Gold Ready for New Highs?

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• Gold Ready for New Highs?
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As I write this mid-day on Monday, gold has addded more than five percent to recover from of its intraday lows 10 days ago. It is about $1,100 at the moment.

It looks like the $1,108 level is one that would signal to technical traders to again jump in to buy. If gold can get and hold that level, and there is a good possibility it will occur this week, then it’s highly likely that gold will generally rise in the short term to pass the early December 2009 all-time high of about $1,212. It won’t go in a straight line, but it could rise so quickly that it will amaze people.

Once gold reaches a new record high, the odds are that it would pause for some profit-taking before again rising up to even higher levels.

There continues to be so much demand for physical gold (versus paper gold contracts) relative to the available supply, that many would-be buyers seeking immediate delivery in the London market are having their orders rejected by every trading house on that exchange.

London is the world’s largest gold trading center, so larger buyers frequently try to place their orders there. The London Bullion Market Exchange trades contracts for physical delivery of gold. In theory, the trading houses on the exchange have the physical gold to deliver on maturing contracts. It does not make sense for these firms to reject orders on which they would make a profit. With multiple reports of great difficulty experienced by buyers seeking delivery of London contracts, a great suspicion is raised that the physical gold may not all be there.

I would not be surprised if, within a month, a two-tier market develops between the physical and the paper gold spot prices. If this happens, the price for physical is almost certain to be significantly higher. The lower price for paper gold contracts reflects the risk that the seller of the contracts would default. Obviously, a buyer who takes custody of physical gold has no risk of seller default.

The recent major snowstorms in the eastern part of the United States have disrupted U.S. Mint production and delivery of gold and silver American Eagles. The U.S. Mint headquarters in Washington, D.C., was closed Feb. 8-11. Both the Philadelphia and West Point, N.Y., mints, the manufacturers of most Eagle products, closed on Feb. 10. The receipt of planchets to make the coins, the production of the coins, and the shipment of finished product were all interrupted. This has made existing supply shortages even more of a problem.

Even better than the positive outlook for gold, silver seems hugely undervalued at today’s levels. Silver fell more than 20 percent from its early December peak, with the result that the gold/silver ratio is now above 70. The long-term forecasts I have seen for this ratio range from about 10 to 50, so all of the analysts behind these projections like silver’s prospects better than gold.

My own long-term expectation is for a gold/silver ratio of about 35 to 40. If our analyses are correct, silver’s price should appreciate far more than that of gold.

It should be no surprise that most of the action in physical metals in the past two weeks has been in the silver market. It is almost unanimously one-way traffic, with buyers eager to buy but almost no liquidation by owners. As a result, premiums are rising and delivery times are stretching out into the future, with some products already having expected delivery of more than one month. Supplies are not yet as tight as they were in late 2008, but they are going in that direction.

Physical gold products are relatively available, though U.S. Buffaloes are up in premium and not that easy to find. Once the price of gold starts to rise to new heights, I anticipate that supplies will dry up, just as we are now experiencing with silver. Between now and the end of March, the precious metals markets could get very exciting.

Patrick A. Heller owns Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” the company’s monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Financial Sense University (www.financialsense.com). His periodic radio interviews on WILS-1320 AM can be heard at http://www.amlansing.com and on the Korelin Economic Report at http://www.kereport.com.

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The big story this week is the continued retreat in the precious metals sector and its effect on bullion-related type gold coins. While gold is down about 1 percent, silver and platinum have eroded by 6 to 7 percent and all are near the bottom of the recent trading range. Trading in this area and lack of strong investment buyer demand has hammered many of the premiums on eagles and double eagles of the generic variety. So far there has been little to no effect on better date issues.

Circulated common date Morgan and Peace dollars remain firm at recent levels due to promotional demand and tight supplies. There has been some minor softening in lower grade S-mint Peace dollars starting with the 1924-S followed by the 1927-S and 1928-S with the 1934-S bringing up the rear. With the exception of 1928-S, only the VG to Fine show decreases, typical of the grades that set promoters buy for their mass marketing programs.

