Problem is that its measured in dollars…so if you factor in the rate of money creation and assume that affects buying power you get a DOW thats worth about 5000 in buying power.

When measured against gold however, it looks more like this:

DOW / GOLD Ratio Chart - 10 Yr

That tiny little uptick is what all the Wall St cheerleaders are excited about.

If history repeats and the DOW and Gold meet at a 1:1 ratio at the top of golds run up, and the DOW keeps rising (due to inflated dollars more than anything else) , then where is that meeting point going to be? Maybe these guys calling for a 20,000 DOW are right…but what also does that mean for gold? What also would that mean for the buying power of the dollar?

To me that looks like a buying opportunity in a major trend.

Remember what the ’sub-prime’ catastrophe did to the economy?

Get ready for market panic 2.0

Remember Sub-Prime?

Interesting piece from Deutsche Bank on rapidly deteriorating Construction loans. DB predicts that “construction loans will be the epicenter of bank loan problems”

• By far the riskiest type of loan product in bank portfolios;
• Substantial portion represents loans to homebuilders;
• Market currently penalizing properties with vacancy issues extremely severely;
• Newly constructed (or only partially constructed) properties are the poster children for vacancy problems in CRE;
• Values of most newly constructed properties are down massively;
• Expect extremely high default rates and extremely high loss severity rates, both likely to be in excess of 50%;
• Total expected losses of 25% or more.

Commercial Loan Delinquency

You may notice that the date I posted that article in the link above perfectly co-incides with a spike in the ‘Fear Index’.

This chart is the ‘VXO’ also known as the ‘Volatility Index’ – it typically represents when there is a great deal of fear sentiment in the marketplace, or lack of.

Volatility Index Chart Chart

The interesting thing I would like to point out is that although we saw a rise in fear as well as a general sell-off in commodities, retail demand for gold soared and it was not un-common to see anywhere from 10% to 300% premiums on gold coins for sale on Ebay.

Are we about to see another massive spike in retail gold demand?

U.S. Mint gold, silver coin sales ‘temporarily suspended’ – again

Sales and suspension of gold and silver coin or bullion coin sales by the U.S. Mint are becoming a regular part of doing business as overloaded refiners and mint facilities struggle to meet continuing high demand.
Author: Dorothy Kosich
Posted:  Tuesday , 14 Jul 2009

RENO, NV -

Unprecedented demand, a shortage of blanks, and restrictive policies and regulations continue to exacerbate what is almost becoming a chronic shortage of gold and silver coins authorized by the U.S. Mint.

The U.S. Mint has again “temporarily” suspended sales of almost all of its gold uncirculated and proof coins, along with nearly all of silver uncirculated coins because of the limited availability of blanks.

The mint no longer offers for sale the American Buffalo Gold Proof fractional coins and four coin sets are no longer available. Meanwhile the mint will no longer offer American Buffalo Gold Uncirculated Coins.

The 2009 American Buffalo One-ounce Gold Proof Coin is scheduled to go on sale in the second half of the 2009 calendar year after an acceptable inventory of 24-karat gold blanks can be acquired.

The U.S. Mint Online Product Catalog says production of the American Eagle Gold Proof and Uncirculated Coins has been temporarily suspended due to the “unprecedented demand” for American Eagle Bullion Coins for which all available 22-K gold blanks are being allocated.

In the catalog, the government says it will resume the American Eagle Gold Proof and Uncirculated Coin Programs “once sufficient inventories of gold bullion blanks can be acquired to meet market demand for all three American Eagle Gold Coin products.”

Congressionally authorized American Eagle Bullion coins are aimed at providing investors an effective way to invest in precious metals. Prices may change on a daily basis as the platinum, gold and silver markets may fluctuate. The mint does not sell the bullion coins directly to the public, but distributes them in bulk through a network of official distributors, who meet government financial and professional criteria, which must be attested to by an internationally accepted accounting firm.

So far this year, the mint has sold 700,000 ounces or 700,000 gold bullion coins, compared to last year’s total sales of 860,500 ounces of gold or 1,172,000 bullion coins.

Federal laws and regulations say the gold must be newly mined in the United States. Only a handful of refineries meet the standards and regulations to produce the blanks for the coins.

Meanwhile, silver producers have found themselves equally frustrated by the inability of the U.S. Mint to meet the demand for silver coins. Production of the American Eagle Silver Proof and Uncirculated Coins has also been temporarily suspended because of unprecedented demand for the American Eagle Silver Bullion Coins.

The product catalog states, “Currently, all available silver bullion blanks are being allocated to the American Eagle Silver Bullion Coin Program, as the United States Mint is required by Public Law 99-61 to produce these coins ‘in quantities sufficient to meet public demand.’”

Thus far this year, silver bullion coin sales total 14,899,500 compared to last year’s total sales of 19,583,500.

While gold and silver producers have repeatedly gone to government officials to get them to authorize an increase in the number of refineries which can produce the blanks and the facilities that can mint the coins, industry sources say they feel they have been stonewalled by mint officials who refuse to budge.

Among the U.S. manufacturers of blanks is Sunshine Minting in Coeur d’Alene, Idaho, and Stern-Leach of Attleboro, Massachusetts. Nearly all U.S. Mint gold coins at manufactured at West Point, New York at a remote site on military academy grounds.

U.S. Mint spokesman Michael White told Mineweb refiners are running 24-hours a day, seven days a week trying to meet demand for blanks.

Original Article

By Jeff Clark, editor, BIG GOLD

Does this sound like your world?

You trudge to the office, nervous about keeping your job. Some of your friends are out of work. The economy struggles, and recession seems just around the corner. Stores where you once shopped are now closed. Americans are still shooting and being shot at in the Middle East. The price of oil is far off its peak but remains high.

The government has promised action, but frankly you don’t like the president’s ideas nor trust the government’s judgment, since they don’t seem to notice that the budget and trade deficits are huge and show no sign of easing. 

You invested in some gold and gold stocks, but they’re all down. Everything has lost value. Things are looking grim indeed.

If any of this sounds familiar, you’ve got a good memory. It’s what was happening in November 1975.

Yes, things didn’t look so rosy back then, either. And yet look how November 1975 fits into gold’s bigger picture:

Gold During the 1970s Bull Market

Now compare that chart to today’s…

Gold During the Current Bull Market

You’ll see that from 1970 to 1974, gold rose 400%. In our market (2000 to 2008), gold climbed 290% to its March 2008 peak.

From 1974 to 1976, gold fell 40%. In the current market, gold has fallen 31% in eight months, a much steeper decline.

Finally, during the three-year rise leading to gold’s peak of $850 in 1980, it gained 670% from its 1976 low.

This year’s gold price has been behaving much as it did in 1975.

So where will the price be a few years from now? I can tell you that Casey Research expects gold’s chart to look more and more like the 1970s before this is over. The U.S. government has only very recently fired the starting gun for racing inflation, but it has fired it very loudly.

In just the last two months, the Fed has increased the basic money supply (cash in circulation plus deposits held by commercial banks at the 12 Federal Reserve Banks) by nearly 50%. Nothing close to such a rapid increase has ever happened before in the U.S. It’s the kind of news that normally comes only from desperate banana republics. And it always means rapid price inflation is on the way.

What the Federal Reserve has done in the last two months guarantees high inflation. But the timing is unknown. In fact, it’s unknowable.

Looking at the past, a pop in the basic money supply gets felt strongly throughout the financial markets within six months or so. But that’s just the average experience, with some inflationary episodes running much faster and others running much slower. And our current situation is anything but average – very recent but extreme money growth colliding with a years-old but extreme credit crisis.

So we’ll have to sit and let the timing show itself. And if what you are sitting on is gold, you should sit comfortably. Patience served gold investors well in the mid-70s. It will serve them well again.

Regards,

Jeff Clark

The gold and silver shortage has not abated, and if you can find gold or silver at the retail level, consider yourself fortunate.

