Swiss Government Bonds Spike

Swiss government bond yields dropped to a record -0.23% on 31 May 2012. There is no reason why 2 Year Swiss government bonds should have such low yields (chart 1), other than the fear that the euro will break up or the Swiss National Bank will de-peg against the euro.

Go HERE to read the full analysis.

Chart 1: Swiss Government Bonds 2 Year

Gold again at François Hollande highs

I predicted already that the downtrend of gold in function of the euro was very odd. Everyone would assume that the "Hollande" effect would be beneficial to gold.

And today gold hit an all time high again, since François Hollande became president of France, as predicted...

If you're a U.S. citizen, your chance to buy gold is right now, as the euro is in oversold territory. 10 year U.S. government bonds are also overbought, with yields dropping 7% to 1.629%. Looks like a bubble to me.

Chart 1: Gold Price: Period after French Election

U.S. Dollar Bill Seen As Trash: The Story of John Davis

We all know cash is trash and the U.S. dollar will ultimately be worth nothing. It's ironic how this actually played out in real life.

John Davis, a normal average Joe, tried to help a man in a wheelchair, handing him some spare cash. In doing so, he accidentally dropped a 1 U.S. dollar bill on the ground. Immediately after that, the cops pulled him over for littering in public. He violated Section No: 613.06 of Cleveland’s Municipal Codes and was fined $US 500 for this act.

It reminds me of Ben Bernanke throwing trillions of dollars out of his helicopter, which is completely legal. But throwing a 1 dollar bill on the ground is a crime?

What is even more funny is that the cops see a 1 dollar bill as "trash". Hence: "Cash is Trash". It isn't as funny for Mr. Davis though, as he will have to pay up $US 500. He preferred not to pay it though...

Agricultural Commodities Break Down, Start of Another Great Depression?

When we take a look at history and go back to the Great Depression, we find that agriculture is a leading indicator for the economy. During the recession in 1930 we saw that agriculture prices declined very rapidly (for example cotton prices dropping 18% in just one week). A few years after that, the Great Depression initiated at full force with bank deposits being frozen. This started the Great Depression of 1932.

Today, the same is happening with agricultural commodities. Cotton dropped 10% in 1 week and is now down 20% in two weeks time. All other agricultural commodities have been very weak since the start of 2012 with the exception of soybeans.  The CRB index has also hit a new 2 year low.

Weakness in agriculture today is the evidence that the Great Depression is now being repeated. The only commodities that went up during the Great Depression were gold and silver, along with the gold/silver mining shares.

I will analyze 8 key agricultural commodities here: Agricultural Commodities Breaking Down, Start of Another Great Depression?

Platinum Demand Falling

In my previous article about platinum I pointed out it was time to trade gold for platinum. You would think that the time has come again to buy platinum, but I fear that the automobile industry is deteriorating again.

Rhodium prices keep falling and I already said that this means that this indicates that demand for vehicles in the automotive industry is dropping. The correlation between rhodium and the automotive industry was discussed in this article. 

If we look at the platinum to gold ratio (Chart 1) we see that the trend is going down. It is now at a platinum/gold ratio of 0.9. Historically platinum should be more expensive as gold but these days people are fleeing out of industrial commodities and into the safe asset of gold.

Chart 1: Platinum to Gold Ratio

However, during Q1 of 2012 investment demand recovered by 63,000 troy ounces. So a turnaround in platinum is possible.

Analysis of Deficits to Outlay Spending Ratio

I already talked about how the U.S. budget deficit is skyrocketing in this article. Reason was that outlay spending has outpaced government tax revenues since 2008.

I decided to make another chart of this going to the early 1980's. As James Turk stated, when governments start to borrow more than 40% to fund their outlay spending, then we have come to a hyperinflationary scenario.

To see what this chart means, go to: the full version of this article.

Chart 1: Deficits (+)/Surplus (-) versus Outlay Spending Ratio

Goldonomic.com: About Hyperinflation

Just found an interesting site that gives information about the correlation between hyperinflation and money velocity.

=> http://www.goldonomic.com/inflation.htm

The key measure to follow is money velocity of the broad measures of money supply M3 or MZM (which resembles M3). When money velocity spikes, hyperinflation has set in as people scramble for tangible assets.

