and he said that for every 100 people that would have had contact with him in times past, the number is more like 20 now. If I take that same sentiment gauge and cross it over to the exploration/ junior mining sector and even the mid-tier and senior one you get a really sad story. Here is what a professional capitulation looks like from a seasoned mining writer that makes his living selling information 1/ convince me that the resource sector recovery expected this fall is no longer valid. Even the strongest companies are now weakening again and I think this is a strong indica­tion that our market troubles will continue well into next year. This unfortunate chain of events leads me to believe that we should not be buying any junior mining stocks right now. 2/ Many of us, including myself, beefed up positions in companies like “%$” thinking this would be the start of getting our portfolios back on track. It hasn’t happened and I have never felt more discouraged about anything I have dealt with in my entire life. It has felt like an emotional earthquake to my soul. 3/ Even during the 2008 meltdown situation, I felt more composed and confident because I knew we would rebound, which we did within a relatively short-period of time. But this current market situa­tion has gone from bad, to worse, to intolerable with further downside very likely. 4/ I even wrote many times in the last several years that before the screaming, parabolic market in our favour would happen we may have to deal with downside volatility that would shake us to the core. But what we are experiencing now is beyond even what I thought could happen. This is a wipe-out that will basically eliminate at least another 35% of the junior mining companies that are currently still in business. This is after those who have already shut their doors. Many more are hanging by their fingernails right now. I thought by moving towards those companies with the best assets or near-term production stories that we would protect ourselves until the dust you spoke about settled. I...

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2014 – Helicopter Money is Coming! Jim Rickards, Currency War Update

PARTIAL TRANSCRIPT: Greetings and thank you for joining us at I’m here at the Casey Summit with Jim Rickards. He’s the author of Currency Wars. He has a new book coming out as well. What is it called? James Rickards: It’s called The Death of Money: The Coming Collapse of the International Monetary System. It’ll be out in April; April 8th is the publication date. I finished writing it about a month ago and we’re in editing. It’s a funny thing, Dan. We live in a world of what I call instant digital gratification, whether it’s YouTube or Twitter, everybody wants to put everything out there immediately, but a book is still an old-fashioned process. It takes a year to write it and edit it and bind it, so it’ll be out in April and I’ll be talking more about it between now and then. It should be very interesting because I’m sure some of your analysis will have either been proven right or proven wrong in the book, am I right? James Rickards: Well, that’s right, I mean it is forward-looking, so I say a lot of things in the book that I will be looking over in the years ahead, but sure. It’s something coming out in six months, it’ll be a good test to see how things play out. We’ll see if they play out as expected. That’s exactly right. I’ve always wondered in the dollar crisis scenario if right on the cusp of the market just melting down and going crazy that Obama and whatever Fed chairman of that time, say, next to him and they’re instituting a gold standard. Do you think it’s possible that they, right before a major crisis is about to happen, they come in and switch the currency? James Rickards: I don’t think so. I think there are several scenarios: one is that we get to a gold standard by design. In other words, people look at the system and they say that it really is not sustainable, it really is based on confidence, but we’re in the process of eroding confidence. There is no exit from quantitative easing. We should say there’s no good exit. You can back away from it, but then you’ll implode the economy in a deflationary crash. Or you can keep going and eventually cause a loss of confidence in the dollar and then have a hyper-inflationary crash, so you got a crash either way. One looks like the Great Depression, one looks like the late ’70s but worse. Those are the only two paths, but there’s no other path. There’s...

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Valuing gold

The original article shows just how unsound currency has become since the banking crisis, with FMQ appearing to be hyper-inflating from that time. This article explores the implications for the price of gold. Firstly lets look at Chart 1, the chart of FMQ.   It differs slightly from the chart in my original article, in that I have recalculated the exponential growth curve at 5.859%, which was the average annual growth rate for FMQ between 1960 and 2008 before the banking crisis. This throws up a larger gap of $ 4.5 trillion between that long-term trend and FMQ today. Therefore, FMQ is now 62% over trend. This is a massive and potentially currency-destructive development going unrecognised. But since July 2008, the month before Lehman Brothers collapsed, gold has risen from $ 918 to about $ 1270 today, which is a 38% increase. Does this illustrate that gold is broadly discounting monetary developments? The answer is no, because the question ignores the accumulating quantity of above-ground gold and more importantly the expansion of FMQ. And while both have increased over the last five years, FMQ has expanded much more rapidly than the stock of gold. The net effect is illustrated in Chart 2, where gold at $ 918 has been indexed to a base of 100 as at July 2008.   This chart shows that at Friday’s nominal price at $ 1270, gold adjusted for increased gold stocks and FMQ has actually fallen to 68, 32% down from its pre-Lehman crisis level. Of course, any value we place on gold is entirely subjective; but in coming to that view we naturally assume that the quantities involved do not change. The more sensible thing to do in forming a judgement is to take changing quantities into account, particularly when the expansion of the currency is unprecedented and appears to be out of control. Before Lehman collapsed, there was a general lack of awareness of the risk that the whole financial system was in danger. In this context, a gold price of less than $ 918 was perhaps justifiable. After the event, while the Fed struggled to stabilise the banking system, the gold price initially fell to $ 656, or to 71 on our index, reflecting fears of a deflationary collapse. As the Fed showed signs of succeeding with monetary expansion, gold began to rise and in January 2009 regained the pre-Lehman crisis level in nominal terms for the first time. It wasn’t until September 2010 that gold recovered to pre-Lehman levels in real terms deflated by both FMQ and the increased stock of gold. The conclusion is simple: gold should logically...

