Saturday, December 31, 2011

Gold/Silver charts to bring in the New Year

Thought I would share some charts to bring in the New Year. Click on each of the charts to enlarge. All charts are weekly.

First for Australian readers here are some AUD Gold and Silver charts, it looks to me like we have a good buying opportunity here (and I have made a couple of Gold and Silver purchases in the last week), although there is still room for some downside here if we head down to the lowest levels of support:

AUD Gold Entering the Buy Zone


AUD Silver Meets Support
And finally here is Gold in USD. If the exciting third phase of the precious metals bull market is upon us then it's likely we will see Gold start rising more sharply at some point in 2012.

 USD Gold Ready to Increase Pitch Again

Have a safe New Years Eve and prosperous New Year!

Thanks for reading, commenting and your support over the past 12 months. I look forward to covering developments in the year to come which in my opinion is going to be an exciting time for the precious metals market.


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Friday, December 30, 2011

Valuables at risk - Safe Deposit Box? Is it safe?

There are risks associated with owning physical metals. There is no counter party risk, but that's of little assurance if they are stolen.

Those keeping tabs on the news may already be aware of the story of two thieves who were recently caught with $6.5m in cash and valuables ($4m cash, bullion, jewelery, etc):
A father and son faced a Melbourne court yesterday after NSW Police uncovered a ''treasure trove'' including $4 million in cash, a large amount of foreign currency, 120 kilograms of silver bullion and thousands of pieces of jewellery worth up to $6.5 million at a Sydney storage facility.

Police said thieves had broken into a storage facility in Ivanhoe and more than 100 homes and businesses on Sydney's north shore, cleaning out safes and leaving them looking like they had never been tampered with.

Christopher See, 56, and Phillip See, 33, were each charged by Victorian police with one count of burglary and one count of theft in relation to a robbery at Kennards storage depot at Upper Heidelberg Road, Ivanhoe, between December 3 and December 10, where it is alleged they accessed 36 security boxes. The Age
It's concerning enough that these thieves were able to get in and steal the contents of safes without the owners knowing let alone that they managed to (allegedly) burgle 36 safe deposit boxes at the Kennards facility. If nothing else this story should act as a reality check for those that think it's worth saving a few dollars for a cheaper storage facility when it comes to protecting your assets.

Here are a couple of benefits that Kennards suggests they have over a bank facility:
The Kennards Safe Deposit Boxes are available in 3 sizes and have several clear advantages over Bank operated safe deposit facilities:
- No 100 point I.D. check. Kennards is not required to enforce 100 point I.D. verification.
- Access 7 days a week – banks limited operating hour’s means you are restricted and cannot attend when it is convenient for you.
While these might look like advantages to some, the convenient access (24/7) and privacy offered (no 100 point check for customers) is potentially as useful to thieves as it is to the legitimate customers who are using the facility.

I think safe deposit boxes are safer than storing your metals at home, but ensure you are trusting the right company and facilities with your business and where it isn't already provided it's best to consider insurance as well.

A home safe might seem like a good option, but in the case you were threatened with a knife or gun by an intruder the level of security the safe provides will be of little benefit if you are forced to open it.

Buying, holding and storing physical metals isn't without its risks, ensure you investigate the best solution for your personal situation before buying metals.


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Wednesday, December 28, 2011

Beware those acting in interest of the greater good

Gonzalo Lira wrote an interesting post yesterday about the MF Global collapse, here is part of it (read the entire post here):
Rather than being treated as a bankruptcy of a commodities brokerage firm under subchapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (subchapter III) for the purposes of its bankruptcy.
Why does this difference of a single subchapter matter? Because in a brokerage firm bankruptcy, the customers get their money first—because after all, it’s theirs—while in an equities firm bankruptcy, the customers are at the end of the line.
In the case of MF Global, what should have happened was for all the customers to get their money first. Then everyone else—including JPMorgan—would have picked over the remaining scraps. And the monies MF Global had already pledged to JPMorgan? They call it clawback for a reason.
The Chicago Mercantile Exchange, which handled the bankruptcy, should have done this—but instead, the Merc was more concerned with making JPMorgan whole than with protecting the money that rightfully belonged to MF Global’s 40,000 customers.
Thus these 40,000 MF Global customers had their money stolen—there’s no polite way to characterize what happened. And this theft was not carried out by MF Global—it was carried out by the authorities who were charged with handling the firm’s bankruptcy.
It means that nobody’s money is safe. It means that regulators care more about protecting the so-called “Systemically Important Financial Institutions” than about protecting Ordinary Joe investors. It means that, when crunchtime comes, central banks and government regulators will allow SIFI’s to get better, and let the Ordinary Joes get fucked.
So far, so evil—but here comes the really troubling part: It is an open secret that there are more paper-assets than there are actual assets. The markets are essentially playing musical chairs—and praying that the music never stops. Because if it ever does—that is, if there is ever a panic, where everyone decides that they want their actual asset instead of just a slip of paper—the system would crash.
Now, question: When is there ever a panic? When is there ever a run on a financial system?
Answer: When enough participants no longer trust the system. It is the classic definition of a tipping point. It’s not that all of the participants lose faith in the system or institution. It’s not even when most of the participants lose faith: Rather, it’s when a mere some of the participants decide they no longer trust the system that a run is triggered. Gonzalo Lira
If the above is true (MF Global was placed in bankruptcy under the wrong law) then it's clear that market regulators are prepared to act in the interest of the greater good. In this case it meant putting the financial well being of JP Morgan (Too Big Too Fail) above that of 40,000 customers. This is not particularly surprising given that if JPM failed it would probably take down the entire US investment banking system, if 40,000 investors lose some or all of their capital it is of little consequence to anyone else or the system.

