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Deflationisnowcreatinginflation,whichwillultimatelyimplodedebtand propelgold China,ZIRPandOPECtriggereddeflation,lowerprices Thetwomainreasonsfordeflationaryforcesarethestronglyreduceddemandforgoods fromChinaandtheQE,ZIRPandNIRPprogramsfromthemainCentralBanks(CBs).Chinese GDPgrowthofapprox.7%can’tbemaintainedforaneconomythesizeoftheUSeconomy. Especiallywhenallthegrowthfactorsboostingtheeconomy,thebuildingofghosttownsand infrastructuralprojectsandcompetitivewagesareexhausted.Wejustwitnessedthatrailcar trafficinChinadeclinedto2007levels.In2015railfreightvolumeplunged10.5%andthe economywassupposedlystillincreasing6.9%?Whichispreciselywherethingsdon’taddup. Thisisconfirmedbythedataforthefirstquarterof2016,whichwereevenworsewithrail freightvolumeplunging9.4%year-over-yearto788milliontons,accordingtodatafromChina RailwayCorporation.Atthisrate,railfreightvolumeforthewholeof2016willbedown20% from2014andwillendupwhereitwasin2007! Firstquarter2016GDPfigureswerereleasedonFridayApril15,2016withGDPgrowingby 6.7%,downfroma6.8%gaininthepreviousquarter,whichwasinlinewithexpectationsof 6.7%thoughstilltheweakestsinceQ12009.Retailsalesbeat(+10.5%vs.+10.4%exp), industrialproductionbeat(+6.8%vs.+5.9%exp)andfixedassetinvestmentbeat(+10.7vs. +10.4%exp).ThoughChina'seconomystillslowedfurtherinthebeginningoftheyeardespite Beijing'spoliciestorevivegrowthwithold-styletoolssuchaslendingandconstruction. Doyoustillbelievetheofficial6.7%GDPgrowthfortheChineseeconomy?Howcanone calibratethenegative9.4%freightvolumefigureswithGDPgrowthof+6.7%????Inmypoint ofviewGDPgrowthismorelikelytobeflatorevennegative.TheChinesearesufferingfrom thesame“makebelievestories”asthoseintheUSforobviousreasons.AnywaywithChinain thepasthavingaccountedfor50%ofworldwidedemandforhardcommoditiespriceshave declinedsubstantiallyforallindustrialcommoditiessuchascopper,ironoreandcoaltoname afew.AsktheAustraliansandBraziliansiftheybelieveChinesegrowthstillis6.7%! NexttothestrongfallindemandfromChinathezerointerestratepoliciesoftheWestern CBshaskeptalotofbusinessesmuchlongerinexistencethanwouldhavebeenwith normalizedinterestrates.ZIRPorNIRPrepresenttheultimateformofdeflationorlower interestcosts.CentralBankspumped$29trillionintotheglobaleconomyoverthelastfew yearswiththeFedaloneinjecting$4.5trillionintheU.S.Centralbankerswere“forced”to takesuchstepsbecausegridlockedgovernmentsdidn’tacttoputmorefiscalstimulusinto theireconomiesafterthe2008financialcrisis.Andasaresultoftheultralowinterestrates wewitnessedmuchmoresupplythandemandresultinginstronglydeflatedprices.Ontopof thatOPECformarketshareand/orgeopoliticalreasonsopenedtheoiltapandforcedoil pricesdownfrom$110/bbl.mid2014to$26/bbl.(-76%)midFebruary2016.Andwedidn’t seeanyimprovementinconsumerspendingbecausethereisnotrustintheUSeconomy. Wagesdidn’tkeepupwiththeinflationofday-to-dayhouseholdnecessitiesreducingreal income,thenumberofgoodspeoplecanbuywiththeirmoney,to2000levels. Andnowthedeflationiscreatinginflationorhigherpricesbecauseoftheverylowprices, theflightintotangibleassetsandaweakerdeflatedUSdollar Oversoldprices SincethelowinFebruaryoilpriceshaverecoveredtoalmost$44/bbl.