While all other classes are getting slaughtered, gold still has second best performance of all assets in the following chart:

A great letter from one of our fellow bullion dealer colleagues:

Dear Clients and Friends,This is the day you bought gold for. You are probably as shocked as we are to watch the on-going devastation created by the banking crisis, the Stock Market meltdown, and the U.S. Government Trillion Dollar taxpayer funded bailout plans.

* Oil prices are down more than 50% from the highs.
* The DOW’s lost 40% from Oct ‘07 highs.
* A broader index, the S&P 500 is off 40% in the past year
* The NASDAQ is down 41%.
* Fed Funds interest rates are down from 4.8% a year ago to 0.7% today
* Gold is down only 1% from the price of one year ago.

This is what happens in a Financial Meltdown! Investments you depended on for years suddenly crash and years of profits are lost in a matter of days. It’s ugly. Alan Greenspan, the Ex-Federal Reserve Chairman testified today, “We are in the midst of a once-in-a-century credit Tsunami.” We wish he had said instead, “We were wrong, America cannot borrow our way out of debt or into prosperity.” Sadly, he doesn’t get it.

The Perfect Financial Storm

Is it any wonder that investors have lost confidence in our financial system? As a result, stocks, bonds, homes, real estate, commodities, and even precious metals are caught up in an event we predicted was coming over two years ago. We called it the “Perfect Financial Storm.” When the Austin Report researchers faced the most optimistic Stock Market in history hitting new highs, we dared to warn our readers that falling home sales, a mortgage crisis, and inflation threaten to suddenly drive down stock prices and would ultimately take the world’s economy into a severe recession.

Now, after the disaster has struck, the mainstream media describes this as the worst banking crisis since the 1929 Stock Market Crash and the Great Depression. Little do they understand of exactly how correct they are or how much further stocks still have to fall. The wild gyrations reflect that investors have totally lost confidence in the world stock markets. Years of blindly trusting their life savings to Stock Brokers has ended poorly. Millions of Americans are finding their 401Ks, IRAs, and stock portfolios losing half or more of their life savings.

Most Severe Gold & Silver Coin Shortage Ever

As one of American’s leading internet Gold and Silver dealers we are in a unique position to observe the markets and comment on them. From an investor point of view, this crisis is far from over. Bank runs are continuing and money markets are being liquidated as people are moving to safe havens.

1. We must report that there are no Gold or Silver Coins in dealer vaults or at the mints. Demand has simply overwhelmed the physical supply-every dealer has sold everything!

2. To complicate the shortage, the U.S. Mint halted minting 2008 American Eagles for the year. The Canadian Mint, Austrian Mint, and other World Mints are waiting for 1,000 ounce Gold and Silver Bars so they can mint coins and fulfill backorders. Even bars are in extremely short supply.

3. As we write this letter, the wholesale premiums for Gold and Silver Bullion coins have risen to the highest levels we’ve ever seen. Despite strong bids, none of our clients are calling us to sell physical coins or bars during the financial panic. They realize their reasons for owning physical gold and silver are coming to fruition.

4. By contrast, Gold and Silver futures prices are way down this week. This is a paradox that clearly indicates the financial crisis has spilled over into the futures markets for precious metals. What we like to call the “paper” Gold and Silver market is just that- bets on the movement up or down. Right now, the price to really buy a physical Gold or Silver coin is far higher than the futures price.

5. Falling prices would make one think that Gold and Silver are trading like commodities- oil, copper, and wheat that go down during a recession. That’s should not be the case. In a crisis, in times of recession, and inflation, precious metals become the “money of last resort.” We feel that the huge demand for physical Gold Coins and Silver Dollars is evidence that investors are protecting themselves from monetary risk.

In Our Opinion….

Gold and Silver, at today’s price lower levels, may be the “Buy of the Century.” The last time Gold dipped near these levels we sent a Red Alert declaring prices were about to rise $50 in one day. Frankly, it was the most optimist prediction we had ever made. the next day Gold rose $80. It was our best call in history! Right now, we’re feeling that we may be very close to another turning point.

