Gold has traded in a range between $1,713 and $1,723 so far today…as of 6:45 am Pacific, bullion is flat at $1,715…Silver is 20 cents higher at $33.64…Copper is off a penny at $3.61…Crude Oil has gained $1.32 to $90.23 while the U.S. Dollar Index is hurting, down one-fifth of a point to 79.96…
China’s Economic Recovery Gaining Traction
The mainstream media is so focused on scaring Americans with the so-called “Fiscal Cliff”, it’s missing an important good news story unfolding in China…the pace of China’s manufacturing activity quickened for the first time in 13 months in November, with the final reading for the HSBC Purchasing Managers’ Survey (PMI) rising to 50.5 after seven quarters of slowing economic growth…China’s economic health has improved since September, with an array of indicators from factory output to retail sales and investment showing Beijing’s pro-growth policies are starting to gain traction…analysts said the end of a destocking cycle and a greater pace of investment would keep driving up domestic demand, and extend the recovery trend into the final quarter of this year…smaller and private firms, however, are still pleading for greater access to credit and investment incentives, which have gone disproportionately to the state sector, particularly since the financial crisis of 2008-2009…
China’s National Development and Reform Commission (NDRC) approved new metro rail and railway projects amounting to Rmb 160 billion in November, after approving metro rail projects of Rmb 843 billion in September…those projects will be able to support fixed asset investment growth for the years to follow…China’s premier-in-waiting, Li Keqiang, stated the other day that his government’s priorities going forward will be urbanization and modernization of infrastructure which will drive GDP and the construction, materials, property and consumptions sectors…
Codelco, the world’s largest Copper producer, said there has been “sound and solid” interest from Chinese customers amid signs the country’s growth outlook is improving… “There’s a lot of optimism regarding Copper demand going forward,” Chief Executive Officer Thomas Keller stated in an interview from Shanghai…
Silver Update – Short-Term & Long-Term Charts
Silver is looking strong and continues to outperform Gold – it actually gained 21 cents last week while Gold fell $37 an ounce or 2%…the $33.50 area has proven to be strong support for Silver recently (it has two other very strong support bands between $30 and $32), and $33.50 is also just above the rising EMA-20 which is currently sitting at $33.21…below is a 9-month daily chart from John…after some strong selling pressure most of October and into early November, buying pressure has been increasing significantly recently…at 56%, RSI(14) is currently in decline but has a good chance of finding support at or just above the 50 level…next major resistance is $35.50…
Silver – Long-Term Chart
Based on historical trends, there’s an excellent chance that RSI(2) could once again climb into overbought territory for an extended period in the near future, so this bodes well for a potential Silver rally through the end of the year and into the first quarter of 2013…”Wave 5″ continues to progress well and the ultimate Fibonacci target (no timeline) is $78 an ounce…
Asian markets were mixed overnight…Japan’s Nikkei share average edged up to a seven-month closing high, helped by futures buying as a weaker yen and improved Chinese manufacturing data encouraged investors…China’s Shanghai Composite fell another 20 points to close near a four-year low at 1958…European markets are strong this morning while the Dow is up 47 points through the first 15 minutes of trading…the TSX and the Venture Exchange are both off slightly…
Discovery Ventures (DVN, TSX-V)
Discovery Ventures (DVN, TSX-V) has performed exceedingly well in a challenging market environment over the past couple of months, gaining more than 50% since the beginning of October on a massive increase in volume…the company’s go-to project is in the heart of the Slocan Valley in southeast British Columbia, about 8 miles north of Rainbow Resources‘ Gold Viking Property, where it has inked a deal to acquire the Willa deposit (Au, Cu, Ag) with the intention of fast-tracking production…and DVN isn’t wasting any time in moving forward…the company very quickly closed $2 million in financing at 25 cents last week, and then this morning announced it has added another 1.7 million units ($250,000) to that financing…this is certainly a situation for our readers to watch closely going into 2013…if Rainbow is able to make some sort of a discovery at Gold Viking, this will only add to the growing interest in this area with the possibility of the Willa (which has plenty of mining infrastructure) going into production…below is an updated DVN chart from John…as always, perform your own due diligence…DVN is off a penny at 30 cents as of 6:45 am Pacific…
Cascadero Copper (CCD, TSX-V)
We’ve been keeping a close eye on Cascadero Copper (CCD, TSX-V) in recent months as we’re impressed with the company’s assets in Argentina…a sharp increase in volume is often an early indicator of an impending move, and we’ve seen record volume in CCD recently including two days (Oct. 18 and Nov. 19) when it traded nearly 5 million shares each day…in our view, “smart money” has been loading up on this play which is also evident from private placements the company has recently completed…below is an updated chart 2.5-year weekly chart from John after CCD closed Friday at 14 cents…as always, perform your own due diligence…
Richmont Mines (RIC, TSX)
Not surprisingly, Richmont Mines (RIC, TSX) took a pounding Friday when it announced the closure of its Francoeur Mine and a winding down of exploration at Wasamac…that was investors looking at their rear-view mirrors…in our view the worst is behind Richmont and those tough decisions show that CEO Paul Carmel has the smarts and the boldness to do what’s necessary to move this company forward…Richmont still has two operating mines and it’s book value exceeds $3 a share…below is a chart from John that shows two important support levels – $2.80, and a band between $1.90 and $2.30…the stock closed Friday at $2.82 and is off 4 pennies in early trading this morning at $2.78…
Note: John, Jon and Terry do not hold positions in DVN, CCD or RIC…
Ben’s Friend: QE IV Is Coming!
