Kirsty Hogg Interviews David Morgan - Facebook Group Mailbag Questions

David Morgan takes the time to discuss the silver market and answers a couple of mailbag questions from the Face book Groups: "Why Buy Gold &Silver?" and "Silverbugs".  David discusses his newsletter, The Morgan Report, explains why he's happy to be involved with Silver Saver and predicts the silver price for year-end. 

Darwin Resources: Virgin Property In Peru: Suriloma Project

I caught up with Graham Carman, President and CEO of Darwin Resources.  We sat down at the Mining Interactive head office in downtown Vancouver to discuss the latest developments at Darwin Resources. 

Graham shares with us why he got into this sector and how he recently teamed up with his veteran junior mining team to form Darwin Resources in his familiar "stomping ground" of Peru.  Darwin Resources boasts a never-been-drilled property in La Libertad region of Peru, Suriloma, that has many people interested and excited in the mineral exploration sector.

Darwin Resources is listed on theTSX-V: DAR
Follow Darwin Resources on Twitter: @DarwinResources
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Is There Hope for the Junior Mining Sector? Kirsty Hogg Interviews Mickey Fulp

Kirsty Hogg interviews Mickey Fulp, the Mercenary Geologist on physical gold ownership, the field of geology as well as a short term outlook on the junior mining sector. 

For a free subscription to Mickey's website, visit: http://www.mercenarygeologist.com

A Good Time to Buy Gold, by Adrian Douglas

Adrian Douglas, Chairman of GATA and author and founder of Market Force Analysis has given me permission to republish this excellent article titled: “A Good Time To Buy Gold”. I hope you enjoy reading it as much as I did.  I have a deep respect for Adrian's work and analysis on the gold and silver market.  He has received accolades from John Embry and Eric Sprott about his unique algorithm and methodology for analyzing the precious metals markets, and the conclusions he's drawn about the suppression of the price of gold and silver.  When Adrian goes out of his way to send a specific message like this one, I urge everyone to read it.


A Good Time to Buy Gold, By Adrian Douglas

Many investors are unsure as to whether gold is a good investment and if gold will continue its rise in price that started twelve years ago. Those who have not invested in precious metals may well be thinking that their investment is too late. Other investors who hold the metal are wondering if gold will fail to reach new highs.

A reassurance that precious metals are nowhere near their potential is that the world has in no way started to resolve the massive debt burden that has been created. Precious metals are one of the few things that can be purchased that have no counter party risk. I prefer to look at precious metals from the different view point that paper money is being debased at an alarming rate due to excessive issuance of paper and it is the precious metals that are not altered. By holding precious metals, one is able to preserve purchasing power. In fact, when panic sets in, the rush for precious metals will actually increase purchasing power.

It is important that investors understand the function of gold. Gold is unlike any other commodity that exists; it has the unique property of having no other use except as being held for intrinsic value. Almost all the gold ever mined in the world is still available above ground. This is the purpose of gold in that it is held as an asset. Some gold may be used for jewelry or electronics, but this is a small portion of the available gold and, in any case, it is always recycled because it is so valuable. The most important thing to understand about the mechanism of gold buying and selling is that it is central to the world of finance. If there were to be a drought in the U.S., reducing grain harvests, the price of grain would rise. Gold, however, is not consumed, and is unaffected by seasonal variations.  Furthermore, the total stock of gold is large compared to the yearly addition which makes the supply extremely stable.

In searching for the rationale for investing in gold, there is undisputable proof as to why gold is the most valuable asset on earth. This evidence comes from the central banks themselves. The central banks only hold two assets; one is paper assets, the second is gold. They do not hold soybeans, oil, orange juice, or any other asset. The only intrinsic asset they hold is gold. The central banks prefer to operate in terms of paper currency. This gives flexibility to expand their provision of credit far beyond the ability to repay it. When the cycle of money expansion comes to an inevitable collapse, the central banks must return to the ultimate money of gold. Once excessive credit has been eliminated or reduced, the cycle of credit expansion will begin again. This is how the central banks operate. We have just entered a cycle of excessive credit expansion and so the massive credit excess must now be eliminated. They must also return the gold that has been leased on a leveraged basis. This is the environment in which precious metals reach their potential. All around the world, central banks are increasing their holdings of gold. The central banks are the masters of the universe when dealing with the world’s finances. When the central banks are owners of only paper money and gold, it is clear that following in their footsteps must be the most intelligent strategy. The central banks try to slow down the move into gold by creating sudden and violent sell-offs. Such take downs are effective against leveraged traders but not those who are serious buyers of gold. While the central banks are net buyers of gold, we can be certain that the gold market will continue higher. As I write this article, gold is trading at $1552. This is likely to be a turning point as gold continues higher. As stated previously, it is paper money that is losing purchasing power rather than gold increasing in value. This is assured by the fact that central banks are showing a preference for gold over paper money. This preference is in its infancy and the equilibrium has a long way to go to reach its true balance.