Government or regulators acting in the interests of the greater good is not something that Australia is immune to. For example as I've discussed before, during the GFC the government and regulatory bodies imposed new rules, laws and guarantees to ensure that our banking system was protected. Individual companies acted in the same way, for example to protect some mortgage funds during the GFC there were strictly enforced withdrawal limits put in place. This ensured sufficient liquidity to allow the fund to continue, rather than resulting in run on their funds and collapse, this from December 2009:
INVESTORS trying to reclaim up to $15 billion frozen for the past year in a range of mortgage funds have been unable to recover all their money, with redemption requests vastly overwhelming the money funds have at hand.

Perpetual, one of the industry's giants, said yesterday that investors, mostly retirees, who sought to redeem their holdings this year had received 91¢ in the dollar.

Others have paid out a lower proportion of claims to retail investors, who bought the assets for their higher returns and perceived safety.

Investors in AXA Asia Pacific's mortgage funds have been able to reclaim no more than 22.8 per cent of their holdings in the past year.

Australian Unity, a smaller fund, has paid out 55 per cent of the value of redemption requests.

Colonial has paid out around 20 per cent of its funds under management, but the wealth giant did not say what proportion of requests it had met.

These companies say none of their investors have incurred losses because the capital is intact, albeit unavailable.

Up to $30 billion worth of mortgage funds were frozen last year, affecting 150,000 investors, after the bank deposit guarantee sparked a mass rush to safety. The Age
Although we have a government guarantee on funds in Australian banks ($1m per customer, per ADI, dropping to $250k in February 2012), there is no guarantee that you will have easy and instant access to these funds in the case we saw a run on Australian banks. If the liquidity of our banks was threatened you could expect the government, regulators and our banks to act accordingly (in the interest of the greater good) by freezing accounts, limiting withdrawals, enforcing temporary bank holidays, basically whatever it takes to ensure the banks remained solvent.

It would be prudent to ensure that you have sufficient hard assets and physical cash outside of the banking system to rely on in case such events took place. The MF Global collapse shows there are even circumstances where an investor might believe they hold title over physical metals with a receipt, but this ends up irrelevant:
The trustee overseeing the liquidation of the failed brokerage has proposed dumping all remaining customer assets—gold, silver, cash, options, futures and commodities—into a single pool that would pay customers only 72% of the value of their holdings. In other words, while traders already may have paid the full price for delivery of specific bars of gold or silver—and hold "warehouse receipts" to prove it—they'll have to forfeit 28% of the value. Barron's
Another reason to reconsider allowing a third party to store your metals.


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Wednesday, December 21, 2011

Negative equity blues - Trapped on the bottom rung

Chris Zappone published a piece today on the increasing number of Australians who are suffering from negative equity, that is owning a property worth less than the mortgage over it:
New reality: owing more than you own

There is no doubt housing has become less affordable in recent years.

Falling house prices may leave more households owing more than the value of their homes.

Rising property values have been an article of faith in the housing market for a generation of Australians who borrowed big as real estate prices marched ever upward.

Now, though, some buyers are finding that their homes are worth less than the size of mortgages taken out to acquire the proverbial roof over their heads.

While the percentage of home owners with so-called negative equity remains tiny - about one in fifty of the 3 million households with mortgages - the number may well swell in 2012 if home prices extend their declines as some analysts expect.

The emergence of a sector of the housing market ‘‘under water’’ on their mortgages may hurt an already fragile real estate market. Any forced sales would obviously dent individual household wealth but further drops in home prices would deter investors from buying residential properties.

Ben Phillips, principal research fellow at the National Centre for Social and Economic Modelling, helped prepare the analysis which pointed to 60,000 households nationwide with negative equity.

"The prospect of negative returns will certainly detract from sentiment through 2012," said NATSEM’s Mr Phillips. The Age
Now 1 in 50 homes in negative equity may not sound like a lot, but it's just another compounding problem in an already weakened market.

