April 15, 2013
- Amid the slaughter, Jim Rogers waits for gold to drop even more. What’s his target? He won’t say, but The 5 offers a suggestion…
- “The Fed is rigging the bullion market”: Father of Reaganomics on a tear… and the argument’s getting traction
- It’s not only the precious metals in trouble today: The trio of disappointing numbers that’s not helping
- The strangest tax in the president’s new budget… a warning about Obamacare you haven’t heard yet… an insider’s perspective on whether government employees are sociopaths… and more!
OK, so perhaps we were a year early.
At the start of 2012, we suggested gold was due for a rest after 11 straight years in which the price on Dec. 31 was higher than a year earlier.
In the end, the Midas metal eked out a 7% gain.
As we write, gold is at $1,380. That’s down 17% from the start of the year. And nearly 12% since the open on Friday.
As two-day drops go, this is shaping up to be the fifth-worst on record.
Silver’s been smashed more than 8% today alone, to $23.66.
“This may be the correction that gold needs,” says adventure capitalist and Vancouver veteran Jim Rogers.
“If it goes down enough,” he told reporters in Singapore today, “I will start buying it.”
No, he did not specify what’s “enough” for him…
“Sellers are now in control,” writes our resident technician Greg Guenthner, now that gold has failed miserably to bounce off the key $1,550 level that had held since mid-2011.
“You’ll hear a lot about how gold is ‘oversold’ after this huge drop,” he adds in today’s Rude Awakening. “But it’s too early for this type of analysis. In fact, most bear markets begin with scale-tipping oversold readings. Stocks were massively oversold in summer 2008.”
In the large community of technicians, an “expert consensus” has developed: If $1,400 can’t hold — and it’s looking tenuous right now — the next downside target is $1,315.
Greg says they’re optimistic.
[You might wish to grab on to a stable surface before you read the following sentence…]
“My longer-term price target is between $1,000-1,100. This is where the metal consolidated immediately before and after the 2008 financial crisis, before its three-year push toward $2,000. Book it.”
Yes, that would be a drop of nearly 50% — on a par with gold’s drop from $200 to $100 during 1974-76, before the run past $800 on Jan. 21, 1980.
Heh… We suspect that would be “enough” for Jim Rogers.
“Remember,” writes GoldSwitzerland proprietor and Vancouver veteran Egon von Greyerz this morning, “that in 2008, gold corrected 34% from $1,032 to $681.
“From the $681 low, gold then went up almost three times in just 34 months.” His target: $3,500-5,000 in the “next few years.”
“The Fed is rigging the bullion market,” wrote Paul Craig Roberts over the weekend, “in order to protect the U.S. dollar’s exchange value, which is threatened by the Fed’s quantitative easing.
“Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for bullion possession.”
Mr. Roberts is the Reagan-era Treasury Department official sometimes credited as the “father of Reaganomics.” Now in his 70s, he falls squarely into the “gold-is-manipulated” camp championed by the Gold Anti-Trust Action Committee (GATA).
“GATA… has come up with some interesting data,” writes an even-handed Lawrence Williams at Mineweb, “…which certainly do suggest that the financial powers that be are, at the very least, conscious that some kind of control of the gold price can work to the favor of an attempt to maintain global financial stability, and that of the U.S. dollar in particular.
“Where perhaps GATA gets it wrong, perhaps unintentionally,” he says, “is that it appears from some of its statements that this price manipulation is seen as something of a plot designed to do down the gold investor, whereas it would be better presented as a desire to protect the perception of currency value in people’s minds.”
In other words: It’s not all about you. The aim is to mask the erosion of paper currencies.
Think back to September 2011. From its all-time high at $1,921, gold fell nearly $400 in three weeks — a much bigger percentage drop than we’ve experienced this month.
It was at that moment the news gods delivered The 5 one of our all-time favorite video clips. Then, we watched it as a knee-slapper. Now we watch it with an eye toward the sort of perception management Paul Craig Roberts is talking about…
This morning, we see Matt Drudge is following the script. Gee, we’d have thought he’d be more interested in the vain and fatuous message Justin Bieber left in the guest book at the Anne Frank Museum…
Among the amusing links provided by Drudge is a CNBC interview with Dennis Gartman, attributing the movement to the news last week that the Cypriot central bank might unload 10 metric tons of gold.
Yeah, right… The Chinese imported nearly 10 times that amount in February alone.
“The manipulation [has] been going on for years,” says John Embry, chief investment strategist at Sprott Asset Management, “but the fact is it’s becoming more widely recognized” since an earlier Paul Craig Roberts article posted on April 4.
“As a result of the counterintuitive price action we’ve seen for a considerable period of time,” Embry tells Mineweb, “sentiment is dismal, and when you put that combination together, undervaluation, dismal sentiment and improving fundamentals, to me it’s just a matter of time.
“I think when we look back at this period, we will recognize this may have turned out to be the single best buying opportunity in the entire bull market, which is now in its 13th year.”
[Ed. note: We’ve eagerly sought John Embry to speak at the annual Agora Financial Investment Symposium in Vancouver. And for several years running, he’s had a schedule conflict… until now.
We’re delighted to announce Mr. Embry will deliver a talk — and take part in our popular Friday-morning resource round table with other luminaries like his Sprott colleague Rick Rule and our own Byron King. The dates for this year’s symposium are July 23-26. We’d be delighted to have you join 850 other smart people. Early-bird registration discounts are still available.]
“Amid an ongoing decline in the price of gold,” writes Ralph Benko in today’s Daily Reckoning, “a major brawl recently broke out in the elite media over… the gold standard.”
We took note of David Stockman’s recent cri de coeur in The New York Times. Predictably, Times man Paul Krugman has fired back — “cranky old man stuff,” he says.
“Krugman,” Mr. Benko writes, “risks losing relevance by attacking a caricature of the gold standard, one that is not actually being promoted in the policy sector.” Benko takes a leisurely and insightful stroll through Krugman’s gallery of red herrings and straw men — watch for it later in today’s Daily Reckoning.
Nearly every asset class is getting clobbered today — just not as badly as the precious metals…
- The Dow is bouncing off the morning’s lows, but is still below 14,800
- The rest of the commodity complex is ugly: Oil is approaching $88, a number last seen on Christmas Eve. And at $3.23 a pound, copper is as low as it’s been since 2011
- Treasuries are benefiting, but not much: The 10-year yield is still above 1.7%
- Nor is the greenback getting much love: The dollar index is up only a tad to 82.3.
Some of the action can be attributed to a raft of numbers that — in a theme we’re seeing a lot of in recent days — confounded the “expert consensus”…
- China’s year-over-year GDP rang in overnight at 7.7%, slower than the previous quarter’s 7.9%
- New York State manufacturing is also slowing. The Fed’s Empire State survey remains in positive territory — barely — but it’s been slipping two straight months
- Confidence in the homebuilding sector is cratering: The National Association of Home Builders’ housing market index clocked at the lowest since October. The new worry: rising costs.
Volatility notwithstanding, the last several days have been good ones for Options Hotline readers. Last Thursday, they bagged gains of 58% in less than three weeks playing call options on Home Depot. This morning, they’re already up 23% on his latest recommendation issued last night.
Steve’s research is available for the next 36 hours at a substantial discount. Take advantage at this link.
On this tax day, we take note of a peculiar line item in the president’s budget proposal. Flavored vodka drinkers: There’s a target on your back.
“Distilled spirits,” explains ABC News, “currently get a tax break if they include flavors, but the president’s budget proposal does away with that. Spirits are taxed at $13.50 per proof-gallon (a gallon of 100-proof liquor), but if distillers add flavorings, they can roll back some of that tax: Up to 2.5% of the alcohol in those flavoring mixtures is exempt from the spirits tax.”
The president’s number crunchers seem to believe this tax break gives a leg up to flavored liquors, “particularly foreign producers whose flavor quotients aren’t restricted, as they are for U.S. producers,” says ABC.
No, this is not a parody…
Thus can foreign spirits with a high flavoring content can be sold cheaper. The president seeks to remedy this horrible injustice.
Better load up on that Absolut Citron while you can…
“I am 72 years old,” a reader writes. “When I was 65, I failed to sign up for the ‘prescription drug coverage’ mandated by our government. At 68, I signed up. I was told at that time I would have to pay a penalty for each year over 65, because I did not do what the government said to do.
“The penalty was 1% per year of the monthly premium. That penalty has increased each year. I was informed by the government that I will pay that penalty until I die (this was voted in by Congress). I can’t help but believe this will happen to thousands of Americans that do not sign up for Obamacare. It will be very bad for someone who does not sign up at 20 and tries to sign up at 40. They will face a 20-plus-year penalty on top of their premium.
“This is ‘We need to pass the bill so we can find out what is in it.’ Mark my words, they will find out what was in that bill, and they’re not going to like it.”
“As a government employee,” writes a reader in reply to a rant on Friday, “I can vouch for there being no ‘sociopath’ checkbox on hiring forms. The propensity of the government to hire sociopaths is far more natural.
“Forgive the crudeness of this title, but this is a legitimate business book (one of the best). In The No Asshole Rule, the author states that ‘assholes reproduce.’ That is, people with those tendencies tend to get into a position of power and surround themselves with other people who share those tendencies. This, of course, tends to drive out the people who don’t share those tendencies, leaving you with an organization of the crew of Spaceball 1.
“I find the same pattern in the government with incompetents and sociopaths. Whether they’re conscious of it or not, that’s how it goes. They hire like people. Far too few of us who understand this can actually get into those hiring positions, and the rules make it impossible to get the incompetents and sociopaths out.”
The 5: Yes, but do you think that’s by accident, or design?
Cheers,
Dave Gonigam
The 5 Min. Forecast
P.S. With less than 12 hours to the midnight filing deadline, we can’t do much to help you with your tax return this year, but for a few more hours, you can still snag our special report to help you with next year’s.
It’s called Starve the Beast: 13 Still Legal Ways to Slash Your Taxes in 2013 and Beyond. Here’s where you can learn how to secure your own copy.