27 November 2015

The Beer Economy

Proponents of a Gold Standard look forward to the day when people use gold and silver coins as money but it seems that beer and spirits have a head start. This article sheds light on hundreds of secret Facebook groups in Australia where people barter goods and services for alcohol in various forms, with one group claiming 50,000 members.

Read more here.

26 November 2015

Perth Mint to collaborate with Australian Securities Exchange

Today the Perth Mint and Australian Securities Exchange (ASX), one of the world’s top-10 listed exchange groups measured by market capitalisation, announced that they would be collaborating on developing new exchange traded precious metals products.

The first product is mostly likely to be a gold futures contract deliverable in Perth. Given the focus the gold community has on futures markets, and Comex in particular, I’m sure there will be a lot of interest is this Aussie gold contract. As we are in the process of talking to the market about what features they would like, it is not possible to get into contract specifications at this time but I can make some general comments about the approach ASX and Perth Mint will be taking.

Read more here.

25 November 2015

Federal Reserve International Finance Discussion Paper #582

The idea that the US Mint has a legal obligation to mint and issue bullion coins in quantities sufficient to meet public demand is one that I have seen mentioned every time the US Mint puts its bullion coins on allocation. While originally true, it is no longer the case.

Read more here

FYI, you'll also like Sec. 5116 authorising the Secretary of the Treasury to sell gold.

22 November 2015

Five Metals

Those who frequent the precious metal forum www.silverstackers.com will know the name goldpelican, who is the forum administrator as well as one of the guys behind http://www.goldstackers.com.au/store. Well he has just started a blog called Five Metals and his first post is on a favourite topic of mine - excessive coin premiums. Worth adding to your blog reading list.

The chart below from WSJ via Zero Hedge shows a complete lack of consensus amongst banks as to gold's future direction. That may translate into a sideways market as participants compete on their view.

Thankfully there doesn't seem to be many forecasting prices below $1000.

Steven Saville made a good point about gold futures and arbitrage in this blog post, noting that:

Strangely, many gold ‘experts’ assert that gold is different due to its dominant monetary and store-of-value roles, but then insist on applying a traditional commodity-style method of supply-demand analysis.

Yep, it doesn't make sense to treat gold the same as a commodity like orange juice futures.

15 November 2015

Three ways to get paid for your words

From The Irrelevant Investor:

“Three ways to get paid for your words:
1) Lie to people who want to be lied to, and you’ll get rich.
2) Tell the truth to those who want the truth, and you’ll make a living.
3) Tell the truth to those who want to be lied to and you’ll go broke.”

The first category explains why there is so much crap out there. I think I've spent too much time in the past doing the third. I'll leave it up to you to work out which of the gold bloggers/commentators out there fit into which category.

14 November 2015

Interpreting The Perth Mint’s Financial Results

The Perth Mint recently released its 2015 Annual Report. This article discusses the Mint’s financial results with a focus on those areas where conventional financial analysis would fail due to the unique aspects of a the Mint’s business model. Read more here

09 November 2015

Indian gold monetisation schemes

While FT Alphaville’s coverage of the Indian gold monetisation schemes started off with “why gold investing in and of itself is stoopid” they did note that

“people, especially in fledgling economies, are distrustful of sharing because they’re worried about payback. That kills trust, which consequently ensures capital isn’t put to productive use … there is also a real (and dare we say warranted) distrust of government and an historically deep-rooted inflation fear to take into account”

As Jayant Bhandari observed in his Precious Metals Investment Symposium presentation, India is a negative-yielding economy, with nominal yields on property and stocks below the 10 year government bond (even cows return -6% assuming zero labour costs). In such an environment, a zero-yielding asset like gold is better than a negative yielding asset.

The Indian government’s gold monetisation schemes, however, are more about addressing the symptom rather than the disease, which is the lack of trust in “payback”. Jayant says that high levels of corruption, superstition and irrationality in India “discourages accumulation of financial and intellectual capital”. But dealing with that, I guess, is a lot harder than trying to hoodwink “its population to take a leap of faith on the trust front”.

Why do I say hoodwink? Firstly, as I discussed in this post, the lending of any physical gold deposited in the schemes will have a one-off impact on throttling Indian gold imports. Secondly, as discussed in this post, the other uses the Government of India says it will make of the gold and the way it will run its Sovereign Gold Bonds Scheme mean that the government is simply going naked short gold in Rupees, as they themselves acknowledge in this press release:

“the risk of increase in gold price that will be borne by the government” and they “will not be hedged and all risks associated with gold price and currency will be borne by GoI”.

With that sort of risky behaviour from their own government, who really is stoopid – those holding physical gold or those trusting the government schemes?

[originally posted at
http://research.perthmint.com.au/2015/11/09/indian-gold-monetisation-schemes/ ]

05 November 2015

Precious Metals Symposium, Interview with FXStreet

Last week I was in Sydney for the Precious Metals Investment Symposium. While the turnout was down on last year (surprising as the Australian gold price has been performing but I suppose people just look at the US price) the speaker turnout was excellent. For me the standouts were opening speaker John Butler, Keith Weiner and Jayant Bhandari. The presentations by Keith and Jayant were complimentary, with Keith covering his idea of yield purchasing power and how low interest rates were resulting in people eating their seed corn, and Jayant explaining why countries like India are so interested in gold (zero yield is better than negative yield), forecasting that the West is headed in the direction of negative yields/capital destruction.

On Monday night Mark from Gold Stackers roped me into helping him with the launch of the Back to the Future coins, which involved me putting on white coveralls and a wig to “act” as Doc Brown in a skit (emphasis on the double quotes around the word act). It was all good fun but thankfully I have not seen any pics of our attempt at acting circulating on the internet.

Tuesday night saw the Precious Metal Award Gala Dinner at which I was humbled to win the ‘Maggie’ Bullion Award, which is named in honour of an Australian coin dealer known for her exceptional focus on customers, who died unexpectedly last year.

Last night I recorded an interview with Dale Pinkert at FXStreet, covering a wide range of topics including:
  • bitcoin
  • personal vs third party storage
  • banning of gold in safety deposit boxes
  • manipulation
  • German repatriation
  • Chinese gold accumulation
  • price expectations for gold and silver
Towards the end I also discussed why gold has not responded to recent geopolitical and economic events, which is based on my view that everyone has a different level of trust in the politicians and central bankers to keep things under control.

[posted at http://research.perthmint.com.au/2015/11/05/precious-metals-symposium-interview-with-fxstreet%ef%bb%bf/]

19 October 2015

A Manipulation Smoking Gun?

Dave Fairtex, writing for Peak Prosperity, claims he has The Smoking Gun Proving Silver & Gold Manipulation. In identifying all of the 0.5% or greater one minute price spikes over the past 6 years I’d argue he has proven how infrequent it is.

Dave’s main result is that there were a total of 135 gold events and 869 silver events where the price moved up or down more than 0.5% within a minute, with 66% of the gold events, and 54% of the silver, being downward moves. While the data shows a bias to the downside, Dave doesn’t put any of the results into context, undermining I think what is a worthwhile analytical approach. Read More >

16 October 2015

China will save us

I have a lot of respect for Michael Kosares of bullion dealer USAGOLD but his recent commentary has a bit of the “China will save us” meme which has been around for many years and had its fullest expression in the Pan Asian Gold Exchange farce. READ MORE >