Here is a story about negative equity I read in a forum post the other day:
User A: Some friends of mine, after getting married, purchased a 2bdr unit with a small courtyard out past Hornsby, Sydney in mid 2009 for around 475k. They had a 5% deposit and i advised them to hold off a bit and save some more and look around, but they were adamant and wanted to get into property as it only goes up....

2 years down the track and they're looking for a larger place to start a family. They spent just over 20k doing it up (place really needed it). The value of their place has dropped to around $430k. There's no way they can break even and move so they're staying put. Travel is at least an hour each way into the city and they don't mind too much. least they have the train (how much is a weekly return to Hornsby ???)

They've sold one car as they cant afford the luxury of a second. They've got a large mortgage over their heads backed by a property they cant get rid of. Welcome to the world of the 1st home buyer nowadays - not an enviable position.
This was followed by another user who didn't seem to recognise the gravity of the situation, instead focusing on the potential that the want-to-be-upgrader could be better off as prices fall:
User B: Surely if the value of their property has dropped, then the value of the larger property that they want to move to has dropped, so the larger property is actually more affordable in $ terms than it would be had the market risen by the same amount.

ie you are saying value of their house has fallen by 13%, $495k to $430k. Let's assume that the $600k (2009) larger house is now for sale for $522k. So if they switch tomorrow they need to pay an extra $92k.

If the market went up 13% then their $495k would sell for $559k, but the larger $600k house would now be for sale for $678k, so they would have to find an extra $119k.
This was followed up by my post:
Bullion Baron: It may very well be the case that the larger property has also dropped but the issue of negative equity is still something difficult to overcome.

For example their 95% loan on $475k is approximately $450k. Let's assume they've paid down principal of $5k over 2 years so have $445k outstanding. If they sell their unit at $430k they will need to take out a personal loan to finance the $15k shortfall, plus any selling expenses (agent fees, etc), so potentially they will need to be able to finance and then service a $25k unsecured personal loan as well as working out how to find a deposit and finance for the new larger house.

While technically you have a point regarding an across the board fall (assuming that the larger house has fallen by the same amount as the unit), in reality it is not as easy as you might suggest to work around it.
Now I'm not ignorant to the possibility of falling prices being a benefit to some owners who wish to upgrade, I wrote this in a post earlier this year:
Chances are that many families that have to sell and realise the loss will be moving into another purchased home at the same time, so if their own property has fallen 20% and so has the one they are buying, then there is little loss to them. Bullion Baron
However upgrading from a position of negative equity could be very difficult (as I've already pointed out). Price falls are only going to benefit upgraders if they are in a position financially to take advantage.

The sad reality is that a large number of those now sitting in negative equity would be the First Home Buyers who have been sucked in by government handouts over the last couple of years. It's these buyers who are most likely wanting to upgrade having purchased their home with the intention of using it as a stepping stone. It's also these buyers who are now trapped in their homes with prices in many areas having dropped below their 2008-2010 levels. 

With first home buyers unable to move off the bottom rung of the "property ladder" this will have a flow on effect with those on the second rung unable to sell to the first they are in turn unable to buy the third and so on. With the property ladder broken and the property clock running slow I have to wonder just how many property memes are left to bust.


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Monday, December 19, 2011

Fortune Investor's Guide 2012 - False Advertising

I'm not a regular buyer of financial/investment magazines, but when I saw Gold coins all over the front cover of the Special Issue 'FORTUNE Investor's Guide 2012' I had to grab a copy to see what they had to say about Gold and it's prospects. Although Gold wasn't specifically named on the front cover I thought there would have to be some coverage...

Front Cover:

The Gold coin theme continued through the magazine with another Gold coin on the contents page and even more again on page 61 which kicked off the 2012 Investors Guide.

Page 61 Title Page:

On the first flick through and skim read of the guide I was unable to see any analysis on the metal that graced their front cover and inside pages, but the second time when reading more carefully I found these two mentions:
"Despite good days here and there, things in the U.S. aren't all that wonderful. At a time when things are so uncertain here, the standard advice is to seek safety, and to protect yourself against inflation and the almost certain future declines of the dollar.
One traditional "safe" investment is bonds, especially Treasury bonds. Another haven in foreign stocks or foreign company mutual funds, and for the more venturesome and sophisticated - foreign currencies. Then there are commodities and "hard assets" such as Gold, Silver, copper, oil and diamonds, that will presumably hold their value if the dollar's decline continues and inflation rises.

None of those options - bonds, foreign stocks and currencies, and commodities - feel even remotely safe these days."
This was later followed by:
"And commodities - well, when you see Gold being marketed everywhere, the game's pretty much over. If you had a time machine and could buy commodities at what they fetched 3 years ago, they'd be a great investment. At today's prices not so much".
So they've decided to lump Gold in the too hard to analyse basket? Are they really going to just lump Gold with commodities and provide no real analysis? Are they really going to line their magazine with pictures of Gold only to dismiss it with a couple of lines? It would appear so.