Froom Goldonomic.com:
"Hyperinflation starts when the public is unwilling to hold the money for more than the time it is needed to trade it for something tangible to avoid further loss. A good indicator that Hyperinflation has started will be a sudden increase in the Velocity of Money. [ P = M x V ]. This alone can increase the general level of prices. Even with a falling M3!"


So be warned, when the following graph spikes up, it's time to get into real tangible assets! You can see that in 1980 we had the hyperinflationary crisis where gold spiked into a bubble when everyone feared inflation.

Chart 1: MZM Money Stock

Deflation Starts, Followed by Hyperinflation: Swiss Government Bonds Yields Hitting New Low

This article is meant to give a status update on the economy and in particular money supply. We will see that deflation is starting to show up. I will focus ono bonds, foreign exchanges, precious metals, money supply and personal savings.

To see the full analysis, go here:
http://seekingalpha.com/article/614231-deflation-sets-in-hyperinflation-to-follow

J.P. Morgan crashing on high volume, silver manipulation over

J.P. Morgan is crashing on high volume as losses keep piling up. After 2 billion last week, it hit 3 billion this week and I think it will keep increasing.

Chart 1: J.P. Morgan Chase & Co. (JPM)

This interview with Bix Weir discusses the squeeze in J.P. Morgan. 

As Max Keiser points out how the silver market is being manipulated by J.P. Morgan, finally, we see a weakening J.P. Morgan. As all banks were up today, J.P. Morgan was the only bank going down, with news about the cancellation of a share repurchase program. They won't even buy their own shares anymore.

As J.P. Morgan weakens, I predict that the silver price will be unleashed to the upside once the black swan appears.

George Soros Quadruples Gold (GLD) Holdings

If you don't believe in the bottom in gold yet, then here is the ultimate evidence of gold hitting the bottom.

George Soros, who calls the gold an "ultimate bubble", has quadrupled his SPDR Gold holdings (GLD). Likewise, David Morgan recently bought the bottom in silver.

I'd say: let's follow the gurus.

James Turk and John Embry on Gold

An interview between James Turk and John Embry on 18 May 2012 in Jersey, Channel Islands.

They talk about how the gold price has been going down, however counterintuitive it may seem.

The Rich People of France are Leaving... for Belgium

I talked about the "Hollande Effect" in a previous article. One of the biggest fears of rich people is the 75% tax on their income once Hollande became president. So what happened the day Hollande became president? A record of 1500 applicants came to Belgium to store their wealth exactly after the French election day, as reported by Dekeyser & Associés. One of those super rich was Gérard Mulliez, boss of Auchan super mart.

This comes to a surprise to me, because Belgium isn't the country with the lowest taxes in Europe..., but rather the highest.

Job Cuts Starting All Over Again

When we had the crash of 2008, we knew that job cuts followed immediately after it. Today, the stock market is rapidly deteriorating with China and India slowing down, American and European banks hitting new lows, European bond yields hitting new highs.

Here are the highlights of the most recent job cuts since 2012 started.

Lufthansa cuts 3500 jobs
HP cuts 30000 jobs
HSBC cuts 3167 UK jobs
Dell set to cuts jobs in the UK
Yahoo cuts 2000 jobs (14%)
Sony cuts 10000 jobs
Credit Suisse could cut 5000 jobs
First Solar cuts 2000 jobs
French banks about to cut thousands of jobs
T-Mobile cuts 1900 jobs
Bank of America cuts 2000 jobs + 400 investment bank jobs
RBS and Lloyds cut 2000 jobs
Allied Irish Banks cuts 2500 jobs
IBM cuts 1790 jobs
Nokia cuts 4000 jobs
American Airlines cuts 13000 jobs
Astrazeneca cuts 7300 jobs
USPS cuts 35000 jobs
PepsiCo cuts 8700 jobs
P&G cuts 5700 jobs
Kraft cuts 1600 jobs
RBS cuts 4800 jobs
Novartis cuts 1960 jobs
NEC cuts 10000 jobs

Food Stamps Hire People

Initial claims in the U.S. were having a very positive trend lately. Today, we have initial claims coming out at 370K, which is a miss of estimates. Will the trend reverse upwards?

Chart 1: Initial Claims

It looks like the trend is positive, but when looking at the food stamps participation rate on Chart 2, it hasn't gone down a bit. Increasingly more Americans are on food stamps. 

Chart 2: Food Stamps Participation

But as Jesse Jackson says: "Food Stamps Hire People", unemployment will decline ever more rapidly.

