Two New Dangers Facing Gold Investors

  • Beware “American Eagles” that are really gold-plated tungsten
  • Another danger facing gold investors: Misconceptions about “standing for delivery”
  • Now the “Brexit” is a big deal? Behold the market impact…
  • Market impacts — expected and otherwise — of the Orlando attack
  • New official line on the “28 pages”: Move along, nothing to see here
  • Inflation confusion… the war on cash, Caribbean vacation edition… The 5 gives the mic to a couple of critics… and more!

After nearly five years in the cold, gold is hot again… and dangers abound for the unsuspecting precious metals investor.
For one thing, Chinese knockoff coins are flooding the market — consisting of cheaper metals plated with gold. Tungsten is a favorite because it weighs almost the same as gold.
American Eagles, Canadian Maples, South African Krugerrands — Chinese counterfeiters have ’em down to a science. “It has been getting more authentic-looking over the years,” Cincinnati coin dealer Brad Karoleff tells NBC News.
Online dealer Brian Silliman says he’s been to China and seen the process up close: “They take the actual image of the coin, use a graphics program to touch it up and then they send it to an engraving machine that cuts the die.”

Are you sure it’s the real thing?

They complete the illusion of authenticity by putting the bogus coins in those “slabs” complete with phony bar codes and registration numbers, to make it look as if they were professionally graded.
Your best defense? Indeed, your only defense is to buy through a reputable dealer that stands behind its products. Be careful on eBay. Be more careful on Craigslist. And if you see an unbelievable deal in the pages of your weekly shopper paper… it’s probably unbelievable for a reason.
Maybe an even greater danger facing gold investors is a stubborn misperception about the catalyst for a “super spike” in the gold price — past $2,000, $3,000, even $5,000 an ounce.
“Most gold investors will face big losses when gold reaches that price,” says Jim Rickards — a fact that’s brought him and a small entourage to Switzerland this week.

Jim along with publisher Peter Coyne on Lake Zurich…

As we’ve mentioned in recent days, Jim is meeting with one of the most connected — and private — figures in the gold world. This individual keeps a low profile… but his speed-dial list includes high-level bankers, central bankers, finance ministers, high-volume gold dealers and the heads of the world’s biggest refineries.
“He knows,” says Jim, “why this gold shock is coming better than anyone else, because of his firsthand knowledge in the space. He sees the dynamic at work.”
What will set off the shock?
Well, it won’t be a major player “standing for delivery.”
We emphasized this point in detail earlier this spring, but it bears revisiting. “For years, gold bugs implored futures traders to ‘stand for delivery’ on the Comex,” Jim said.
Most traders are content to take cash settlement once their contracts expire… if they don’t simply “roll over” those contracts to a future date. Many gold bugs have spent years hoping against hope that someone will stop playing that game and demand physical delivery of metal. Because for every ounce of metal held by the Comex, there are at least 100 registered “owners” holding a contract; more recently, the numbers have been closer to 500. It would take only one of those owners demanding real metal to set off panic buying.
So why hasn’t it happened yet? Jim cites three reasons…

  • The Comex has emergency powers to prevent traders from taking delivery in a way that disrupts the “normal” functioning of markets
  • The Comex also has authority to change the rules during “emergencies” — which is how the Hunt brothers’ attempt to corner the silver market in 1980 was broken
  • And there’s the ever-present threat the Justice Department will come down hard on anyone who stands for delivery.

“Most major participants in the gold market (banks, dealers and hedge funds) are regulated by one or more of the Federal Reserve, U.S. Treasury, SEC or CFTC. Applicable laws contain strict anti-fraud and anti-manipulation rules, including jail time in cases of willful and knowing violations.”
An ambitious prosecutor would have an easy time building an overwhelming case entailing a half-dozen felonies, each of which could mean decades in Club Fed.
Don’t get us wrong: Someone will stand for delivery sometime. But it will take an external market shock to give them legal cover.
A rogue hedge fund manager won’t just up and demand delivery because he feels like it or he wants to call BS on the system. Rather, he’ll wait for the proverbial snowflake that triggers the avalanche.
“At that point, the hedge funds can demand physical delivery of gold without fear of prosecution. If a hedge funds tries to start an avalanche, it’s manipulation. But if the avalanche starts from another source, then a hedge fund piling on is ‘normal’ market conduct.”
What might that snowflake be? “It could be a geopolitical shock,” says Jim. “It could be anything, assassination, a suicide, a natural disaster, a real tsunami.”
But there’s one trigger especially that’s on Jim’s mind, especially after his conversations with this connected gold insider, the man he identifies only as “Goldfinger.”
As secretive as Goldfinger is, this individual has agreed to join Jim for an online briefing live from Zurich tonight, exclusively for Agora Financial readers like you.
It’s tonight at 7:00 p.m. EDT. (Yes, they’ll be up late in Zurich; that’s how important it is.) This is our last opportunity to invite you to witness this event and even submit questions in advance.
Best of all, it costs nothing to watch… and we still have a handful of slots available. Claim yours right now at this link.
To the markets, where traders have decided this is the week to freak out over the “Brexit” referendum on whether Britain should leave the European Union.
The referendum isn’t till a week from Thursday. But between a poll over the weekend revealing a break in favor of the “Leave” camp… and Britain’s leading tabloid The Sun coming out in favor of leaving… it’s suddenly a thing. As we write…

  • The S&P 500 has shed 12 more points, on top of yesterday’s 17 point loss. At 2,067, the index’s latest run at the record 2,030 level has failed
  • The safety trade is benefiting high-quality government bonds around the world, sending yields down. The yield on a 10-year German bund has now gone negative…
  • … which is only accelerating demand for positive yields, and U.S. Treasuries are the best source of that. The yield on a 10-year note continues to hover at the critical 1.6% threshold we spotlighted on Friday
  • Gold is steady at $1,282…
  • … and that’s despite continued dollar appreciation. The dollar index is now knocking at the door of the 95 level
  • Crude continues to slide, now at $48.23.