It was amusing that as I wrote this I spotted Houses and Holes (from Macro Business) had posted another misrepresentation of Gold from AFR: Getting Gold Wrong

While Gold has received an increased profile as mentioned in the Fortune magazine (and as I've covered several times on this blog before), it likely won't be until mainstream press "gets Gold right" and the public is buying that the metal should be put under scrutiny.

Following this false advertising from Fortune magazine all I could do was file it away.

Special filing cabinet:


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SHTF Bar: Gold Valcambi Combi Bar 50g - 50 x 1g

The divisible Valcambi Gold CombiBars are now available from Bullion Money.

These 50 gram bars easily separate into small 1g bars of Gold (with no loss of material) allowing for exchange or resale in smaller quantities.

If you're looking for a way to buy Gold for a SHTF scenario where we will literally be needing Gold in an exchangeable format then these bars look like the perfect addition to your stack.

The premium on the bars is quite reasonable. Individual 1 gram Gold bars would normally run you up around $65+ per gram, currently this bar is priced around $56 per gram. So reasonably priced and allows the flexibility of keeping it in original form until such time you wish to break it up.

The bars come in a plastic presentation case:


You can read more about the bars or purchase them on the Bullion Money product page: 50 gram Valcambi Combi Bar


Sunday, December 18, 2011

Gold/Silver on the verge of bubble phase

Many times over the course of writing this blog I have attempted to publicise that I believe we are on the verge of Gold (and Silver) heading into the bubble (3rd) phase of the precious metals bull market.

Back in January this year I made some observations:
- Similarities between bubble chart and the metals (2008 being the bear trap)
- Similarities in time frame between this bull market and the 1970s
- An increase in mainstream media & investor/trader coverage
- Increase in retail sized bullion demand resulting in shortages/wait times
- Premiums increasing on sites like eBay

Further coverage included this post where I compared month on month gains between the 1970s Silver spike and today's: Silver Bull Market - 70s vs Today and then another similar one more recently where I looked at the percentage gain between the Gold bull market in the 1970s and today where the 700% gain marked where Gold headed parabolic last time (and we just passed the same mark earlier this year).

I've looked at the cyclical nature in Gold vs other assets such as houses, oil, the dow and even vs wages. In many of these cyclical measurements there is room for Gold to head higher if it is going to perform similarly to the last bull market peak. Of course we can't take it for granted that things play out exactly the same as last time.

There were some interesting comments made by poster 'briefly' on Macro Business last week. After suggesting it looks like the Gold bull market run is over (not really providing any real reason to support this specific point) he went on to post the following:
The property bubble lasted for a lot longer than 13 years. I think the gold market – like the property market – depicts a series of ricochet effects from the whole anarchic credit expansion cycle.

The credit load in advanced industrial economies has become incredibly large, so large in fact that even with very low or negative interest rates, the real economy is struggling to support the accumulated debt burden.

In my opinion, this is ultimately related to the role of the USD as the global reserve currency. Long-run stable growth in the non-US world and the corresponding increase in global trade flows has required a plentiful supply of USD. This supply has been met by the ongoing creation of dollar surpluses, at least since the 1960′s.

Of course, the obverse side of this is that the dollar supply needs to be financed somewhere inside the US economy – in practice, in the balance sheets of households and their proxy, the US Government. This process appears to be on the point of exhausting itself. It is axiomatically almost impossible for the both the US Government and households to achieve a net income balance at the same time, while also maintaining economic stability. However, the US is not far from the point where achieving income balance is going to become a mathematical imperative.

Like the Europeans, the US is now in a position where it is almost impossible to either grow or shrink their way to fiscal balance. The logical consequence of this is either depression or permanent fiscal instability.

The result of moves to simultaneously balance the accounts of both the US Government and households will be deep and irrevocable contraction in the US economy. If this occurs, it will catalyse a reversal of the process by which surplus dollars are supplied to the global economy. Dollar shortages will ensue, which will provoke additional contraction in the non-US world.

In turn, this will induce the collapse of the post-Bretton Woods reserve system as economies seek to combat the deflationary consequences of USD-hoarding.

For the moment, the unfolding and completely ineluctable collapse of the Euro is driving flight to the USD. But this is not sustainable for long, as USD-appreciation will impel contraction in the already-labouring US-economy. This will only be intensified by the competitive devaluations that will follow the re-basing of European economies in non-Euro currencies.

The result will be recurrent crisis, contraction, deflation and insolvency. My contention is this is far more likely to lead to the widespread cancellation of debts than to money-printing, not least because in an insolvent world, money-printing will cease to be an effective means of re-booting stricken real-world demand.

