-- Published: Friday, 24 July 2015 | Print | Disqus
By Steve St. Angelo, SRSrocco Report
Investors worried about the coming explosions in the financial system purchased record numbers of Gold Eagles in July. Not only are July sales of Gold Eagles the highest in 2015, they surpass all monthly totals for the past two years…. and we still have another week remaining.
The reason for the big surge in the U.S. Mint’s Gold Eagle sales is due to the increasing number of financial time bombs that are now set to go off in the future. Financial contagion stemming from a Greek default and possible exit from the European Union triggered increased buying of Gold Eagles in June.
Sales of Gold Eagles were a measly 21,500 oz in May. However, this picked up significantly towards the latter part of June as the financial situation in Greece became more dire. Gold Eagle sales in June jumped more than three times the rate compared to the prior month reaching 76,000 oz. But, this was just a warm-up for the further spike of demand in July.
If we look at the chart below, we can see that Gold Eagle sales for the month of July are 126,500 oz. The U.S. Mint updated their figures yesterday adding another 8,000 oz sold in one day.
As I mentioned in a past interview and in my recently released THE SILVER CHART REPORT, investors tend to buy more silver as the price declines, while spikes in physical gold buying occurs during financial turmoil. The evidence is shown in the next chart:
The price of gold fell from a high of $1,307 in January to a low of $1,148 in March, but Gold Eagle sales were only 46,500 oz in March. As the price of gold moved higher to $1,220 and then reversed to a low of $1,171 in June, Gold Eagle sales shot up to 76,000 oz from 21,500 the prior month.
Thus, the increased demand for Gold Eagles in June was a reflection of the possible financial instability stemming from a Greek default and exit of the European Union. Even though the price of gold continues to trade lower, I believe the motivation for the increased demand of Gold Eagles this month (126,500 oz) is due more to financial turmoil than the lower price.
Financial Time Bombs All Around Us
The world is not setting on top of the most Financial Time Bombs in history. Not only do we have the Greek situation in Europe, but Americans now get do deal with the probable default of Puerto Rico’s Bonds. Why is this such a big deal? Well, according to the recent article, UBS’s Puerto Rico Bond Funds Implode, “Collateral Value” Drops to Zero, Investors Screwed:
“We believe that the probability of default is approaching 100 percent, and that losses given default are substantial,” Moody’s wrote on Wednesday about Puerto Rico’s $72 billion in bonds that were stuffed into numerous conservative-sounding bond funds spread across America’s retirement portfolios.
Chatting with some of the folks in the industry, I found out that certain Municipal Bond Funds are heavily weighted towards Puerto Rico’s bonds as they have a higher yield than other municipal issuers. Furthermore, American investors purchasing Puerto Rico bonds are tax-exempt compared to most other state issued bonds. Basically, Mom and Pop Americans own Puerto Rico’s Disaster without even knowing it. Forget Greece, this is right in front of our faces.
So, investors and Bond Funds chasing higher yields over the past several years are now holding onto $72 billion worth of paper garbage. And… this is just the tip of Time Bomb Icebergs.
Let’s not forget this headline, Pension Shocker: Plans Face $2 Trillion Shortfall, Moody’s Says:
Moody’s, which in 2013 began using a lower rate than governments do to calculate future liabilities, has estimated that the 25 largest U.S. public pensions alone have $2 trillion less than they need. Cincinnati and Minneapolis are among cities Moody’s has since downgraded.
In short: America is facing a fiscal crisis at the state and local government level and it appears as though at least one ratings agency is no longer willing to suspend disbelief by allowing officials to utilize profoundly unrealistic return assumptions in the calculation of liabilities. This means downgrades and as for what comes next……
Of course, the supposed $2 trillion pension shortfall will not be impacted if the U.S. and Global economies fall off a cliff at the latter part of this year…. only kidding here. I would imagine this will turn into a huge contagion along with most of the highly leveraged debt propping up the markets.
Then we had this nice TIDBIT show up yesterday on Zerohedge, In Latest Market Rigging Scandal, Wall Street Now Sued For Treasury Market Manipulation:
In short, the banks simply conspired to keep the spread between the when issued price and the price at auction as wide as possible, thus inflating their profits at the expense of everyone else where “everyone else” includes institutional investors and hedge funds all the way down to retirees and Main Street in general….
…. And as for the Treasury market, well, it was cornered long ago by the Fed and HFT, which means it is now infintely more dangerous than it ever was when it was beholden to mortal manipulators and carbon-based conspirators.
Just another example of BANKS GONE BAD. Do you all remember this chart from my earlier article:
Of the $128 billion in fines and settlements paid by the top banks in the world since 2009, U.S. Banks were place in the top three. Nothing like being the best in one’s category. Furthermore, I went on to say that the $128 billion in bank fines would have paid for all global silver production since 2008. Thus, it pays the banks dearly to commit fraud.
The world is sitting on top of the biggest financial Ponzi scheme in history. Unfortunately, you wouldn’t know it from the recent price action in the precious metals. However, this is not a long-term phenomenon. While some precious metal investors are questioning their gold and silver investments, the fundamentals are better than ever.
The downside to the prices of gold and silver are limited, but the coming Global Financial Enema is most certainly not It’s just getting started.
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-- Published: Friday, 24 July 2015 | E-Mail | Print | Source: GoldSeek.com