While there has been little price change noted, both varieties of the 1879-CC Morgan are showing strong activity. Also the 1889-CC has advanced in MS-60 through MS-63 and was joined by the 1884-S. ably a good buy.

Proof sets and mint sets remain active and demand lead by the 2008 issues is healthy.

Premiums Decline on Older Gold

Metals stocks and bullion-related coins seem to be signaling some continued weakness in gold and silver. Gold is hammering away at the lower end of its recent trading range with silver following. Thus far the $1,100 level has held. Platinum while off its high is well above recent levels on continued ETF demand.

Older U.S. eagles and double eagles have again lost premium in the most commonly traded grades and there is definite absence of any aggressive buyers in the market. High-grade and small-size issues are moderately active with some pluses and some minuses. Proof gold American Eagles are quiet with few buyers seeking them at current levels. Proof silver Eagles remain strong and business strike 2010 issues have come down in premium slightly in anticipation of large shipments available next week (about when you receive this issue). Demand remains strong for all silver-related bullion issues.

Type coins remain active with very optimistic reports regarding Seated issues of all denominations with special emphasis on scarcer dates and by variety. There is a continued scarcity of all better date Barber issues especially in grades F-12 to EF-40.

Aggressive buyers go for half cents, large cents and three cents with emphasis on the tiny silver issues, which in my opinion are much underpriced in VF to EF grades.

Historic Hoards Echo in Population Reports

There have always been some mixed emotions when it comes to hoards. It’s probably natural if you are a collector or dealer to have a concern about hoards and the possibility that one might appear and cause a sharp decline in the price of a coin you own.

The classic instance of that happening occurred to collectors owning 1903-O Morgan dollars back in 1962. They thought that they had a $1,500 coin only to see it fall to $15 seemingly overnight as hundreds of thousands of examples were released by the Treasury.

It would be hard to convince them that hoards are good.

On the other side of the matter, there is the very real fact that a hoard can make a certain coin much more available and at a much more reasonable price than was previously the case. This allows many collectors who otherwise would never have owned something to be able to acquire it.

The discovery of roughly 5,400 examples of the 1857-S Coronet Head double eagle on the sunken wreck of the S.S. Central America made not only the date available, but it also made it possible for many to have a chance to have a Mint State Coronet Head double eagle and one that was produced from the early days of the San Francisco Mint.

Without that recovery of 5,400 examples of the 1857-S from their underwater resting place, the possibilities of owning a nice Mint State double eagle from San Francisco in the 1850s would definitely be reduced and that is just one of many examples.

The discovery, promotion and original sale of hoard coins is just one part of the story. That may be the most exciting part of the story, but after the hoard coins are dispersed, how well do they really hold up in terms of price? In fact, there may be no single answer for the simple reason that there are literally hundreds, if not thousands of hoard coins.

In many cases, we simply do not have a name and story to attach to the numbers of one issue or another that are known today. That is especially true in the case of gold where hundreds and in a few cases even thousands of Mint State coins returned to the United States from primarily European bank vaults in the past half century.

There was no accounting of the numbers, but when you check the numbers seen at grading services today there is absolutely no doubt that there were substantial numbers.

Even in the cases where we know of specific hoards and likely numbers involved, it is unfair to expect that each and every hoard coin will show similar price movements. After all, they are part of a set and a set of large cents is not likely to move in price at the same rate as double eagles or silver dollars or Jefferson nickels. Consequently, we cannot really expect uniform results. That said, there is still a certain question as to just how well hoard coins have done in recent years, not when compared with each other, but perhaps when compared to other non-hoard dates of the same type.

One of the most famous hoards of all was the Randall Hoard. If you have collected large cents for more than three hours you have probably heard of the Randall Hoard. The story may not be quite in tune with the reality, but the fact remains that sometime in the late 1860s in Georgia there was a discovery of a significant number of large cents allegedly in a keg. The precise dates were debated as were an assortment of issues and the story over the years has evolved slightly but we have very solid evidence that five dates were found in some numbers in Mint State in the Randall Hoard.

The two most heavily represented dates were the 1818 and the 1820, with lesser numbers of the 1816, 1817 and 1819. We can say that with some certainty as the numbers of Mint State examples of the dates found at the grading services showed the 1818 having been seen 296 times at the Professional Coin Grading Service and 288 times at Numismatic Guaranty Corp. in Mint State, while the 1820 was seen 267 times at PCGS and 391 times at NGC. In comparison, the lowest numbers for any of the five dates were posted by the 1819, which appeared 81 times at each service. In the case of a date with a similar mintage from the period the combined total at the grading services was basically under 50.

Clearly the 1818 and 1820 are available in significantly higher numbers. Back in 1998 in MS-60 the 1818 was priced at $250 while the 1820 was $275. Today, in the same grade, the 1818 is $270 and the 1820 is at $300. It would appear that the dates are not doing well except for the fact that the large cents of the period in general have moved very little. The 1816 for example was $420 in 1998 and still is $420. Other dates have increased and usually more than the 1818 and 1820, so while perhaps increasing in price at a below average pace, it would be hard to say that the Randall Hoard dates are very different from other dates of the type.

The 1857-S double eagle found in such large numbers on the S.S. Central America, which sank in 1857 off the North Carolina coast, certainly has to be seen as an extreme test in terms of double eagles. It is not simply a case where the numbers are large, but it is also a case where the S.S. Central America is a relatively recent hoard.

The market has had very little time to really absorb what was over $100 million in sales. It is probably too early to expect the 1857-S, which was basically an available date in circulated grades but not a readily available date in Mint State, to show any signs of price increases. In fact, with very serious doubts that there are even 5,400 collectors of Mint State Coronet Head double eagles to absorb the supply, it would not be at all out of the question to expect the 1857-S to show some potentially serious price declines.

If you check the prices for the 1857-S back in 1998 in MS-60 it listed for $2,600 while an MS-63 was $10,000 with no price listed in higher grades. Today in MS-60 the 1857-S is at $4,500 while an MS-65 is at $7,250. It’s a very interesting situation and a somewhat volatile one as prices are all over the board depending on the price guide. The consensus, however, is that in MS-60 the 1857-S seems to have increased in price perhaps as publicity over the sale of the S.S. Central America coins encouraged some to want to acquire a lower cost example of a famous date.

The price decline in MS-63 may well be a case of this grade was actually hurt because there were suddenly significant numbers of higher grade examples. It is definitely an opposite trend from other Coronet Head double eagle dates. The question for the next few years is likely to be not what happens to the MS-60 or MS-63 prices, but rather how does an MS-65 or MS-66 fare at their current levels.

Another recent double eagle was one involving Saint-Gaudens double eagles. Called the Wells Fargo Hoard, the hoard involved 19,900 examples of the 1908 no motto double eagle. The number was extraordinary and so was the quality of the coins. The breakdown given to Q. David Bowers for his book A Guide Book of Double Eagle Gold Coins by Ron Gillio, who purchased the hoard, had 6,000+ in MS-66 with 1,700+ in MS-67.

These high grades were not just wishful thinking by the person buying the hoard. The coins have gone through the major grading services with stunning results. At PCGS, 793 Wells Fargo hoard coins were called MS-67 compared to 38 that were not from the hoard.

At NGC the number of Wells Fargo MS-67 coins was 941 compared to 94 not from the hoard. There were similar numbers in other high grades. The impact of so many top quality examples of a single date almost had to have an impact.

The MS-65 listing of the no motto 1908 back in 1998 was $1,350 and today in MS-65 the price is $2,350. This is the cheapest of the “No Motto” type.

If MS-65 were the top grade available, then there would be considerable pressure on buyers to find and buy an MS-65. The Wells Fargo Hoard, however, has made MS-65 an average grade for this one date. Combined NGC and PCGS have graded over 6,400 Wells Fargo coins as MS-66 and 1,700 more as MS-67. Under the circumstances, buyers will seek those upper grades and not the MS-65 so there are more than just numbers potentially working against the MS-65 price of the “No Motto” 1908.

A dramatically different situation involving gold coins would be the gold dollars of 1879, 1880 and 1881. The three were low mintage, with the 1879 having a mintage of 3,030 while the 1880 was just 1,636 and the 1881 was 7,707. The three should have all been tough dates, but back at the time they were released someone saved examples. In fact. they saved hundreds of each.

We can see evidence in hundreds of each in Mint State reported by both PCGS and NGC. The hoards of the three were not all that well known, although it is a case where relatively few study and collect gold dollars. While we do not know the details of the hoard, we know that hundreds of each of the three dates are known and the MS-60 price of the three back in 1998 saw the 1879 at $700 while the 1880 and 1881 were each at $400. Today in MS-60 the 1879 is $525, the 1880 is $425 and the 1881 is $410.

There is simply no good way to make sense of that change. Ironically, the 1879 which declined the most in price is the least often seen of the three in highest grades, while the 1881 which actually increased in price in the highest Mint State grades has been graded more often than either of the other dates. There is no good way of explaining the changes, but every so often strange things happen in the market and this would have to qualify as one of those times.

If there is such a thing as a blue chip hoard coin, it is ironically a pattern as the 1856 Flying Eagle cent could not have been a coin even though it circulated simply because the law authorizing the Flying Eagle cent was passed in 1857. Over the years, few coins have been hoarded like the 1856, which seemed to always inspire speculation or at minimum a hoarding instinct.

George Rice of Detroit probably won the prize for the largest hoard of the 1856 with his accumulation numbered 756 pieces while close behind was John Andrew Beck of Pittsburgh, whose total included some from the Rice collection, reached 531.

In the case of the 1856 the numbers are small, but the percentage of the total mintage is large. Produced both in proof and also with a small number of business strikes there is no certainty regarding the 1856 mintage although perhaps 1,500 to 2,500 pieces would be a good range. Back in 1998 the 1856 was at $4,000 in G-4 and today that price is $6,250. In MS-65, the 1998 price was $21,000 and today that price is $65,000. Clearly as hoard coins go, the 1856 Flying Eagle cent continues to defy the other patterns by surging strongly to higher prices and in all grades.

There was a great deal of hoarding during the Civil War and some of that even reached down to copper-nickel cents. As a result, small groups of the copper-nickel cent dates have been reported over the years. The largest was discussed by Q. David Bowers in his book American Coin Treasures and Hoards” The group of probably 1,000 Mint State specimens of the 1862 was offered in a Thomas Elder auction in 1918. The group was significant based on the fact that PCGS has seen about 675 Mint State examples of the 1862 while NGC is at roughly 850. The 1998 prices for the 1862 in Mint State were $80 for an MS-60 and $575 for an MS-65. Today those listings are the same for an MS-60 but $1,050 for an MS-65. For a hoard coin that is not heavily publicized, that’s a strong MS-65 increase, although in reality it reflects a general increase in copper-nickel Indian cents prices in MS-65 as all dates have done basically the same thing in terms of price.

One of the more interesting dates that was heavily hoarded was the 1883 without “CENTS” Liberty Head nickel. No particular hoard can be discussed although groups of 100 or more were known. The 1883 without “CENTS” was simply hoarded by many as a new design. It was an unusual time for hoarding, but people then also hoarded the last couple years of the Shield nickel series. We see the proof in the fact that there are thousands of Mint State 1883 without “CENTS” nickels reported at the grading services and that produced 1998 prices of $32 in MS-60 and $300 in MS-65. Today those prices are $25 in MS-60 and $260 in MS-65, so clearly the extremely large numbers reported by the grading services are keeping the price down.

In his book, Bowers reports on the mysterious appearance on the market of hundreds of Mint State 1877-CC quarters in Mint State. It was an odd situation as traditionally there was very little saving of new coins at Carson City and even if there had been, the 1877-CC quarter with a mintage of nearly 4.2 million would have been an odd choice. That said, the observation of Bowers is supported by grading service totals, which show hundreds of examples of the 1877-CC in Mint State.

Since 1998, the 1877-CC which was at $375 in MS-60 has dropped to $325. Interestingly enough, that is still a premium over the most available Mint State Seated Liberty quarter dates of the type. Realistically the 1877-CC is one of those most available dates, but it happens to have a “CC” mintmark, which may be the only thing stopping it from further declines.

There is no doubt there have been a few Lincoln cents that were hoarded. It was reported that John Zug had some 25,000 examples of the 1909-S VDB, although that hoard was allegedly broken up before 1920. There were at least 10 or more rolls that hit the market in the 1950s, but the demand for the 1909-S VDB is so great that such numbers were drops in the bucket when it came to meeting demand.

Since 1998 the 1909-S VDB has gone from $720 in MS-60 and $1,800 in MS-65 to a current $1,825 in MS-60 and $6,850 in MS-65, proving that with enough demand no hoard can keep prices from rising. The situation with the Philadelphia 1909 VDB is slightly different. Its total numbers hoarded were much, much larger. There is solid demand for the 1909 VDB, also. Its 1998 prices of $9 in MS-60 and $39 in MS-65, respectively, have risen to $25 in MS-60 and $195 in MS-65.

A final Lincoln cent worth noting is the 1931-S. With a mintage below 1 million we know the 1931-S was hoarded. We can dispute the numbers hoarded with a Walter Breen claim that the Maurice Scharlack hoard had 200,000 pieces, which would have been about 25 percent of the entire mintage, but there is no doubt the 1931-S was heavily hoarded in Mint State and upper circulated grades. Since 1998 in Mint State the 1931-S has moved from $53 in MS-60 and $215 in MS-65 to a current $163 in MS-60 and $685 in MS-65.

Probably the most famous hoard coin of all time would be the 1950-D Jefferson nickel. We frankly do not know what percentage of its 2,630,030 mintage was hoarded initially, but somewhere on the order of 50 percent or more would be in the ballpark. A.J. Mitula of Houston, Texas, reportedly had 1 million pieces while another 320,000 were reported in Wisconsin and there were others with larger numbers involved.

The 1950-D soared in price during the 1950s and 1960s probably in part because all were tied up in hoards. Then it simply went into a coma, not moving for decades. In 1998 the 1950-D was $6.50 in MS-60 and $9.50 in MS-65. Today it sits at $18 in MS-60 and $30 in MS-65.

It is certainly a mixed bag when it comes to prices of hoard coins. Greater numbers should hold prices down, but a good story or heavy demand for the whole series can still lift prices higher.

Will gold supply run out as Barrick Gold warns?

 By David Vaughn

Barrick Gold says the world gold supply has run out. Wow! Isn’t that what some have been predicting for the past 10 years? The president of the largest gold company in the world, Barrick Gold, has just recently announced that gold production peaked in the year 2,000.

It is becoming increasingly more and more difficult to find significant deposits of gold ore. And as the tide has turned the central banks have now become serious buyers of gold and no longer sellers. China has doubled its gold reserves these past 10 years. Asia is turning those worthless US dollars into gold.

Will someone please tell Sarah Palin to get a haircut and take a class in rhetoric?

Rhetoric is simply the art of learning to speak well. Persuasive speech without the mouthful of peanuts. And through the power of effective speech your life begins to develop a sense of purpose and you can influence the thoughts and dreams of a nation.

Sarah’s recent appearance on The Oprah Winfrey Show rocketed Oprah’s show to its best numbers in 2 years. Guess someone’s listening to her. The world awaits your destiny, Sarah.

Ever wonder why Adam decided to share with Eve that forbidden bite? Adam considered Gods wrath. He considered his wife’s wrath. It’s easy to conclude whose wrath he was most afraid of.

And what about investing in those mining companies producing gold and exploring for new deposits? A lot of money to be made here as long as you remember you’re dealing with speculation.

I like that word.

Let me say it again. Speculation. Has a soothing comfortable effect on the tongue. Technically, there is a difference between the term speculation and investment. Investment supposedly promises safety and speculation in the past has always been defined as risk. If there is any one thing investors have learned these past 10 years is that no investment is without substantial risk.

Remember Uncle Bernie?

Bernard Madoff? For years known as Wall Street’s most successful money manager. It is really best to classify any and all investing as speculation. There are no guarantees where ever you place your money. That’s a hard pill to swallow for 401K participants who were counting on 30% annual returns until retirement. And back to Uncle Bernie. I understand that about 50 billion still remains unaccounted for.

What about speculating in mining stocks?

There are those who promise significant profits in just a couple of weeks. Nostradamus couldn’t do better. Somehow I feel a chapter needs to be written about gold speculation. So here we go.

When you hear any one touting a particular gold or silver mining company as a sure thing then head for the hills. The following terms below are good warnings to look for. When you hear the following terms below run.

“the next big thing” “elephant country” “new improvements in mining technology” “enormous land position” “no cash” “no permits” “may prove up” “should” “…quick and cheap to drill exploration holes.” When you hear this kind of language it sure whets your greed.

And the following crap below is a favorite.

Someone touting an existing property having over 90 million ounces of gold before the first drill hole has been drilled. Give me a break. Or how about? “There’s no limit to the potential size of this deposit!” And the following is a good one. “Volume of ore is somewhere between huge and enormous.” “Past exploration confirms…”

And the best probably. “A great deal can be learned with just a FEW drill holes.”

A few drill holes? What a load of bull. A mining company can never drill too many holes. Who knows what’s under that ground? That’s what determines what’s under there…lots of drill holes.

There’s an old saying. Know how to make a quick 20,000 dollars? Invest 50,000 in a gold mine. There’s a lot of truth in that. Actually, a lot of truth.

If none of this makes sense then Google Bre-X. Bre-X provides a good education. And Bre-Ex is not a soap cleanser. The mining business is complicated. The geology of a site is always difficult for even professional geologists to interpret. Assay results often are not right on the money.

Precarious business.

The following names below are worth following. Lot of gurus out there worth reading. A few?

Doug Casey. John Doody is a master craftsman. Kenneth J.Gerbino has brains. Jon Nadler always has a grip on reality and emotions. Kind of like Spock. You’ve never heard of these? Well, you need to acquaint yourself with these guys. If you do you might just make money.

The following fellow below may just have been a successful speculator in gold mining stocks. And maybe not. Who knows? But the story sounds good.

”We talked about Gods grace and all the hell we raised” ”Then one sunny day, I saw the old mans face” “Front page Obituary, he was a millionaire” ”he left his fortune to some guy he barely knew, his kids were mad as hell” ”But me, I’m doing well” “And i drop by today, to just say thanks and pray, i left a six-pack right there on his grave…” Billy Currington

And back to good analysts to follow? Don’t forget Dennis Gartman. Brains there too and perspective and objectivity. There are others not mentioned, but in due course they make themselves heard. Information is always valuable. Almost forgot to mention Jim Sinclair! Been in this business for 30 plus years. The one and only gold prophet.

Is information important?

The founding father of international finance, Meyer Amschel Rothschild believed in information. Though born in a Frankfurt ghetto he had the ability to realize the importance of information. It was Meyer who put to the test that information can represent the difference between poverty and wealth.

What leads to poverty or wealth is volatility. What we are seeing today. Instability and volatility generally contribute a great deal to the direction of a share price…whether up or down. Jesse Livermore lost more money when the markets were “flat.” But with the depression of 1929 and volatility that went crazy. He went on to make 100 million dollars.

Volatility is always the friend of speculation.

Information is proving in the world markets today that gold is being recognized as real currency. More central banks around the world are increasing their gold reserves. Physical gold and physical silver represent insurance and shares in mining companies will always be speculation. Gold will probably continue its climb. 2,000 per ounce looking more like a reality down the road..Let’s change direction here and take a history lesson.

History always repeats itself. Lot to learn from the past. A lot of people often refer to the decline and death of the Roman Empire. Don’t think it ever really fell. Sure, the emperors all died and civilization collapsed. But Rome’s influence continues to endure and shapes the very foundation upon which our civilization exits. Its influence truly never died. Its influence still reigns today.

The ancient Roman world began around the 8th century BC. Just a humble little trading post that began its road to fantastic wealth by trading salt along the Tiber River. Officially, the last vestige of Rome, Constantinople, came to an end in 1453. What is that? From the 8th century to 1453 is over 2,000 years.

What does this have to do with anything, especially gold and current events? So much so that Rome created the blueprints for modern day society, modern finance and even the futures currency.

Nothing new under the sun.

Particularly economics and finance. Throughout history, the ancient Egyptians, Babylonians, Rome, the medieval era, France, Germany, the 20th century, the 21st century. Always a predictable pattern. Never ending economic cycles. A little variation here and there. But nothing new under the sun.

Pompeii had air conditioning…known as evaporative cooling. Modern day air conditioning was not re-invented until 1902. Romans also invented central heating, long forgotten, and not commonplace again until the mid 20th century. Indoor plumbing and running water was available in every major city in the empire. Both indoor plumbing and outside running water became a forgotten luxury by the 6th century. Not until the 18th century would common citizenry enjoy running water. And, oh, those flushed toilets I like so much.

Rome had the brains and engineering to build a great sewer system 2,600 years ago, the Cloaco Maxima and its still in use today. Rome’s engineers provided public toilets flushed with running water and elaborate fountains were every where.

Rome designed horse racing stadiums called hippodromes. The one in Rome held as many as 250,000 spectators. These hippodromes were scattered all over every major city in the empire. Chariot racing was as popular in that day as world soccer is today. The Blues (Venetii) and Greens (Prasinoi) chariot racing teams raced against the Reds (Rousioi) and the Whites (Leukoi).

Engineering marveled the age then.

Stretching from the Atlantic Ocean all the way to the western edge of Parthia, modern day Iran. Rome paved over 250,000 roads all over Europe, North Africa, and the Mid East. Just in Britain alone there were over 6,000 miles of paved road. And many of these roads are still being used today. Roman roads were often as straight as our modern expressways and even tunneled through solid rock where necessary. The only difference in modern day road systems and the Romans is that ours require more maintenance and are constantly in a state of deterioration. Contractors have learned to build things in our day that quickly fall apart so they can shortly be built again. More money made this way.

The US senate, the executive branch, all old ideas. Their Capitoline Hill we call today the Washington DC capital. All today’s classic buildings are patterned in the ancient Roman style. And the major building component was concrete. The secret of making concrete was lost and not rediscovered until 1756. Over a 1,000 years with out concrete until just 250 years ago.

The point in all of this?

We can see what our past forefathers did to ruin their economy and currency. And this understanding proves that what is happening today was learned long, long ago.

In an effort to attempt to deal with their increasing economic problems the rulers gradually began to devalue the currency beginning around 60AD and eventually became even worse when the silver content was substantially reduced in coins. And the economy only worsened. By the 3rd AD century the amount of silver content in a silver coin was only .02%.

One reason the economy began to fall apart in the roman world was because the existing currency was debased. Much as is happening again today. As the money became worth less and less people began spending even less money.

Always, through the ages, the middle class is eventually squeezed out of existence, economic opportunity ceases, and the majority becomes the poor masses dependant on the state. And as an economy worsens the middle class eventually became lower class.

And inflation ensued.

And of course inflation then was caused by the creation of more and more debased currency. Like the US pre 1964 coins made of silver and now made of some trash metal. The phenomenal rise in prices in the later empire followed the large increase of the amount of money in circulation just as today.

And in the later empire it became forbidden to hoard gold and silver coins and the penalty became death. Sounds like the United States under FDR in the 1930s when physical gold and silver was confiscated from the average man in the street. Inevitably, we are all just conduits for stupidity and avarice.

Jim Sinclair – “Be careful as gold is going to $1224-$1278, $1650 and then on to Alf [very, very high!] Numbers. Ask yourself if you are a speculator or an insurance holder?”

Summary

A major cycle is unraveling in the global financial economy today. And as this crisis cycle evolves the world as we know it will for ever change.

Every world cycle is about freedom and security. Some will want freedom and others will want to keep the security and the status quo. Some want to be free while others happily will wear a golden collar of servitude provided by a polite government.

Always look for the gold in the ground. “Proven & Probable” is always the superior classification for the best affirmed deposit. This is the term the banks like best before lending money.

Courtesy: http://goldletterdv.com

By John Winston Commodity Online
In this world we are faced with an ever changing landscape. Nowhere is it truer as soon as you learn the game, the rules are changed. For instance, we are told that gold is signaling an inflationary future coming for the USA, yet its long term interest rates are below the 4% level and short term rates are basically zero. How can this be? Who would lend money to a nation whose currency depreciates and pays almost no return on its debt?

Nations who depend on consumption from the USA have little choice but to extend credit or face economic contraction in their own economies. And while debt has reached 12% of GDP the foreign support of the dollar and treasuries continues for the United States. But there are changes going on.

Most disconcerting is the fact that China has been rolling over its debt from the long term bond to the short term Treasuries, which basically pay zero. While there has been little fanfare over this development, one has to wonder why China would forgo a 2 – 3% rate of return in favor of a zero rate of return on investment. This much we know. They have moved their seat in the theater very close to the exit door.

When your biggest creditor moves his seat that close to the exit and the movie is not even close to intermission, one gets the impression that the film is not pleasing to them. Now it would be one thing if China were a paying customer viewing the film. But they are not here to pay and watch the film. They are here to lend money to the filmmaker to use the money to distribute the film to the consuming audience. Let us hope they stay for the remainder of the story.

There can only be one reason interest rates are so low at a time when the monetary base is so expansive and that is that the central bank policy is to avoid a depression and attempt to jump start the economy. While the lowering of interest rates was a success during the Reagan era, it came at a time when interest rates had just completed a cycle high and inflation had completed its run up from the consequences of the US Dollar coming off the gold standard.

The most recent bank bailouts can best be described at this. Cash was distributed to the banking sector to shore up their balance sheets. Instead of taking this money and lending it to industry, it took that cash and deposited back with the Feds by buying up the Treasury curve.

And to understand how the stock market can rise at a time like this is simply the consequence of funds and government insured deposits along with Fed liquidity that is channeled from the banks to the hedge funds where the money is put to work in a speculative manner. This “free” money is creating bubbles in Hong Kong real estate and other Far East markets too.

We’ve arrived at a time when the price of many commodities and other financial instruments trade in direct opposite to the US dollar. This brings us to the realization that many markets are invested in as a short position against the US dollar. What else would explain such phenomena?

In 2009, it did not matter where you invested, as long as you stayed away from the US dollar, you’ve done well

By Marc Davis Commodity Online
Silver may yet outshine gold in 2010 as spot prices for the white metal respond to the prospect of a surge in industrial demand. With a little additional help from investment demand, silver may even rally into the $25 an ounce range.

So says Chintan Parikh, a commodity analyst at the CPM Group – a leading New York-based commodities research, consulting, asset management and investment banking organization.

“Prices may spike as high as $25,” he says. At the very least, it should breach its most recent high, which was set at $20.79 in the spring of 2008, he adds.

Parikh says much of this impetus for higher prices is being driven by the fact that traditional industrial end users of silver, such as the ever-burgeoning global electronics industry, have in recent weeks begun to replenish severely depleted inventories.

In fact, silver inventories became so run-down during the financial crisis that it may take up to six months to fully rebuild them to normal levels. Parikh also notes that demand from the industrial sector tends to be quite price inelastic, meaning that buyers have few options other to pay prevailing prices.

Another key driver for 2010 will be the advent of new market places for silver, including pent-up demand for silver-zinc batteries in ‘smart’ automobiles and an array of portable electronic devices, Parikh says.

In fact, the widespread adoption of silver-zinc batteries is going to be “one of the major drivers behind a rise in prices because it may absorb a lot of silver,” he adds. