Servias Ministries Blog

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I wrote last week of the expected takedown of gold as early as Friday, maybe Monday.  It appears that the central planners have figured out that a quick smackdown will be met with immediate increased buying in the physical market.  A slow decline causes investors to deal with sustained emotions of loss.  How much pain can one take?  The offset is the belief that the current environment is only temporary and that requires commitment.

The Baltic Dry Index (BDI) is a number issued daily by the London-based Baltic Exchange. Not restricted to Baltic Sea countries, the index provides "an assessment of the price of moving the major raw materials by sea. Taking in 23 shipping routes measured on a timecharter basis, the index covers Handysize, Supramax, Panamax, and Capesize dry bulk carriers carrying a range of commodities including coal, iron ore and grain."

The BDI has never recovered from the 2008 slide.  This ought to tell us that the stock markets around the globe do not represent consumer demand for products.

Source: http://www.bloomberg.com/quote/BDIY:IND/chart

If the markets reflected true demand for goods, they would be down well over 50% of their current levels.  The central banks continue to “goose” the numbers hoping that consumers will be convinced of a real recovery but that is not happening.  23% unemployment in the U.S. is a constant reminder that all is not well.  The BDI is not a popular index by the media so it has no focus placed on it by central planners.  Instead, gold & silver continue to be where the battles are being fought.  The mainstream media accommodates those who want to depress the price and this has been the case for the last twelve years.  The markets have a serious disconnect with main street reality.

Interest rate suppression has caused investors to chase returns.  Junk bonds are now yielding 5%.  In 2008 junk bond yields were 20%.  There is no way that a high risk bond should yield only 5%!

Gold buying volumes in China year over year are up four to five times.  India is also a big purchaser.  And the price of gold is declining?  During the last smackdown there was the sudden appearance of a naked short sell order for 400 tons of gold.  Who has 400 tons of gold?  Goldman Sachs put the order in.  This should be investigated but I seriously doubt that anyone will take the “perp walk”.  These acts by central planners indicates desperation at the highest levels.

“The stock averages are over-bought, over-valued, over-loved and at record highs.  Margin debt is sky-high, showing that there is a great deal of speculation built into this market.” says Richard Russell, a seasoned investment newsletter writer.  I agree.

Power Consumption in China is no longer on a growth pattern:

If their economic engine isn’t supporting global growth, who is?  This virtual reality being promoted in the markets cannot last indefinitely.  When the curtain is finally pulled back, I would not want to be on the wrong side of the gold & silver market.  The foundation of the shell game is deceit and a slight of hand where your eyes are misled by distraction.  We are in the midst of a “super bubble” and the inside of the bubble looks calm… until it bursts.

As I mentioned before, gold could test the $1,260 area with silver dipping below $20 in the paper market.  Clearly the physical market will not observe these prices and will simply increase premiums if and when the price drop occurs.

The central planners are trying to make the markets look robust and profitable under the current fiat system.  Their goal is to break the emotional back of the gold investors and traders.  In the meantime, the BRIC countries continue to accumulate gold:

China gold imports to keep growing after hitting record high.

Net gold flows from Hong Kong to China, the world’s No. 2 gold consumer after India, jumped to 223.519 tonnes in March from 97.106 tonnes in February, smashing a previous record of 114.372 tonnes in December, data from the Hong Kong Census and Statistics Department showed on Tuesday (www.censtatd.gov).

See: http://uk.reuters.com/article/2013/05/08/uk-hongkong-china-gold-idUKBRE94702C20130508

Gold Imports by India Seen Topping 100 Tons for a Second Month

Gold imports by India, the world’s largest consumer, are set to exceed 100 metric tons for a second month in May as jewelers rush to beat central bank curbs on overseas bullion purchases by banks, a refiner said.

See: http://www.bloomberg.com/news/2013-05-08/gold-imports-by-india-seen-topping-100-tons-for-a-second-month.html

The Kings of the East continue the wealth transfer while we focus on being entertained.