(13/4/16)oragainof 69%!Inotherwordswewillmostlikelybelookingatstronginflationaryforcesin2016 becausewehavedepartedfromsuchalowbasetriggeredbythestronglydeflationaryforces in2015.Oilisanimportantpartofconsumerpricesanddaytodaylivethinkheating,driving andtransportandtheproductionofgoods. Akindofsimilarpricedevelopmentasforoilwewitnessedforironorepriceswithpricesof $95perdrymetrictonneinJuly2014and$40/tforDecember2015(-58%)andnowwithina whiskerof$US60atonne(+50%),sendingsharesinBHPBillitonandRioTintosoaringin Londontrade.AndasmainreasonfortheriseofironorepricesismentionedthatChina’s exportssurged11.5%inMarch,risingforthefirsttimeinninemonths,and“thus”soothing fearsaboutthehealthoftheChineseeconomy.Againnothingislesstrueasdemonstrated withtherailcarshipmentvolumefigures. Commoditiesarenon-dilutiveassetstheycan’tbeprintedcontrarytopapermoneyhence thelikingfortangibleassets Anotherreasonforthehighercommoditypricesinmyopinionstemsfromaflightfrom intangibleassets(bonds,equitiesandcurrencies)intotangibleassetslikeoil,copperandiron oreandagriculturalland.Peopledon’ttrusttheintangibleassets(basicallyanypaper promise)anylongerwithalltheirartificialbackingwithstronglydilutedpapermoneyfrom QE,ZIRPandNIRPprogramsthatareclearlynotworking.Justlookatthevelocityofmoneyin theUSwhichisathistoriclowsandlookatJapanwherefundsarenotsellingtheir governmentpaperbecausetheydon’tknowwhatisavailableandwhattheywouldgetin return(10ynowyielding-0.084%)leadingtostrongilliquidity.TheJapaneseareevenissuing CDSs(CreditDefaultSwaps)inordertogeneratehigherreturns(soundsfamiliartotheAIG CDSdebacle?).Germanyisalsogoinginthatdirectionwiththe10ybund“yielding”now 0.131%only13bpfrom0%.Anywayitistheincreasinguncertaintyandmistrustthatis forcinginvestorsintotangibleassetsthatwillalwayskeeptheirvalue,whichcan’tbesaid,of paperpromisessuchaspapermoney.Papermoneyisnolongerworththepaperitiswritten on!Resourcesneedtominedorliftedoutoftheearthandtheamountoflandintheworldis notgoingtobeincreasedcontrarytotheamountofprintedfiatorpapermoney. Commoditiesarenon-dilutiveassets!!Hencetheireternalvalue.Rememberthis. TheUSdollarwillfallwhichwillpropelgoldandsilverbecauseofitsinversecorrelation TheQEs,NIRPandZIRPhavecausedcompetitivecurrencydevaluations.Withtheirmoney creationthey,theCBs,havedrivendown,dilutedthepurchasingpower(thenumberofgoods thatcanbebought)oftheircurrencies.Theauthoritiespumpedmoneyinthemarketsinan efforttostimulatetheeconomies,whichfailed,insteadtheavailabletangibleassetswerebid uporbecame“worth”moreandthusasaresultofwhichpapermoneybecameworthless! Theadditionalproductivityfromthestimulusmeasureswaslimitedbecausetherewasandis noconfidenceamongsttheconsumers.Wageshaven’tincreasedatallbecauseofthehuge outsourcing(cheapwagesandtaxes)andautomation.Anywayyoucanbringahorsetothe waterbutyoucan’tmakeitdrink. Andthusthethirdandprobablymostimportantreasonforthestrengthinthehard commoditiesandespeciallygoldandsilveristhatthemonetarypolicieshavefailedwithall thetoolsinthetoolboxbeingexhaustedwhichisfinallyweakeningtheUSdollar,thereserve