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Commodity Crash (But Don’t Worry, Precious Metals Are Not “Commodities”)

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I have lots to get to today; so let’s start with the utter miracle of the Cartel allowing yesterday’s “key upside reversal” in gold and silver prices.

Back in the day of “relatively” freely-traded PM markets, circa 2003-07, not only did mining shares rise sharply, but gold and silver would routinely start the day lower – often via Cartel suppression – yet rise sharply in the afternoon.  Since 2008, this has never been allowed to happen, barring dramatic incremental news; while conversely, it always happens to the “Dow Jones Propaganda Average,” via the “dead ringer” and “hail mary” algorithms we have long written of.  Thus, after the Cartel did this at yesterday’s 12:00 PM “cap of last resort” yesterday – along with this “dead ringer” algo on the Dow – I was sure we were in for another typical day.

24hr Gold 9-9

Dow Chart 9-9

Thus, you can image my surprise when not only did the Dow’s “hail mary” algo fail – albeit, with losses capped at 100 points (i.e., “PPT limit down level #2) at the key round number of 17,000 – gold and silver actually rose throughout the afternoon to turn positive on the day.  Yes, I know, the gains were modest – and immediately “Cartel Heralded” and attacked at 4:00 PM and 6:00 PM EST, respectively, per what we discussed in last week’s “Sixth Sigma PM Manipulation”; followed by the 295th2:15 AM” EST raid in the past 332 trading days and a prototypical COMEX-opening paper raid.  However, given the aberrational nature of yesterday’s “key upside reversal,” we have our eyes wide open for the potential the Cartel may be weakening as we head into the year’s most volatile period – amidst the most PM-bullish equity bearish fundamentals of our lifetimes.

24hr Charts Gold Silver

And by the way, remember what we wrote in yesterday’sSingle Most Bullish Precious Metals Factor Imaginable” – i.e., extreme currency volatility inadvertently created by unfettered money printing?  Well, guess what?  “Emerging market” currencies crashed further yesterday; and this morning the Yen is in veritable freefall – in other words, “The Real Yen Bomb – Starts Now” – down to 106.8/dollar and clearly headed much, much lower.  As are countless other currencies, which will consequently catalyze regional inflationary spurts – and likely, new rounds of social unrest and draconian government response.  Including, by the way, the “conservative” Swiss Franc plunging this morning as a Swiss Bank governor said negative interest rates could be utilized to defend the Franc’s suicidal peg to the dying Euro.  Makes one wonder if the November 30th Swiss referendum to re-peg it to gold will be successful, huh?

Before I get to today’s primary topic, let’s just go over some of yesterday’s news stories and topics – as frankly, there are simply too many “horrible headlines” to give my full attention to.  To start, loudly validating what we wrote in July’s “Need or Want, Demand is Dying,” global retail bellwether McDonalds reported that August was one of the worst month’s in its 74-year history as – no, this is not a typo – same store sales plummeted an astounding 14.5%!  Second, validating our ceaseless attacks on the fraudulence of the BLS’s “birth/death” model – which assumes small businesses have added 3.5 million unreported jobs in the past six years, amidst the worst economic conditions of our lifetime – I read that American small business ownership has fallen to an all-time low.  Third, the “bizarro world” madness of the Bank of Japan monetizing short-term government bonds yielding negative interest rates – as the “Land of the Setting Sun” takes another giant step towards the hyperinflationary abyss.

Fourth, Russia formally announcing the most damaging countersanction possible; i.e., reduced natural gas shipments to Europe, just three months before winter’s onset.  Fifth, a statement from the Mines Minister of Peru – the world’s fifth largest gold producer – that 2015 gold production would plunge 20% and fall again in 2016.  This is what the Cartel has done to the gold mining industry; which, mark our words, will never see higher output.  Sixth, an utter collapse of U.S. mortgage purchase (-3%) and refinance (-11%) applications last week, as America’s “Great Recession” worsens by the week.  And finally, renewed vigor in the November 9th Catalonia independence referendum, care of what’s going on in Scotland.  Catalonia contributes 20% of Spain’s GDP and 25% of its tax revenues; and thus, if it were to secede, Spain’s finances might instantaneously implode.  And last but not least, an ominous survey proclaiming that citizens of Greece (95%), Spain (91%) and Italy (90%) are more dissatisfied with the direction their nation is going than those in – drum roll please – Ukraine (80%)!