Capacity utilization rate April 2012 79.2% above estimates

In my previous article I pointed out how important it is to follow the capacity utilization rate to estimate the prices of gold and silver going forward. When the capacity utilization rate plummeted in 2008, we knew for sure that commodities would plunge with it. So what happened recently?

Today the capacity utilization rate for total industry for April 2012 came out at 79.2%, up from 78.4% the previous month (Chart 1). This number is the highest since July 2008 and bodes well for commodity prices, especially gold and silver (which had a very significant correction in the last months). There was a concern the previous month that capacity utilization would come down in April, but it didn't. So gold and silver prices should have significant support in the coming months.

To read the full article, just click on this link: Capacity Utilization Rate in April 2012 Pointing to Inflation.

Chart 1: Capacity Utilization Rate

1987 aka 2012 Crash by Marc Faber

Today I have very important news. According to Marc Faber, we will have a crash like in 1987 in the second half of this year, if there is no QE3. Marc Faber is known to have accurately predicted the 1987 crash. So we better prepare for this event.

As we already can see on the federal balance sheet, there has not been any QE3 since July 2011 (Chart 1).

Chart 1: Federal Reserve Balance Sheet

What happened in 1987 (also known as Black Monday)? And what to do about it? Let's go over all asset classes one by one in this article.

Jim Rogers might sell the euro

It's amazing how the euro has outperformed gold since Hollande became president of France (Chart 1-4). It signals that there is a higher risk that Greece will not get their aid package. Euro global polls say that there is 50% chance that Greece will exit the Eurozone. If this were to happen it will be a deflationary collapse first, after which hyperinflation will occur.

Chart 1-4: Gold Price in Euros

During the second half of 2011 we even see that the euro is losing its secondary currency reserve status. The U.S. dollar is increasing its status as reserve currency (Table 1).

Table 1: Reserve Currency

Jim Rogers knows this and might sell the euro in the future.

As Europe is going to contract in 2012, Mario Draghi has signaled that further stimulus is on its way. 

China pegging CNY to USD once again

Since the European crisis, which started end 2011, the Chinese have been reverting their policy once again. Basically, they are pulling their money out of Europe and putting it in the United States. China is already starting to stop buying European debt. Instead they are accumulating U.S. debt and gold.

Go here to read the full analysis: China is pegging the CNY to the USD once again.

Chart 1: China U.S. treasury holdings (billion USD)

Chart 2: Exchange rate USD/CNY

Eric Sprott on CNBC

According to Eric Sprott, gold will be over $US 2000/ounce and silver will be above $US 50/ounce by the end of the year 2012.

I'm curious if this will hold..., I highly doubt it.

For gold it should do something like this:

Chart 1: Gold Price Prediction (Eric Sprott)

For silver it should do something like this:

Chart 2: Silver Price Prediction (Eric Sprott)

By 2013: Another Increase in U.S. Debt Ceiling

Everyone is saying how great the United States is growing with a positive purchasing manager index and positive GDP. But the fact is that U.S. public debt is growing much faster as GDP. But this happened only just recently.

Before 2008 (the economical crisis), debt was increasing at a slower pace as GDP. The slope at which debt rose was moderate. Notable is that for each unit increase of debt, we got more than one unit increase in GDP.

After 2008 though, we get a very different picture. Please go here to read my analysis. 

Chart 1: U.S. Total Public Debt VS. U.S. Debt Ceiling

Spain's government bonds shoot up above 6%

Spain's government bonds shot up today to 6.1%. At this rate we're rapidly approaching the "danger zone" of 7% and above, often mentioned by James Turk. You can easily see LTRO I and LTRO II in this chart 1. Maybe Spain will need LTRO III to make the yields drop again...

Chart 1: Spanish Bond Yields (10 YR)

Meanwhile, people keep fleeing into German bonds, which dropped to 1.5%.

Chart 2: German Bond Yields (10 YR)

Sprott Silver Premium (PSLV) at a record low

Amazing, the silver premium of Sprott's silver trust is at a record low of 3.64 % today. Very bearish going forward.

Chart 1: PSLV premium (%) (blue) vs price (USD) (orange)

Status on the Dow-Gold Ratio

Gold has been doing miserably on negative news in Europe. As a result the Dow/Gold ratio has been going up since Europe has been implementing LTRO I and LTRO II late 2011. I believe we will have support now at Dow/Gold ratio of 9 and it could be time to sell the Dow and buy gold (Chart 1).