Will gold hit USD275? In a deflationary world, anything is possible.
I agree with a lot of what he posted. Deflation, contraction and debt cancellation could come about as opposed to the hyper-inflationary, end of all fiat currencies destruction that some predict. Although I don't think Bernanke & The Fed are going to go down this path (deflationary) without a fight. They have continued to highlight that they are "prepared to employ their tools to promote a stronger economic recovery in a context of price stability". I think 2012 is likely to bring in the use of increased stimulatory measures by the Fed, most likely to be publicly titled as QE3 (4/5/6?).

It is my opinion that these last ditch efforts by the Fed to avoid deflation will send the USD tumbling and Gold soaring as it launches into the final bubble phase of this bull market. The deflationary bust that briefly predicts could come about after this in a couple of years and be the driver of Gold's bear market following the bubble (although given the heights I think Gold is heading to I very much doubt it will be dropping below US$1000oz let alone to the US$275 briefly suggests is possible).

Gary Savage is the trader behind the Smart Money Tracker blog, a trading blog which I have linked on this site before. For awhile now he has been talking about a top for Gold following another 8 year cycle low in 2016, suggesting a peak of the bubble around 2017-2018, this from July:
2016 is when the next eight year cycle low is due. My best guess is that we will get the parabolic bubble top for gold in 2017 or 2018.
However, here is what he had to say a couple of days ago:
I know that during a correction of the magnitude we are seeing right now it seems more like the gold bull is dead than on the verge of moving into what I expect will be one of the greatest parabolic moves in history.

However, all of the conditions necessary to launch the bubble phase are now in place. Gold is in the process of putting in an intermediate degree bottom. That bottom, which is only days away if it didn't already happen today, is going to be the single greatest buying opportunity, probably of the decade.

Gold sentiment is at multiyear lows. Retail traders that bought at $1900 have gotten wiped out. The media is full of stories calling for the death of the gold bull. Institutional traders from John Paulson, George Soros, and Dennis Gartman have all gotten knocked off the bull.
And then a little further on:
The scenario that is unfolding in the CRB and dollar indexes has me wondering if the gold bull isn’t going to start evolving much faster than I originally expected. Let’s just say that if I am correct and the dollar is on the verge of topping then we are probably going to see a much shorter consolidation than originally expected. Gold could launch much more quickly out of the B-Wave bottom than I expected and move to new all-time highs as early as the next intermediate cycle.

As a matter of fact I’m pretty confident that if the dollar turns down it is going to trigger the beginning of the third and final, bubble phase, in the gold bull market.

The public is already starting to become aware of the gold bull. All we need at this point to start the flood is for gold to recover quickly from this selloff. If gold quickly shoots back up and tags, or penetrates that big psychological $2000 number I expect it will be the siren call that draws the public into the bull market. And it is the public coming into a market that triggers the bubble phase.

During this phase of the bull I expect we will see the normal ABCD wave pattern break down as gold starts to accelerate into what will almost certainly be the most incredible parabolic advance, maybe in history. By the fall of 2014 I expect we will see gold somewhere between $7,000 and $20,000 an ounce.
I subscribe to Gary's premium site. I don't actively trade following his model portfolio, but I do find his charts and common sense commentary worth the subscription cost (although he shares a useful amount on the free blog). He raises some great points along the way and often superbly catches bottoms in the stock and Gold market using a combination of signs including sentiment, cycles and technical analysis. If he thinks Gold is putting in an important bottom here, I am listening. His new target date for the bubble phase in Gold fits in with my statistical and anecdotal observations on where we are in this bull market.

The correction that is playing out presently has the potential to push Gold lower short term, however it certainly could be the last great buying opportunity before the move to astronomical highs as the metals go from strong growth to bubble territory.

Bubble markets can shock with their intense moves higher. Gold went up a multiple of 5x in the last 2 years of it's last bull market and a repeat performance today is definitely possible if the right environment presented itself.

If you're expecting a similar outcome for the metals to me then I hope you're prepared for what's to come, both from an aspect of asset positioning as well as mindset ready to sell into what could be a deafening stampede from the public into Gold and Silver (as they seek to protect from themselves from the perceived or real danger that quantitative easing will lead to the death of fiat currencies).


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Thursday, December 15, 2011

Panic selling often points to imminent reversal #gold

The psychology around this precious metals bull market is truly fascinating. Over the last week Gold and Silver's pummeling has bought out the precious metal bears, the top callers, the bubble bleaters... suddenly everyone's an expert and everyone has an opinion on the reasons for the fall.

The drop below the 200 MDA has some traders frothing at the mouth for further falls with Gold only having fallen significantly below this level during the 2008 price crash (over the course of this bull market).

With deflationary pressures building we could see a repeat of this sort of correction (we are already 2/3 of the way to a correction of 2008 magnitude), however at least for the short term Gold looks like it could be putting in a short term bottom at these levels.