Now that such “pleasantries” are out of the way, let’s get to today’s primary topic of yet another “pink elephant” the world’s brainwashed “recovery” believers refuse to acknowledge – which is industrial commodity prices in freefall.  Yes, as we discussed in last week’s “West to East, Global Economic Collapse,” it’s not just Chinese construction and manufacturing that’s imploding, but such activity everywhere.  In that article, we noted how imploding prices of staple construction inputs like Iron Ore (-48%), coal (-38%), steel (-33%) and cement (-22%) couldn’t scream louder of how dire the global economic outlook has become.  However, looking across a broad swath of other industrial commodities, it couldn’t be clearer that Central banks – like the ECB, for instance – are on the verge of a new round of hyperinflationary money printing.  Only this time, they’ll be doing so from a “starting point” of exponentially higher debt and dramatically lower economic activity than the 2008 crisis.  And trust us, the Fed will eventually be forced to re-join the party – as the past 18 months’ “recovery” propaganda scheme built on a foundation of unprecedented market manipulation, data doctoring and propaganda is once and for all discredited.

To wit, the CRB commodity index is down 10% in the last two months alone, led by the world’s most widely used commodity, crude oil (-12%) and the most broadly utilized construction commodity, copper (-9%).  “Dr. Copper,” or as we deemed it this spring, “Dr. Death,” is one of the best proxies for global construction activity; and after yesterday’s $0.08 plunge is down 30% from its early 2011 highs.  And speaking of proxies for global construction activity, let’s not forget the world’s largest heavy equipment manufacturer, Caterpillar, has witnessed declining year-over-year revenues for a whopping 19 straight quarters.  In fact, base metal prices all fell sharply yesterday – led by nickel’s astounding 5% decline – with most down similar percentages to copper over the past three years.  Unfortunately, the cost of mining hasn’t dropped at all – see diesel fuel prices, for example – so the odds of a new round of 2008-09 type of mine shutdowns are increasingly rapidly.  And oh yeah, more than half of all silver production emanates as byproduct from base metal mines.

Also unfortunately, the global cost of living hasn’t changed a heck of a lot, despite plunging industrial commodity prices.  Care of monetary inflation – as well as a confluence of catastrophic events like the historic Californian and Brazilian droughts – “need versus want” items like food haven’t declined one bit.  In fact, John Williams estimates that real U.S. price inflation remains just under 10% annually.  And despite said crude oil price plunge, gasoline prices haven’t materially declined either!

Anyhow, its 10:00 AM EST and for the second straight day, gold and silver are attempting to engineer “key upside reversals.”  Trust me, there’s a reason I led off today’s article with this topic – as NO ONE is more aware of the Cartel’s daily machinations, constantly seeking signs of their inevitable demise.  Fortunately, not only are gold and silver prices well below their respective costs of production, but 100% immune to the “commodity crash” discussed above.  Sure, the Cartel will attempt to paint them as such until their bitter end; but just as was the case in 2008, attempting to do so amidst financial and economic crises catalyzes exponentially increases demand.  Yes, gold and silver are in fact “commodities” by definition, but in practicality are principally monetary assets which happen to have industrial uses.  This has been proven by thousands of years of monetary history; and unless a new “philosopher’s stone” is invented will continue ad infinitum.

Here at the Miles Franklin, our goal is to educate of the TRUTH of today’s collapsing global economy and banking system.  The worldwide fiat Ponzi scheme must end in the same manner of the 600 before it, and all signs point to a cataclysmic climax sooner rather than later.  Only you can act to protect your assets beforehand; as once it starts, it will already be too late.

 

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