The one economic number of note is retail sales — up 0.5% last month, on top of April’s 1.3% gain. But the year-over-year growth still looks anemic at 2.5%.
The horrific events in Orlando are moving a few select stocks around the globe — and not necessarily in the direction you’d expect.
Yes, gunmakers usually rally after a mass shooting on the theory that stiffer gun control measures might be in the works, spiking demand for firearms. And Smith & Wesson Holding Corp. (SWHC) rallied 7% yesterday… but it’s given back much of that gain this morning.
G4S, the giant British security firm that employed the gunman (and has many U.S. government contracts), tumbled 5% yesterday in London trade… and another 1.5% today.
But if people are jittery about travel to the Orlando area, it’s not showing up in the stock of Disney — which is bucking the overall market trend. DIS has been in the green both yesterday and today.
The official Obama administration spin on the “28 pages” has shifted — just in time for Saudi Arabia’s Prince Mohammad to pay a call on Washington.
Prince Mohammad — the 30-year-old power behind King Salman’s throne — is meeting this week with President Obama and Secretary of State John Kerry.
A month ago, CIA director John Brennan said nothing positive about the release of the 28 pages — classified content from the Joint congressional Inquiry into the Sept. 11 attacks. The few people who’ve seen the unredacted pages say they point official support from Saudi Arabia for the attacks — but that’s as specific as they can get.
Over the weekend, Brennan changed his tune: He expects the 28 pages will be released… and they’ll let the kingdom off the hook. “So these 28 pages, I believe, are going to come out, and I think it’s good that they come out. People shouldn’t take them as evidence of Saudi complicity in the attacks.”
Brennan went to great pains to call the 28 pages a “preliminary review” — full of allegations that were never proven. He left out the part about how they were also never investigated, heh.
Bonus points: Brennan said this in an interview with Al Arabiya TV — owned by the Saudi government.
Can all this backpedaling forestall a stab in the back by the Saudi regime against its American “ally”? We’re not holding our breath.
“Fascinating, Dave,” a reader writes after Jim Rickards helped us unpack how the global elites will bring about the inflation they desire sooner or later.
“As Jim explains, the central bankers’ new game plan for getting the inflation they need is: ‘helicopter money’ + SDRs + gold repricing.
“So they’re not really out of ammo, as some folks believe. They’re just changing up their tactics — and mixing things in new, creative ways.
“If it weren’t for The 5, it would be so easy (and expensive) to get faked out by that strategy. Thank you as always for clarifying a complex picture!”
“I’m confused by your claim that central banks have been unable to stimulate inflation,” a reader writes, “when I see other articles saying the U.S. government is grossly understating inflation due to what’s included/excluded in the calculation.
“Is there inflation or not? Please connect the dots for this confused reader. Thanks.”
The 5: There is… but not enough to satisfy the central bankers.
That’s why we pay so much heed to the “core PCE” numbers from the Commerce Department each month. It’s the Fed’s favorite measure of inflation; when the Fed talks about its 2% inflation target, core PCE is what they’re talking about. Right now, it’s running at a 1.6% annual clip.
Also important to central bankers is the direction inflation is going. Is it accelerating or decelerating? Most measures of U.S. inflation were accelerating late last year, only to stall out so far this year. That includes the ShadowStats inflation rate, which uses the same methodology the government used during the Carter administration, when the numbers were honest. (It’s currently 8.8%.)
“We were at the St. Croix, U.S. Virgin Islands, airport in March flying to Puerto Rico,” a reader writes with a front-line tale from the war on cash.
“We tried to pay our $35 for extra bags with a credit card and were informed that power was out/computers were down and that if we couldn’t pay the $35 in cash, we could not fly. So much for the cashless society. And this was the good old USA.
“I’m sure, though, that this would never happen in any third-world country… or to any of the elite whose bond servants and hacks handle all the disagreeable and distasteful details for them like touching the filthy lucre they so abhor.
“Love The 5. Keep up the good work.”
“Well, you really blew that June 13 deal,” a reader chides us. “For the last two weeks, we heard that Apple was going to set a small tech company into orbit.
“I watched two hours of Apple presentations yesterday, and unless I took a nap somewhere along the way, I didn’t hear anything about a small tech company. Hope your future picks are better!”
The 5: We were explicit last Friday: We couldn’t say a partnership with Apple was a sure thing.
We also said if no partnership was announced, the company still has much going for it — including a still-unnamed “key strategic partner” to bring its wireless-charging technology to market. The story’s not over…
Best regards,
Dave Gonigam
The 5 Min. Forecast
P.S. As long as we’re giving the floor to criticism in the mailbag…
“I hope that Jim Rickards and the crack Agora Financial staff perform better in Zurich than they did in Tokyo!” a reader writes.
Rest assured that will be the case and that we’ve done everything to ensure tonight’s “Goldfinger” briefing will be glitch-free.
“I’m in the gold vault loading zone,” the aforementioned Peter Coyne told me via IM a short time ago. So yes, it’s an ambitious presentation in a unique setting. But we have backups for our backups. Redundancies for our redundancies.
And what you learn could very well save your retirement. The information is both free… and priceless. If you still haven’t signed up for access tonight at 7:00 p.m. EDT, here’s your final chance.

Dave Gonigam

Dave Gonigam

Dave Gonigam has been managing editor of The 5 Min. Forecast since September 2010. Before joining the research and writing team at Agora Financial in 2007, he worked for 20 years as an Emmy award-winning television news producer.

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