Panic in the Gold market as it rockets to the upside or capitulates to the downside tends to be marked with an increase in volume. You can see on the chart below (GLD SPDR) that the volume has built to the usual capitulation levels.

In my opinion we are probably very close to putting in a short term bottom and Gold will reverse back over the 200 MDA. Of course I could be wrong, I don't trade the Gold/Silver markets short term so have nothing to lose/gain either way and even if it does reverse back over the 200 MDA there's no guarantee it will stay there.

Corrections of this magnitude don't come around that often in a bull market. If your expectations for the medium/long term are that Gold and Silver will be much higher then a reasonable strategy would be to buy the dip (average down, not all in).


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Tuesday, December 13, 2011

Superannuation: Exposure to Precious Metals

For those readers who aren't Australian you can read about what superannuation is here, but essentially it's a retirement account similar to the US 401k accounts.
I seem to be hearing and reading a lot about superannuation accounts at the moment.

The Prince has been pumping out some excellent articles on Macro Business.

There has also been a change made to future payments where they will be increasing compulsory employer contributions incrementally to 12% (from 9%) between now and 2020:
On 2 November 2011, the Federal Government introduced the Superannuation Guarantee (Administration) Amendment Bill 2011 (Cth) ('the Bill') to move an increase in compulsory employer superannuation payments from 9% to 12% which is included in the Mineral Resources Tax Bill (Cth) ('the MRT Bill').

The Bill is expected to come into effect on 1 July 2013 and will gradually increase the compulsory employer superannuation payments until they reached 12% in 2020. In the Second Reading Speech of the Bill, the Hon Bill Shorten MP, Minister for Financial Services and Superannuation ('the Minister') explained that the "Superannuation Guarantee charge percentage will be increased gradually and modestly with initial increments of 0.25 percentage points on 1 July 2013 and 1 July 2014. Further increments of 0.5 percentage points will apply annually up to 2019-20, when the [Superannuation Guarantee] rate will be set at 12 percent." commun-iT
A larger percentage being put aside means that individuals should be even more diligent that they are managing their account appropriately.

The Australian precious metals community has been hot on how to best manage your own super using a Self Managed Super Fund or SMSF (see this dedicated sub-forum on Silver Stackers).

I have also received several emails over the past couple of months in relation to how I manage my own super.

Personally I don't want the hassle or additional expense that comes with a SMSF, however I do want exposure to precious metals through my account.

Spectrum Super is one of the funds who provide easy access to precious metals exposure without the need for a SMSF (my super account is with Spectrum). 

Spectrum allows direct share investment in ASX300 listed companies as well as the option for other related securities.

You can view all of the listed securities they provide access to on this page: Listed Securities.

From those on the linked list, below I have extracted those which I know to provide Gold/Silver mining exposure (there may be others I've missed, so be sure to do your own research into all available options):

Adamus Resources Ltd (ADU)
Alacer Gold Corp. (AQG)
Ampella Mining Ltd (AMX)
Gryphon Minerals Ltd (GRY)
Independence Group NL (IGO)
Indophil Resources NL (IRN)
Integra Mining Limited (IGR)
Intrepid Mines Limited (IAU)
Kingsgate Consolidated Ltd (KCN)
Kingsrose Mining Limited (KRM)
Medusa Mining Limited (MML)
Newcrest Mining Ltd (NCM)
OceanaGold Corporation - CDI (OGC)
PanAust Ltd (PNA)
Perseus Mining Limited (PRU)
Platinum Australia Limited (PLA)
Ramelius Resources Ltd (RMS)
Regis Resources Ltd (RRL)
Resolute Mining Ltd (RSG)
Rex Minerals Ltd (RXM)
Silver Lake Resources Ltd (SLR)
St Barbara Limited (SBM)
Teranga Gold Corporation (TGZ)
Troy Resources NL (TRY)

Disclosure: I currently hold SLR, TRY, NCM, IGR, KCN & PRU in my super.

They also allow the following (not in the ASX300):

Perth Mint Gold (PMGOLD)
Perth Mint Gold ("PMG") is a right created on-market by The Perth Mint to enable you to invest in gold on the Australian Stock Exchange ("ASX"). PMG is structured as a call option in accordance with the ASX’s AQUA Rules, which cover exchange traded funds and structured products. Each PMG entitles you to physically acquire one hundredth of a troy ounce of fine gold and may be exercised by you at any time. 
PMGs trade on the ASX under the code PMGOLD and can be purchased by investors only on the ASX. 
The ASX price of the PMG is intended to track closely the international over-the-counter market spot price of gold and will be based on the market value of the gold backing a PMG at the time of purchase. Perth Mint
Essentially PMGOLD provides exposure to the spot price of Gold (AUD).