currency,towhichallcommoditiesareinverselycorrelated.Thiscommodityinflationclearly doesn’tstemfromstrongerdemandforgoodsstemmingfromahealthystrongeconomybut fromcurrencydeflationstemmingfromweakeconomicfundamentals. Inmyopinionallpositivefactorsfordollarstrengthhavenowfinallybeendiscounted.The Fedkeepsonreducingthenumberofratehikesbecauseoftheweakereconomicand corporatefiguresthananticipated.NexttothattheweaknessintheYenandtheEurohas kepttheUSdollarstrongforawhile.AshasbeenarguedbymanypeopletheUSdollarwasn’t strongbecauseofitssoundfundamentalsbutbecausetheweaknessoftheotherworld currenciessuchastheEuroandYen,whichwereartificiallyweakenedbecauseoftheQEsand earlyZIRPandNIRPprograms,whichnowseemtolackanylastingimpact.TheYen,which stronglyinfluencesthefateofthedollar,isnowstrengtheningaswehavebeenwitnessing becausealltheYendepressingmeasureshavefailedandbecausetheJapanesecurrent accountsurplusandrepatriationoffundsisnowputtingupwardpressureontheYen.The riseoftheUSdollarisover!!Andthiswillbeoneofthemostimportantfactorsboostinggold andsilverpricesgoingforward.NexttothattheweaknessintheUSdollarinconjunction withstrongerinflationaryforceswillforceinterestrateshigher. InflationwillforcetheFed’sorinvestors’handtoincreaseinterestrates,whichwillimplode thebondmarket InordertostayaheadofthecurvetheFedmightbeforcedtoincreaseinterestrateswhilst theeconomyisnotstrongatallasconfirmedtheAtlantaFedforecastsfortheeconomy reducingGDPestimatesfor1Q2016to0.3%.TheNewYorkFed'stodayslashedQ1growthto just0.8%(from1.5%inFeb)andcollapsedQ2growthto1.2%from1.9%lastweek.Thiscuts theentireH1estimatefrom1.5%to1.0%. Theeconomywaspurposelymadetolookstrongusingmanipulatedemploymentandother managedfiguresthoughasweknownothingislesstrueasconfirmedbytwoofthe12 FederalReserveBanks.Itistheartofdeceptiontopretendthateverythingishonkeydory tryingtokeeptheeconomyafloat.Itisallonebigairballoon.Andthereforewheninflation figuressuddenlystarttorisebecausethepercentagestrongincreasesincertainCPI constituentstheFedorthemarketmostlikelywillforcemuchhigherlong-terminterestrates. Andwithalltheilliquidityinthebondmarkets,followingtheQEprogramssuckingthebond marketsdry,themovementsinthebondmarketcouldbecatastrophicandcauseabloodbath takingtheothermarketsinitspathwithit.Thiswouldforceinvestorstolookforassetsthat wouldpreservetheircapitalandwiththepreciousmetalswellinversedtotheequitiesand bondsgoldandsilveraremostlikelytobecomethepreferredassetclassforinsurance. PerhapsyoushouldalsohavealookintotheFederalReservehavingreleaseda19-pageletter onApril14thatitandtheFDIChadissuedtoJamieDimon,theChairmanandCEOof JPMorganChase,onApril12asaresultofitsfailuretopresentacredibleplanforwinding itselfdownifthebankfailed.Isthisawarningsignforwhatistoocomeand/orisJPMorgan justtooarroganttotakeadequatemeasures? AsasidenoteIdon’tunderstandwhyCNBCisgoingonaboutalltheseflawedS&P00 companiesandtheirflawedresults(comparingresultswithestimatesandnoty.o.yearnings! Asham!)andbuy-backswhilstgoldhasrisenby17%from$1,061/oz.to$1,243/oz.sincethe beginningoftheyearwhilstGDXroseevenby62%!!!from$13.72to$22.21.TheGDXwas createdbyvanEckanditsholdingsincludemostmajorgoldminerslistedintheUnitedStates andCanada.SomeofthelargestholdingsoftheETFareGoldcorp(GG),BarrickGold(ABX), NewmontMining(NEM),Franco-NevadaCorporation(FNV),NewcrestMining(NCM),Silver WheatonCorp.(SLW)andAgnicoEagleMinesLimited(AEM).Theindexismarketcapweighted. Itshouldbenotedthatgoldsharesnormallyhaveabetathatistwicethelevelofthe underlyinggoldpricewhilstsilverminingshareshaveabetaof4xthemovementinthegold price.SowhatdoyoupreferS&P500stocksatpeaklevelsorgoldandsilverminingstocksat bottomlevels.Whereisthevalueinyourmind? Only30%ofallthesilverproducedintheworldbypuresilverminingcompanieshencetheir highermultiplethangoldminingcompanies.Silverforthelargestpartisaby-productofgold copperandzincandwhentheproductionofthebasemetalsfallstheproductionofsilveralso falls. ArbitragefromtheShanghaiGoldExchangecouldforcethehandsoftheLBMAandComex Asstatedmanytimesthecurrenciescanbeseenastheultimatebenchmarkofyourwealthor purchasingpowerhencewhyIbelievethattheircurrentweaknessisringingthebellforthe resumptionofthebullmarketinthepreciousmetals.Goldandsilverarethemirrorimageof thehealthofthereservecurrency’seconomyanditspolicies.HencewhytheUSauthorities hadtosuppressthegoldandsilverpricesinordertoavoidtheperceptionofweaknessofthe USdollar(alsoseeDeutscheBank’sadmittanceofsilverandgoldmanipulation).Don’tforget papermoneyprintingequalsunrestrictedgrowthwhilstphysicalgoldandsilverequal discipline,onecanonlyissuesomuchmoneyasisbeingmatchedbynewlyminedgold.Gold forobviousreasonsisseenasaconstrainttothe(flawed)policiesofthepoliticianshencewhy theysuppressthegoldprice.Withgoldasthereservecurrencytheycan’tpromisetheworld totheirelectorate!! Thoughtheauthoritiescanonlykeepthepricessuppressedforsolong.Suppressionislike keepingaballpushedunderwater,ultimatelythewaterwins!Anditlookslikeallthefactors infavorofgoldandsilverarecomingtogether.The19AprilpricingofphysicalgoldbytheSGE (ShanghaiGoldExchange)inYuan(physicalagainstcash)couldmeantheendofthe manipulationofpaperorgoldfutures(papergoldversusnominalsettlement)orchestratedby thebullionbanksandmonetaryauthoritiesusingtheLBMAandComexastheirplatforms. ThephysicalgoldversuscashsetstheonlyrightpriceandiftheLBMAorComexpricesetting willbelowerthanthepriceattheShanghaiGoldExchangeSGEmemberswillarbitrageitand demandphysicaldeliveryfromtheLBMAandComexparticipantswhichwillinturnforce muchhigherprices. Why?Becausethepapertophysicalratiorangesbetween100-300x,inotherwordsforall 100-300futurescontractsontheLBMAandComexthereisonlyonephysicalouncein registeredinventories.Inotherwordsthereisnotenoughgoldinregisteredinventories (bullioninventoriesqualifiedfordeliveryonthefuturescontracts)tomeetthedelivery.And thusitwillforcetheLBMAorComextocallaforcemajeureallowingtheLBMAorComexto settleincash,thoughthiswillatthesametimerendertheexchangetechnicallyindefaultand endtheirviabilityandcredibility.Andthatsituationwearegettingeverydayclosertoasis demonstratedbytheadmittanceofDeutscheBankofsilverandgoldmanipulation. Deutscheadmitstosilvermanipulation(beingalawyerdon’tgivemethatcrapofpayinga