Columbia Economist Dr. Jeffrey Sachs speaks candidly

His statements include:  Settlements without much effect.  $602 Million fine and the CEO takes home a $1.4 Billion paycheck.  Massive bonuses, massive campaign contributions, massive fraud.  Upside, no downside for CEO’s who have Cayman Island ties.  He indicates corruption is independent of the political parties.

From a Biblical point of view.  What happened to “Truth in Love”?  Our focus is to promote lawfulness for all of mankind.  The Law must have Love at its primary foundation.  Dr. Sachs makes a convincing argument that massive corruption and the the complete failure of the U.S. Legal system is alienating other countries from the use of the U.S. Dollar-centric system.  The anger and vulnerability of other countries is coming to the surface.

Sachs ends with the “love of money” criticism of the Wall Street elite.  As you know, we are apolitical.  However, when an economist with impeccable credentials voices the same concerns about the current system lawlessness, we must allow his comments to be heard.  You must judge the veracity yourself.

There appears to be a lot of political pressure on the U.S. Bureau of Labor Statistics to show improvement in the economy.  Shadowstats.com reports:

Employment and Unemployment Data Were Nonsense:
The Economy Remains in Serious Trouble

April Unemployment: 7.5% (U.3), 13.9% (U.6), 23.0% (ShadowStats)

Our goal is to express the truth, not only facts that can be misinterpreted.  Politicians use “plausible deniability” to be elected and reelected to office.  With misleading winks and nods they continue a charade.  23% unemployment is more believable to me than 7.5%.  Why?  Look at how many people are on government assistance.  Many of these people are discouraged workers and thus are no longer counted as unemployed in the 7.5% number.  Why doesn’t our economy look like it did back in the 1930’s?  Several decades of infrastructure building along with astronomical Federal & State deficits have changed the landscape but the reality remains the same.  The largest economy in the world is extremely fragile.  The banking system is technically insolvent.  The fiat currency system has ballooned to epic proportions.  In fact, Cyprus depositors in the failed bank should expect to lose 75% or more of their money.  Notice that Cyprus is no longer part of the national news in other countries.  The template for “bail-in” of banks has been implemented and observed by the central planners and it appears that the fallout was minimal.  Who’s next?

Mankind’s idols are about ready to be toppled.  The groves will be cut down in a “Gideon style” manner.  The remnant is being raised up to bring forth fruit around the globe.  The Census has been called to count those who are committed to bringing forth the Kingdom.  This 2nd census is not only about Spiritual warfare but inheritance as well.  “Blessed [are] they which are persecuted for righteousness’ sake: for theirs is the kingdom of heaven.”

The Canadians have figured it out.

Watch the following:

Canada: Conservative 2013 Budget May Allow Banks to Confiscate Customer’s Deposits

See: http://canadiantimes.ca/ct2/index.php/canada/504-conservative-2013-budget-may-allow-banks-to-confiscate-customer-s-deposits

Do you really think the U.S. won’t implement this popular strategy as well?  All the G20 countries are in this together.  Is there really safety in numbers?

I am adjusting my 2nd potential smackdown gold price to the $1,100 to $12,50 range, $18 to $21 for silver.  Clearly, these are paper market spot prices.

My assumption is this.  The markets are managed by the collusion of central banks.  The global economy is slowing.  The drop in precious metals coincided with the announcement that growth in China had slowed down. In Cyprus we see that insured deposits are being used for planned bank resolutions. The Bank of England and Fed recently published an overview of how this would happen.  Investors, uninsured depositors and creditors are the ones at risk.

Uninsured depositors and creditors in the fixed income markets (including your large pension funds) are worried.  If they become too worried, where would the logical place to direct their funds be?  Physical precious metals. From the central planner perspective, the last thing you want to happen is for the price of gold to skyrocket while your are attempting to keep people’s money  in the banks. They don’t want gold to replace bonds as a the safe haven.  If that did happen, the bond market would disintegrate.