I am sure there are other super companies that provide the same or similar exposure and investment choices, but there are also definitely those who don't.

If your super is currently with a provider who does not give you access to direct shares or other precious metals exposure then consider rolling your account to one that does.

If you want to purchase and hold physical bullion in a Self Managed Super Fund then it is my understanding you are able to do this as well (as long as purchased and stored appropriately), this from e*superfunds PDF on Metals, part of their learning modules:
Physical Metals
ESUPERFUND clients are permitted to invest in Physical Metals and Commodities including Gold and Silver directly. For more details please visit our website at

Metal and Commodity CFDs
ESUPERFUND clients are permitted to trade Metals and Commodities using CFDs with CMC Markets. CMC Markets CFDs allow your SMSF to invest in a wide range of Metals and Commodities including but not limited to, Agriculture, Energy, Gold, Silver, Oil, Coffee and Sugar. CFDs allow you to bypass standardised futures trade sizes and trade smaller quantities.
e*superfund comes highly recommended and they currently have what looks like a decent fee discount on new accounts (only 2 days left to take advantage though):
If you apply to establish a SMSF on or before 15 December, 2011, it is FREE to set up your own SMSF with ESUPERFUND under our current Promotional Offer.  This is a saving of $699.  In conjunction with our FREE 2012 Annual Compliance Fee Offer this is a total saving of $1,398, unprecedented in todays market. e*superfund
Hopefully this post provides enough information to get you started on ways to increase your exposure to precious metals through super.


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Wednesday, December 7, 2011

~ Beautiful ~ PAMP Icon 10g Gold & Silver Pendants

Bullion Baron site sponsor Bullion Money is now selling a range of Gold and Silver PAMP Icon 10g Bar Pendants, which come with a satin cord that can be used to turn it into a necklace.
Here is a picture of the front of the pendant along with the included pouch, satin cord and packaging:

Click the image to be taken to the Bullion Money website

The rear of the coins are stamped with an animal skin pattern with Cobra, Leopard, Stingray & Crocodile available in the Silver (there is also a Zebra design, not currently listed on Bullion Money):


Bullion Money has also listed two of the Gold PAMP Icon Pendant designs (Cobra & Leopard):

Click the image to be taken to the Bullion Money website

I love that Gold Cobra design. I think I've just worked out what I'm buying myself for Christmas!

These bars aren't particularly new, I think they've been around for a couple of years, but I haven't seen another Australian bullion dealer selling them. View more information on the pendants here at Bullion Money.


Monday, December 5, 2011

Political / Energy Crisis to Drive Gold Higher?

In February this year I looked at the possibility that we might have a replay of events seen during the last bull market in Gold/Silver, a set of events which could play a part in driving the 3rd phase of the current Gold bull market. 

I briefly compared the 1979 Iranian Revolution vs the uprising we are seeing today in the middle east, pointing out an energy crisis could result from these disruptions (as occurred in 1979). In the last post I specified Libya as the potential catalyst for the energy crisis, but with Gaddafi dead and tensions building around Iran there is the potential we could see Iran drive the crisis once again. So history could repeat instead of just rhyme.

Over the weekend a Foreign Ministry spokesman suggested that disruptions to Iranian oil supply could spike the price to $250 a barrel (over double current prices):
Iran warned the West on Sunday any move to block its oil exports would more than double crude prices with devastating consequences on a fragile global economy.

"As soon as such an issue is raised seriously the oil price would soar to above $250 a barrel," Foreign Ministry spokesman Ramin Mehmanparast said in a newspaper interview. Reuters
During the last bull market Gold peaked at a ratio of 20.77 to oil. This snippet from a previous post looking at the ratios:
If we were to see Oil at $200, where might we expect Gold and Silver to be relative to the price of Oil given similar ratios to the peak in January 1980?

The price of Silver at a ratio of 1.2 to Oil with Oil at $200 =  $240
The price of Gold at a ratio of 20.77 to Oil with Oil at $200 =  $4154

Of course Silver's peak in January 1980 was also partially the result of the Hunt Brothers attempt to corner the market, perhaps a fairer ratio to use would be that seen later in October 1980 which was a Silver/Oil ratio of .56, which would translate to a Silver price of $112 with the same ratio and Oil at $200.

Of course it's just speculation that Gold/Silver will reach exactly the same ratios as seen in 1980 or that Oil will reach $200 in the near future, however the Middle East unrest seems far from over and I think an energy crisis developing and the prices mentioned above being reached are a definite possibility. Bullion Baron
If we got the suggested $250 per barrel for oil and the Gold/Oil ratio headed back to 20.77 then we'd be looking at a spot price over US$5000. Even if Gold remained around the average ratio (against WTI) we've seen over the past 40 years (see chart below, from a previous post of mine), then we'd still be looking at a spot price of almost US$4000.