Quantitative Easing III, the much-talked-about “QE-Infinity” initiative announced in September, is still so new that it barely shows up as a blip on a chart of the Federal Reserve’s monetary base.
This $40-billion-a-month, mortgage-backed-securities-buying program is not yet a pimple compared to the metastasized monetary malignancies that were QE I and QE II.
And yet, it looks like QE IV is already on the agenda at the central bank’s monetary policy-making arm, the Federal Open Market Committee. After all, the Fed’s “Operation Twist” — the $45 billion-a-month swapping of short-term securities for longer-term debt — is set to go away at year-end.
As Bush White House economic adviser Lawrence Lindsey said, “At $85 billion a month in purchases, the Fed is buying the entire deficit.”
What would happen if we “just” went back to the Fed buying $40 billion in securities a month? According to the man who many say has a direct pipeline to the inside thinking at the Fed, we might not have a chance to find out.
The Wall Street Journal’s chief economics correspondent, Jon Hilsenrath, is thought by many to have a pretty good pipeline to Ben Bernanke and others at the Fed.
In July — weeks before QE III was announced —Stephen Roach, Yale professor and former chairman of Morgan Stanley Asia, assured Bloomberg TV viewers that it was coming, quipping,
“They [The Fed] have gone about their usual pre-FOMC leak frenzy where they talk to this reporter and that reporter. Jon Hilsenrath is actually the chairman of the Fed. When he writes something in the Wall Street Journal, Bernanke has no choice but to deliver on what he wrote.
“…The point is, when they plant a story in the Wall Street Journal, and this story has been planted. Jon Hilsenrath is the weed that grows … the guy has a perfect track record …”
Now in a Nov. 28 piece headlined, “Fed Stimulus Likely in 2013: Bond Buying Is Expected to Continue in Effort to Spur Slow-Growing Economy,” the Fed’s go-to journalist suggests that the central bank intends to kick its money-printing machinery into overdrive in 2013 with QE IV.
The column can be read to telegraph that a “go” decision could be made at the Fed’s next meeting on Dec. 11-12, with Hilsenrath describing it as a “critical issue” on the agenda for the meeting:
“The most pressing (issue) is whether to move forward with bond-buying programs in which the Fed is accumulating immense stockpiles of long-term mortgage-backed securities and Treasury bonds. The bond-purchase programs are meant to drive down borrowing costs, and in turn boost the prices of assets like stocks and homes, and stimulate hiring, spending and investment.
“The Fed signaled strongly in September that it was inclined to sustain these programs. And markets have anticipated some combination of bond purchases will continue next year. Several Fed policy-makers have suggested in recent interviews and public speeches that they support more bond-buying. At their meeting next month, officials will debate extending the programs and hear staff presentations on their impact.”
That’s pretty definitive in the view of experienced Wall Street hands like Dr. Ed Yardeni, the president of Yardeni Research, who was among the first to correctly identify it as QE IV.
His reaction to the WSJ column noted that, despite the Fiscal Cliff, Washington will continue to run “insane” deficits and that “the Fed and other central banks will continue to enable this insanity by purchasing lots of U.S. Treasuries.”
Consider the historical blow-off inflations from France during the Reign of Terror, to Weimar Germany, and the more-recent episodes in banana republics.
Those who have studied them have often wondered how a little inflation … just a bit of money-printing … only a modest amount of debt monetization … ever gets out of hand and becomes a currency-collapsing event.
In such episodes, it generally turns out that the monetary authorities have believed … until it’s far too late … that they could rein in the destructive forces they unleashed.
Can the Fed Ever Return the Monetary Genie to the Bottle?
The results of money-printing binges can be delayed. A reckoning can sometimes be put off for a while. But it is magical thinking to believe that the Fed can buy $900 billion of toxic mortgage securities from the influential banks and $1 trillion in U.S. government bonds, with money it has created of thin air, and that there will be no economic consequences.
Only in Washington — and in certain Princeton and other academic economic circles — can such fantasies be entertained.
Speaking of Washington, now that we know about the monetary authorities’ magical thinking, what about the fiscal authorities and their fantasies?
I’m sorry to report that they are every bit as dangerously unhinged from reality.
Exhibit A would be Tim Geithner. The Treasury secretary recently appeared on Bloomberg TV urging that the statutory ceiling on federal debt be eliminated entirely.
“The sooner the better,” said Geithner.
Yours for Wealth and Liberty,