By: Adrian Douglas

June 28, 2012

www.marketforceanalysis.com

Infation Vs. Deflation. James Rickards and Harry Dent's Debate at Casey Research Conference

Because I lean to the inflation side of the debate in the most terribly biased way possible, I have shamelessly indulged my tendencies and summarized and paraphrased only James Rickards presentation.  I personally love the art of debate and enjoyed listening to Mr. Rickards as he effortlessly explains complex issues to a largely non-academic and lay-investor audience. The irony is not lost on me that I only quoted Jim.

This part of the debate opens where James Rickards replies to Mauldin’s preamble question “What makes you think the Fed will get out of control?”  Rickards explains that the Fed will unintentionally destroy the currency as they don’t understand the statistical properties of risk.  He used this very useful analogy to demonstrate the Fed’s actions in pursuing more money printing:  The difference between dialing a thermostat and working in a nuclear reactor.  If the house is too warm, you can dial the thermostat down; if it’s too cold you can dial it up.  You can dial a nuclear reactor up or down also, but if you get it wrong you have a catastrophic outcome. Here lies the problem: The Fed thinks their dealing with a thermostat, so they’ll act in good faith but they’re actually playing with a nuclear reactor.  He goes onto say there cannot be deflation the way Harry Dent presents it.  Rickards agrees that deflation is the natural state of the world and left to its own devices, the world would be in a highly deflationary period and he added, “That might not be such a bad thing in terms of future growth”.  He gave two reasons why deflation will not happen:

The first reason: Deflation destroys the banking system.  The Fed was created to prop up the banks and always acts in accordance to support banks.   Some might say with deflation the nominal value of debt goes up and because the banks are creditors, this would be advantageous to them. Rickards went onto say that it’s good for them up until the moment of default. The problem is the nominal value of the debt goes up so high that people default. Default is an instantaneous wealth transfer from the creditor to the debtor, so the disadvantage will then lie with the creditor.  The banks will be destroyed in this case and the Fed simply won’t allow this to happen.

The second reason deflation will not take place is the government will not allow untaxed capital gains.  Rickards likens it to everyone getting a raise in salary.  He said if we have deflation of the kind Harry is presenting, the price of goods and services will go down and at the same nominal income, the outcome will be increased wealth for all. It’s just like getting a pay rise with one important difference.  The government can tax the increased income on a raise, but they haven’t figured out how to tax the deflation. So there are no capital gains in deflationary wealth and that’s another reason why the Fed will not allow deflation. An important thinking point here is that not only do the Fed and the government not oppose inflation, but they are solely responsible for its existence through ongoing debt-backed money creation.

Rickards response to Mauldin’s question if he thinks the government has the “cajones” to put 10 trillion $ more on their balance sheet over 3 or 4 years. James replies there’s a limit to what the Fed can do and what Harry chooses to ignore is that the Fed will soon become a relatively minor player in all this. The cleanest balance sheet in the world and the one that will expand is the IMF. They have the capacity to create SDR’s in unlimited quantities. So the next time the physical crises reaches an acute stage, they’ll just flood the world with SDR’s so you’ll get your 10’s and Trillions to prevent what Harry’s describing. Rickards acknowledged that Harry has got the natural dynamic right in terms of assets bubbles need to be deflated and people in distress will need to sell assets, but he points out what Harry is missing is the "force majeure". He’s underestimating the capacity of governments and their blunt force to dictate the outcome and if the Fed can’t do it, the IMF can and will and already is with its own printing press.

You can listen to the rest of the video for Harry Dent’s response to James.  I personally didn’t have the patience to wade through the ranting, curse words and emotionally charged language of Harry’s presentation.

Interview: David Morgan. Why Invest In Silver?

Kirsty Hogg from GoldBullReport interviews David Morgan, the Silver Guru about what is going on with silver today as well as what we can expect in 2013. David also answers the question; "Why invest in silver?". 

Silver, China and Graphite – New York Hard Assets Conference Review

I attended New York Hard Assets, May 14th and 15th and found there was a notable decline in enthusiasm and attendance from the previous year. The exhibit hall crowd seemed thin on both days, and the main speaker hall attracted the most attention. It seems when the markets are down, people seek a guru for guidance and that explains why most people made a beeline for the keynote presentations and shied away from the exhibitors. In my opinion, this is a time when thorough due diligence before a show will pinpoint interesting and undervalued companies. Then we can visit selected booths and ask questions with the CEO’s full and undivided attention. Meeting face-to face is a valuable and underused component in a speculator’s due diligence strategy.  I managed to hear some speaker presentations, and here are three who caught my attention:

Eric Sprott, of Sprott Asset Management, gave a talk entitled: “Mania, Manipulation and Meltdown”. Eric talked about how the markets are manipulated and applauded GATA’s work in this arena. He explained that central banks and governments surreptitiously suppress the price of gold as they don’t want the price of gold to increase to an honest level. He pointed out that the price of gold in any fiat currency reflects their inflated weakness. Eric reminded us that at this time last year; silver was at a near-record 49.50 and gold reached $1900 in August. Despite the fact that both metals have been in a 12 month correction, he predicted that this is temporary and both metals will reach new heights this year and beyond. He stressed that there will be no recovery in the US Markets and encouraged people to look at what is happening in Europe as well as the amount of money printing going on. He asserted that both gold and silver will ultimately shine the brightest and encouraged everyone to “stay the course”. He still refers to silver as the "investment of the decade" and to gold as the "ultimate currency".


Gordon Chang, Forbes, gave insight on why China is not booming. He warned the Chinese economy is faltering and is much worse than official numbers portray. The biggest threat is inflation, in addition to a property bubble, a volatile stock market and capital flight issues. Gordon mentioned the heavy export component in the Chinese economy and predicted a decline with the world going into a “double dip downturn”. He suggested a country with a large industrial manufacturing and export portion to its economy has the most to lose during a depression; much like the United States in the 1930s. Because of this, he thinks that China will suffer the most in the coming depression.

Gordon said that with China’s fragile economic state coupled with increasing mass insurrections and protests (some very violent) against the communist regime, anything can happen. He believes there will be a failure in the Chinese regime in a very short period. Gordon also pointed out the “One Child Policy” has problematic ramifications when considering that a single child must support two aging parents plus grandparents in a society with no social safety net.


Mickey Fulp, The Mercenary Geologist gave a compelling presentation entitled, “Graphite: The Newest Next Big Thing”. He pointed out that when he started looking into graphite’s potential over a year ago, there were only two established companies listed on the Toronto Venture Exchange in graphite; now, there are over 50.

He stated that graphite prices have risen due to strong demand, lack of investment in new mines and export restrictions by China (China controls 75% of production. Graphite has major industrial uses including: Refractories 35%, Batteries/Storage 25%, Lubricant Crucibles 10%, Foundries 7%, Pencils 4% and Other 19%.

Mickey thinks that graphite “is an up-and-coming semi-metal that has very strong upside not only for the short-term but the long-term.”

Despite a huge increase in the number of companies with a graphite play, there are “few contenders and many pretenders”, Mickey said. These are the companies that he called the “cream of the crop” based on his key criteria of project (in particular, safe geopolitics, good infrastructure, high grade, favorable metallurgy, and low operating costs), share structure and people: Flinders Resources, Focus Graphite and Northern Graphite.

Even though markets are getting hammered right now and the general sentiment in the junior resource sector is quite glum, I came away from this show with new knowledge and plan to take a hard look at specific graphite companies. I will adjust my investment strategy to use these volatile times to choose entry points on some great opportunities. And yes, I remain long on both gold and silver as a hedge against inflation and fiat currencies. See you at the upcoming Vancouver Cambridge House Investors Conference June 3rd and 4th!

Kirsty Hogg