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Silver & Gold – Hidden Secrets Of Money 4 – The Biggest Scam In The History Of Mankind (In 7 Easy Steps)

You are about to learn one of the biggest secrets in the history of the world…it’s a secret that has huge effects for everyone who lives on this planet. Most people can feel deep down that something isn’t quite right with the world economy, but few know what it is. Gone are the days where a family can survive on just one paycheck…every day it seems that things are more and more out of control, yet only one in a million understand why. You are about to discover the system that is ultimately responsible for most of the inequality in our world today. The powers that be DO NOT want you to know about this, as this system is what has kept them at the top of the financial food-chain for the last 100 years… Learning this will change your life, because it will change the choices that you make. If enough people learn it, it will change the world…because it will change the system . For this is the biggest Hidden Secret Of Money. Never in human history have so many been plundered by so few, and it’s all accomplished through this…The Biggest Scam In The History Of...

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Simon Black – Gold, and the four words that define western economic policy

[Editor’s note: Tim Price, frequent Sovereign Man contributor and Director of Investment at PFP Wealth Management in the UK is filling in for Simon today.] Despite nearly $ 17 trillion reasons, there are investors stupid enough to believe that debt issued by the world’s largest debtor country (i.e. US Treasuries) should be treated as a risk-free asset. This is even more astounding given that the possibility of formal default is only a matter of days away. Treasury bond defenders will no doubt point out that in a fiat currency world where the central bank has the freedom to print ex nihilo money to its heart’s content, the very idea of default is absurd. But that is to confuse nominal returns with real ones. Yes, the Fed can expand its balance sheet indefinitely beyond the $ 3 trillion they have already conjured out of nowhere. The world need not fear a shortage of dollars. But in real terms, that’s precisely the point. The Fed can control the supply of dollars, but it cannot control their value on the foreign exchanges. The only reason that US QE hasn’t led to a dramatic erosion in the value of the dollar is that every other major economic bloc is up to the same tricks. This makes the rational analysis of international investments virtually impossible. It is also why we own gold – because it is a currency that cannot be printed by the Fed or anybody else. On the topic of gold, the indefatigable Ronni Stoeferle of Incrementum in Liechtenstein has published his latest magisterial gold chartbook. Set against the correction in the gold price 1974-1976, the current sell-off (September 2011 – TBD) is nothing new. The question is really whether financial and debt circumstances today are better than they were in the 1970s. We would suggest that debt fundamentals are objectively worse. Trying to establish a fair price for gold is obviously difficult, but treating it as a commodity like any other suggests that the current sell-off is not markedly different from any previous correction during its bull run: To cut to the chase, it makes sense to own gold because currencies are being printed to destruction; the long-term downtrend in paper money (as expressed in terms of gold) remains absolutely intact: And we cannot discuss the merits of gold as money insurance over the medium term without acknowledging the scale of the problem in (US) government debt, now closing in on $ 17 trillion. Whatever happens in the absurd and increasingly dangerous debate over raising the US debt ceiling, the fundamental problem remains throughout the western economic system. The piper must,...

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Gold Bullion Continues to Drain Out of COMEX

It was announced this evening that President Obama will nominate Janet Yellen as the new Fed Chairman tomorrow, having been denied his first choice of Larry Summers by popular outrage. There were big adjustments in the registered (dealer) gold inventories at JPM and HSBC yesterday as a total of over 40,000 ounces of gold bullion moved back to the customer storage category. In Scotia Mocatta 4,572 ounce of customer gold moved into the deliverable category. Brinks received about 1,700 ounces of gold into its registered category which will be offered for delivery and Scotia also received 1,618 ounces into storage. These were the only external transactions. So as of yesterday there was a total of 731,226 ounces of deliverable gold, and a total of 6,888,160 ounces of gold in all the COMEX warehouses. And there are 48 times more claims for the deliverable gold than there is gold to deliver, at least at these prices. They may dodge, bluff and finesse their way for some time, the audaciously clever ones that they are, but at last there will come a reckoning, as it comes for all. Weighed, and found wanting. Stand and deliver. By Jesse Gold Bullion Continues to Drain Out of...

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$1500 SILVER Mike Maloney on Gold & Silver Bullion Investing

SILVER Mike Maloney on Gold & Silver Bullion...

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