In this article I go deeper into the "China play" on this gold dip.

Chart 1: Dow Gold Ratio Short Term

Copper turns to backwardation, prices poised to rise

I have been monitoring the copper warehouse stock levels in previous articles and today I came across an interesting article on Seekingalpha talking about copper futures contango. In that article the author gave a historical chart of the premium or discount for contracts extending about a year to 18 months in the future.

We will see that backwardation will have a positive effect on copper prices and much more. The Chinese have been doing very odd things with their copper warehouse stocks.

To read about this go to: Copper turns to backwardation.

Chart 1 and 2: Copper futures contango and copper price

Rising U.S. Trade Deficit for March 2012

The U.S. trade deficit has widened to $US 50 billion in March 2012. The trendline since 2009 up till now has been pointing to widening trade deficits (Chart 1).

Imports were probably higher due to more expensive oil imports, while exports have slumped (Chart 2).

Chart 1: U.S. Balance of Trade

Chart 2: U.S. exports

Incidentally, the U.S. dollar cash index is again pointing down just recently (Chart 3), despite problems in Europe. The dollar index spot (DXY) is currently at 79.5. If this index continues to fall, I predict that imports will go up even more in the future as the U.S. dollar loses purchasing power. Accompanied by the devaluation of the U.S. dollar, will be an ever more rising trade deficit.

Chart 3: Dollar Cash Index

The "Hollande" Effect

Investors are speculating on what will happen when François Hollande wins the French elections this Sunday 06 May 2012. Many things can occur, please go here to read about the consequences.

Election results

Significance of Rhodium Prices on the automotive industry

Rhodium is a metal in the platinum group metals group (PGM) that nobody really knows about in the investor world. It isn't traded online through futures, while gold, silver and platinum does. You can only buy this metal physically through dealers which makes this metal perfectly unmanipulated. So I am very keen on using rhodium prices to find correlations in the macro-economic world as they are a very reliable indicator.

Rhodium prices are extremely inelastic, which means that its price is very dependant on supply and demand. If there is no supply and a lot of demand for rhodium, the price will skyrocket. The rhodium market is very small compared to the gold market and will have high volatility and low liquidity. For example, prices in 2003 were below $US 1000/ounce, but went up to $US 10000/ounce, which is a ten fold increase (Chart 1).

Chart 1: Historical Rhodium Price

To read more about this trend correlation, visit: Significance of Rhodium Prices on the automotive industry.

China about to start trading in gold and silver futures

In one of my previous articles about silver, I told an anecdote about how it was impossible to buy silver in China and Hong Kong. There was little to no incentive from the Asian public to even look at silver.

Little by little, a trend change is emerging. China approved silver trading on the Shanghai Futures Exchange on 26th April 2012. This will increase the liquidity in the silver market in China and is a first step into combating the manipulation of silver. The trading of silver futures will start on 10 May 2012. Additionally, PAGE is starting to trade in June 2012.

To read my analysis go to: China Initiates Gold and Silver Futures Trading.

For more background info go to this article: http://samcheekong.blogspot.com/2012/02/page-which-stands-for-pan-asian-gold.html

Time to go long turbo gold/silver

I see positive signals everywhere on many blog sites about the price of gold moving higher.

First, the technicals are suggesting a surge in gold prices to above the $US 2000/ounce level. On Chart 1 we can see that a bounce could occur of the 50 day moving average above the 200 day moving average.

Chart 1: Gold Price

Second, Citibank analysts are suggesting price goals of $US 2400/ounce (Chart 2). Indicating that we are at the bottom of the upwards channel. Time to go turbo long gold.

Chart 2: Gold Price (Citibank Analys)

Third, I read an article about Mish Shedlock going into silver. You only go into silver if you're absolutely sure the gold price is moving upwards. If Mish goes into silver, he's betting on gold going up and thereby leveraging his bet with the silver price.

Chart 3: PHYS gold premium V.S. gold price

Fourth, we see that gold premiums are at an all time low for physical gold (PHYS) (Chart 3). Sentiment is very bearish (1.18% premium) and should indicate a bottom.

Last but not least, we saw gold being slammed down yesterday, but it moved back up later in the day (Chart 4). Bull markets always have sharp declines and gradual increases. This is also a bullish signal.

Chart 4: Gold slammed down and moves back up

And by the way: