Gold and Silver – Are the Lows In

When looking at the gold and silver markets through the eyes of the mainstream media the general consensus would appear to be that the decade long bull market in precious metals is over and that gold and silver are entering a new secular bear market. Many mainstream market commentators are confident that American central bankers have taken the necessary steps to avert a second great depression and are now in a position to start scaling back their unprecedented bond buying program.

The US Economy

John Williams from from Shadow Government Statistics provide a solid case that the US has been in recession since 2005 and that there has not been any meaningful improvement in the US economy. John Williams publishes excellent content on his site that analyses and exposes flaws in the way the United States Government reports financial data.

US Recession


“Courtesy of ShadowStats.com”

US Unemployment


“Courtesy of ShadowStats.com”

Global Debt

Global debt has increased by more than 40% since the financial crisis. Global debt now stands at a staggering $100 trillion. ($100 000 000 000 000)

Geopolitical Tension

Tensions between Russia and the United State have heightened. It looks unlikely that Putin will back down and withdraw his troops from the Crimea. One Russian news source has reported that the Russian parliament is considering the confiscation of US business assets if America imposes economic sanctions against Russia. Former US Treasury official, Dr Paul Craig Roberts believe that the situation in the Ukraine Is “more dangerous than the Cuban Missile Crisis”.

“We hold a decent amount of treasury bonds – more than $200 billion – and if the United States dares to freeze accounts of Russian businesses and citizens, we can no longer view America as a reliable partner,” he said. “We will encourage everybody to dump US Treasury bonds, get rid of dollars as an unreliable currency and leave the US market.”
– Sergei Glazyev – An advisor to president Putin

Gold Flowing from West to East.

Koos Jansen publishes a very informative blog which attempts to document and report on the volume of gold flowing from West to East.

“While the World Gold Council estimates Chinese consumer demand will be over 1,000 tons, my estimate is it will be over 2,200 tons. In my humble opinion just the official route raises a few eyebrows to the WGC demand numbers. If we then take into account that gold is also imported by China through ports other than Hong Kong, more eyebrows are raised.”
– Koos Jansen

Many analysts are of the opinion that that the paper gold price (the price as determined by Comex and other futures markets) is not an accurate reflection of the physical price of gold. If Koos Jansens research is accurate it lends credence to the school of thought that believes that at some point the West could run out of gold which could potentially lead to a Comex default and take away the West’s ability to manipulate the physical price of gold.

China demand for physical gold


“Courtesy of In Gold We Trust”

“Russia is ready to turn their back on the dollar… China, we know, is buying gold, thousands of tons of gold… Iran has been importing gold from Turkey. Look around the world, a lot of people are ready to turn their back on the dollar. They haven’t done it yet, but when the confidence is lost it can be lost very quickly. Investors need to be prepared for that”
– James Rickards


Conclusion

It is our opinion at African Bullion that the gold and silver bull market is still intact and that a well balanced investment portfolio should have a 5 – 10 % allocation to physical precious metals. We also believe that ultimately silver will outperform gold as the gold silver ratio reverts to it’s historic mean of around 18:1 .

While we cannot emphatically say that the lows are in for this downward trend in Gold and Silver, we are of the opinion that current pricing provides a good buying opportunity for investors with a medium to long term time horizon.

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