So the question becomes: “How do you dissuade people from moving their deposits into gold?”   Make gold look riskier and more dangerous than an FDIC-insured deposit. You do a takedown on the price of gold.  The central planners want to keep the trillion dollar bond market going where nobody is earning any money.  They must use fear of loss as their primary tools to keep the current system in place.  They need to make the bond market and stock market look more stable than the alternative thus they need to make gold look too volatile for the average person to move their wealth from the bank to the precious metals.  They must attack the price of gold and silver and promote fear in those investments at the same time they are promoting safety in fiat currency-based investments.

This is a game of epic proportion.  The central planners will use every tool in their bag of tricks in an attempt to keep the current system afloat.  Their ship is taking on water that cannot be successfully pumped out.  The endgame is at hand.

Central planners have used fiat currency to transfer wealth for their use.  Their endgame is to convert their wealth to sound money and leave the masses holding the bag (containing worthless paper).  By smashing the price of gold down, they want to convince the precious metal holders to sell their positions.  Remember, for every seller there is a buyer.  Using the whipsaw technique in the markets helps the big players free up the underlying asset from the small, fearful trader.

If I am wrong then the price of gold will not move under $1,400 again.  If I am correct in my assumption, another one or two great buying opportunities is ahead for gold, silver, and related stocks.  Only Our Heavenly Father knows for sure.

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As Central Banks continue to buy equities and prop up the market, the hole they are digging continues to deepen.  This is a strong indication of desperation among the money printers of the world.  They are buying stocks with money they printed out of thin air.  This will only temporarily inflate the various stock exchanges and it will end badly.  What this tells us is that the Dow Jones Industrial Average does not reflect true demand for stocks and misleads the average investor on the health of the market.  The investor responds by putting hard earned money in a market that could collapse at any time and cause his life savings to evaporate.

The Cyprus Solution has now been implemented, and they have been hosed.  “The Bank of Cyprus, the island’s largest bank said it has converted 37.5% of deposits exceeding 100,000 Euros into a Class A share, with an additional 22.5% held as a buffer for possible conversion in the future.  The flushing of Cyprus was done to steal massive funds from depositors.  The major percentage of their funds taken were replaced by worthless stock in a bankrupt bank.  Another 30% will be temporarily frozen and held as a deposit. So the amount of money that has been taken from the Cyprus depositors is in all practicality almost their entire accounts. Major depositors funds have now been taken in grand style. ”

What does this mean to you and me?  Depositors have been converted to unsecured “lenders” to the bank.  You may say “I don’t have $100K in a bank.”  If you are part of a pension plan, IRA, or 401K with a broker, you may be at risk.  Why?  They make keep large deposits with a major bank at risk.  The system is so interconnected now that you have no idea of the impact of a “bail-in” to your retirement account.  This exposure is also true for major public corporations’ operating cash whose stock is traded on the NYSE.  The systemic risk is substantial.

Elsewhere in central bank intervention, the paper volumes in the gold paper market do not reflect what is happening in the physical market.  Demand for physical is probably 60% greater than supply.  The offset is an increase in premium over spot price.

What does this suggest?  $3,000 gold and $100 silver is now within view.  As we buy our few ounces each month, we should understand thousands and thousands of others across the globe are doing the same thing.  This will help keep the price firm and support a move upward.  China and Russia continue to be buyers and we may find that April will be an extremely active month for those Sovereigns.

I believe that the central planners are losing the war even though they seem to be winning some of the battles.  Gold & silver stocks have a very favorable leverage position as the price of the underlying metal improves.

The silver market is extremely tight.  The $7 premium when silver is $23 makes up for the paper market.  That would indicate the physical market is moving away from the paper market pricing.  As that continues, the paper market is at risk of being nonfunctional.

People from Cyprus, Iceland, Argentina, and Japan would have had much safer portfolios if they had adequate exposure to the precious metals.  The risk to us all is this:  one extreme is hyperinflation, the other extreme is financial collapse.  Keeping the economy away from those extremes is getting increasingly difficult for the central banks’ manipulative efforts.

Think about it.