Can you just imagine the performance of the local Gold price if we were to see the AUD crumble against the USD as this energy crisis played out (see my post from mid November for more on this)? Although if we were to see a rocketing oil price I can't help but assume that western economies would have to return to QE to support their economies (which may result in a more stable or rising AUD).

An oil price of $250 is certainly not out of the question in the short term. In fact it was only in Chris Martenson's video that I posted the other day where he suggests that a doubling/tripling of oil over the next few years is likely without even considering a major supply disruption.

In 1979 the price of oil more than doubled in the last 9 months of the year, peaked in mid 1980 and then remained near those highs for 18 months following.

A user on Silver Stackers pointed out a new ETF on the ASX (launched 2 weeks ago) which which provides Australian traders/investors with direct exposure to the WTI price of oil (hedged A$, much like QAU provides access to US priced Gold). You can read more about the product here.

While I do think Oil and Gold are ultimately heading higher, short term influences can impact heavily on either of their prices. The situation in Europe continues to cast a shadow of doubt over short term price action. If we see the Eurozone break apart rather than try to borrow and print their way out then we could be in for a storm which absolutely decimates asset prices including Gold/Oil. However, recent central bank co-ordination and efforts would suggest they do not want to go down this devastating route.

One of the themes presented at the recent Sydney Gold Symposium (sorry, can't recall who it was) was that timing is critical to play this rolling crisis profitably if you are trading short term and they were dead right. You could buy the right long term assets, but lose your shirt short term if you aren't able to ride out the volatility. Personally this is why I prefer to have most of my exposure to the metals unleveraged and am ready to ride out any short term noise... because in my opinion Gold is heading higher in the medium term, much higher.


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Wednesday, November 30, 2011

Exponential Money Growth vs Peak Oil/Resources

The below embedded video was definitely worth watching and sharing. This is the sort of video that should connect even with those who know nothing about money or energy. It's impeccably presented as those of you have already seen Chris Martenson's crash course have probably come to expect this.

Chris Martenson's initial presentation is 40 minutes and then he spends a further 30 minutes answering questions from the crowd (worth watching all).

In his presentation he focuses on the so-called three “Es”: Economy, Energy and Environment. He argues that at this point in time it is no longer possible to view either one of those topics separately from one another.

Since all our money is loaned onto existence, our economy has to grow exponentially. Martenson proves this point empirically by showing a 99.9% fit of the actual growth curve of the last 40 years to an exponential curve. If we wanted to continue on this path, our debt load would have to double again over the next 10 years. By continually increasing our debt relative to GDP we are making the assumption that our future will always be wealthier than our past. He believes that this assumption is flawed and that the debt loads are already unmanageable.

Martenson explains how exponential growth works and why it is so scary that our economy is based on it. In an example he illustrates how unimaginably fast things speed up towards the end of an exponential curve. He shows that an exponential chart can be found in every one of the three “E’s” for instance in GDP growth, oil production, water use or species extinction. Due to the natural limitations on resources, Martenson comes to the conclusion that we are facing a serious energy crisis.

What Martenson discusses in the presentation is not particularly new, he has covered most of it before and of course there are others across the theme as well.

I recently finished reading 'Confronting Collapse' by Michael Ruppert. In the book Ruppert provides a huge array of facts and figures (and finally an action plan) that deal with the impending crisis we face having passed peak oil. He goes on to write about our monetary system which is reliant on infinite growth (similarly explained by Martenson in the above video), but is used for purchasing finite resources. This is not a sustainable situation.

Ruppert povides a compelling case, but I think the most convincing aspect that we will face an energy/oil crisis in coming years is not all the reserve, production & consumption data that he provides in the book, but the actions of the Unites States government.

Over the last decade the US has invaded country after country, all of whom have had an abundance of oil & energy resources or have been located in a strategically important position for the sake of securing/transporting it. Chris Martenson says in the video above that his country is not talking about oil, but I would suggest discussions and action are already taking place, they are just not doing so in the public eye. It's a case of watch what they do, not what they say.

The speed at which peak oil should play a larger part in our investment themes could vary greatly based on the financial crisis that we face today. If we see another debt/monetary based collapse (continuation of the one that started in 2008) which resulted in return to a Gold standard we could see economic growth collapse and then crawl to a much slower growth rate as participating countries are restrained by their Gold reserves. 

Even if we don't see return to a money system backed by tangible resources, the deflationary debt collapse we face in Europe, Japan, the United States and elsewhere is likely to be the precursor to a global depression (which in my opinion we are already in, but may take 10 years to look back and realise). Such events could see the use of oil/energy drop off dramatically and prolong the need for immediate action.

Chris Martenson certainly calls it well at the start of the above clip, "We live in some of the most extraodinarily interesting times and it's my view they are going to become more interesting". I agree wholeheartedly.


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