penaltybutnotadmittingwrongdoing,thisissuchafallacyofwhatjusticeshouldbe!!) AccordingtoaReutersarticleofApril13,2016DeutscheBankAGhasagreedtosettleU.S. litigationoverallegationsitillegallyconspiredwithBankofNovaScotiaandHSBCHoldingsPlc tofixsilverpricesattheexpenseofinvestors.DoIneedtosaymoretoallthosenaïvepeople thatdon’tbelieveinconspiraciesbecausetheydon’tunderstandtherealworkingsofthe governmentsandthereasonswhy?Youjusthavetolookatthedumpingof10,000futuresin themarketonSundayeveningswhenthetradingvolumeisatitsthinnest.Doyounowfinally believewhatisreallygoingonbehindthecurtains?Yourgovernmentincooperationwiththe bullionbanksisstealingfromyou.Andtocounteranyargumentsthattheprosecutionbythe governmentmeansthatthegovernmentisnotinvolvedseetheCTFC“investigation”below! Wakeupandseebelow. WhatispotentiallyevenmoreinterestingreDeutsche’sadmissionisthefollowingstatement. “Inadditiontovaluablemonetaryconsideration,DeutscheBankhasalsoagreedtoprovide cooperationtoplaintiffs,includingtheproductionofinstantmessages,andotherelectronic communications,aspartofthesettlement.InPlaintiff’sestimation,thecooperationtobe providedbyDeutscheBankwillsubstantiallyassistPlaintiffsintheprosecutionoftheirclaims againstthenon-settlingdefendants.” Finally,we'lljustremindreadersthattheUScommodity"regulator",theCFTCin2013closed itssocalledfive-yearinvestigationconcerningallegationsthatthebiggestbullionbanks manipulatesilvermarketsandprices.ItproudlyreportedinSeptember2013thatitfoundno evidenceofwrongdoinganddroppedtheprobe.Thisiswhatitsaid: “TheCommodityFuturesTradingCommission(CFTCorCommission)DivisionofEnforcement hasclosedtheinvestigationthatwaspubliclyconfirmedinSeptember2008concerningsilver markets.TheDivisionofEnforcementisnotrecommendingchargestotheCommissioninthat investigation.Forlawenforcementandconfidentialityreasons,theCFTConlyrarely commentspubliclyonwhetherithasopenedorclosedanyparticularinvestigation. Nonetheless,giventhatthisparticularinvestigationwasconfirmedinSeptember2008,the CFTCdeemeditappropriatetoinformthepublicthattheinvestigationisnolongerongoing. Baseduponthelawandevidenceastheyexistatthistime,thereisnotaviablebasistobring anenforcementactionwithrespecttoanyfirmoritsemployeesrelatedtoourinvestigation ofsilvermarkets.” InlightofthisconfirmationthattheCFTC'sprobewas"lacking"perhapsitisperhapstimefor theso-calledregulatorwhoatthetimewasheadedbyex-GoldmaniteGaryGensler,to reopenitsinvestigation?Seehowfullof@#$%&thesepeoplereallyareandhowonecan’t trusttheseinstitutionsandespeciallywhentheyareheadedbyexGoldmanemployeeslike GenslerandtheNYFedpresidentWilliamDudley.OtherGoldmanitesareCarneyoftheBOE andDraghi.Doyoureallythinkthatthesepeopledon’ttalktoeachother?Takeoffyournaive hatandstartthinkingmanipulation,conspiracy,insideinformationandfrontrunning!!!All servicesperformedbyGoldman.Goldmanjustpaid$5+bninpenaltiesfortheirmortgage securityfraudwithshareholdersmoney(basicallystealingtwice!)andnotthepartners’ money,whichshouldhavebeenthecase. AnywaythisadmissionandcooperationbyDeutscheandtheSGEYuanpricingshould ultimatelyleadtoendingthesilverandgoldmanipulation.Inotherwordsinterestingtimes forgoldandsilverespeciallyinlightofallfactorsthatareplaying. ©GijsbertGroenewegen,[email protected],2016