Normally, we don’t like to see wild gyrations in precious metals prices. Gold and Silver are not a get rich quick scheme. We think of them as “safe money”, an alternative to risky stocks and paper U.S. Dollars. We expect that while everything is crashing around us, Gold and Silver to be resilient in the long-term and come to our rescue as- “the world’s currency of last resort.”

The Hedge Fund Problem

Right now, the impact of Hedge Fund selling of all assets is creating chaos. Massive Hedge Funds with Billions of Dollars enticed big investors with promises they’d make money in good or bad stock markets. They often made huge “BETS” that were highly leveraged. They shorted stocks they believed would fall or pushed stocks upward on momentum creating shockwaves of volatility.

Hedge Funds often held large positions in Gold and Silver futures or Exchange Traded Funds as well. This was a key to making money (hedging) when stock prices were falling. This year, many Hedge Fund profits have been wiped out in the financial crisis. They made too many bad bets. Investors are demanding their money back. Hedge Funds have been forced to sell everything to raise cash. In a falling stock market, Hedge Funds are forced to liquidate bad stocks, good stocks, great stocks, and liquidate their Gold and Silver positions.

These huge waves of “paper” selling are unexpectedly driving down the value of all asset classes including Gold and Silver. No one in our industry expected this to happen. But, this is where we are. We only wish the Hedge Funds were selling piles of physical Gold and Silver that we could buy from them, but that is not the case. They are only liquidating future contracts, options, and electronic assets. The sheer volume of money moving out of “paper” gold and silver investments has temporarily become the dominant price factor, overpowering the powerful demand in the physical market.

This is Phase One

Whether professional institutional investors are liquidating to generate much needed cash, cover losses in other assets, or to pay debts as they go out of business, the massive run out of electronic assets is underway. This is exacerbated by individual investors acting accordingly out of fear or need of funds. Assets that are liquidated are replaced with dollars and this process can take time. Investors aren’t moving into dollars because they believe it offers attractive long-term strength.

They’re moving into dollars because they have no choice. You sell, you get dollars. For the short-term, the dollar is relatively safe compared to the chaos of stocks, hence the strong dollar. Long-term, savvy investors know the dollar will succumb to the slow death of inflation as the U.S. Government launches the largest creation of new dollars ever for the massive bailouts.

Phase Two

Investors ask, “Now what do I do with this cash?” As investors take this into consideration and re-evaluate in the weeks and months ahead, they’ll be searching for an asset class known as:

* A physical, tangible investment
* A hedge against inflation and economic turmoil
* A profit maker when the economic cycle turns against mainstream assets
* Real money for generations

Only physical Gold and Silver qualify. Only a small fraction of people own physical Gold and Silver today. For these reasons, we see only increasing demand in the years ahead for precious metals. We feel those with the foresight to read the writing on the wall and protect at least a portion of their wealth in Gold and Silver during today’s artificially low prices will find security, peace of mind, and profit in the years ahead. Will you be one of them?

Phone Ringing Off The Wall

Despite falling prices, our phones continue to ring off the wall. Investors are wiring $50,000 to $250,000 at a time. Clearly, the flight-to-safety continues out of banks into Gold and Silver Coins. These new clients are waiting four to six weeks for delivery if they can lock-in lower prices today.

Our point is this- It’s not too late to get a great bargain in Gold and Silver. We have no reason to change our opinion that precious metals will be the safest, and in the long run, the most profitable place to park a portion of your cash. If you don’t yet own any physical Gold or Silver, we feel this is a perfect time to enter the market at undervalued prices.

Another letter from Anglo Far-East Bullion Company Managing Director, Philip Judge:

ANGLO FAR-EAST ANNOUNCES NO SUPPLY DISRUPTION DESPITE RECORD DEMAND IN GLOBAL PRECIOUS METALS

Precious metals refinery capacity maxed out globally in recent weeks due to record levels of investor demand in the metals.

Recent currency volatility and financial institution fragility has been cited as the driving reasons for the record numbers of investors flocking to silver and gold in recent weeks looking for the stability and safe haven the metals have traditionally offered. Global bullion refining capacity has been quickly overwhelmed by the sudden spike in demand for physical bullion supply.

“People are often surprised to learn there are less than seventy industry accredited refiners in the entire world” said AFE’s bullion treasury manager Simon Heapes this week, “refineries have been running three fully staffed shifts most of the year. The industry is just not geared for such huge spikes in demand as we have seen in recent weeks”.

Many refineries are announcing long delivery delays and many are taking no further orders till Q1 quarter of 2009, particularly for refining of smaller investor type bars and coins, while North America coin dealers have been out of all stock for many weeks.

AFE announced this last week after weeks of record demand it continues uninterrupted supply to its clients with allocated good delivery bars through its network of long term supply relationships and unique global infrastructure. “In peak times like these, long term multi-decade relationships are critical” commented AFE’s Founding Director, Philip Judge.

Short Video Series: Understand why the financial crisis is occurring, and how to protect yourself

Buy Gold and Silver Bullion

Many, including some not so well educated financial analysts call this inflation.

The truth is, inflation is not the price of things increasing. When prices rise, this is merely the symptom of what true inflation is: adding more currency to the money supply.

This is not rocket science. When you have more of something, it is worth less. Therefore, if you add more dollars to the available supply of dollars, obviously each dollar is worth less. Preposterous you say? Well let me put it another way, if dollars were as common as rocks lying on the ground, how valuable would they be? Obviously they would not be worth much. Therefore one of the key requirements of any form of currency is that it remains somewhat scarce. So, when the Fed pumps billions of dollars into the economy to rescue our financial system, people cheer because the system goes on for another day.

What many do not realize, is that every time they do, it raises the costs of everything from bread to gasoline.

This of course causes devaluation of the dollar, and inflation, which are essentially the same thing. Devaluation means the dollar is worth less, and inflation means (to most people) that things cost more. It is not that the things we buy are actually worth more, its just that our dollars are worth less, so it takes more dollars to buy the same thing that less dollar bought in the past.

My dear reader I know you are a smart cookie, and you arent so dumb that you will actually fall for the governments reported statistics on inflation. Especially since they have chosen to change the way inflation is measured, by leaving out little things like the cost of food and energy.

The chart below shows the rate at which the Fed is continuing to add dollars to the available pool of currency. As you can see, it is approaching 20%, yet the government reports “core inflation” (a term that is applicable only to the aliens living on planet Washington, because they obviously dont shop for groceries where you and I do) at less than 4%.

Now we come back to my ‘forever rant’. Gold and silver are some of the only ways you can protect the value of your wealth given todays financial landscape. If you are storing it in dollars, I feel sorry for you because it is being devalued at a horrendous rate. If you are storing it in the stock market, again, I feel sorry for you, because it is only a matter of time before the baby boomers who put all their retirement money into the stock market, causing it to rise, start taking their money out to finance retirement, which will obviously cause it to fall. The question is, will you be the first, or the last to get your money out?

Gold on the other hand has retained its purchasing power for thousands of years. Did you know, that an ounce of gold would clothe a man in the finest clothing available thousands of years ago? Guess what, today, an ounce of gold will still, clothe a man in the finest clothing available. 75 years ago $20 would likewise buy you an entire wardrobe, yet what can you buy today with that same $20?

Got gold yet?

Join our newsletter if you want the inside scoop on what is really happening in the gold and silver markets. Or you could of course just stick your head in the sand like everyone else, and pretend it will all just go away. Youre smarter than that!

Many think the bull market in gold is over. I beg to differ. If you want to know the real fundamentals behind why gold, silver, commodities and energy arent done yet, join our newsletter.

Gold has been in a strong bull market since 2001 and picked up the pace in mid-2005 and then again in mid-2007. In fact, gold has gone parabolic and today briefly crossed the $1000 per ounce level for the first time. Today’s chart illustrates how the price of gold has nearly quadrupled during its seven year bull market.

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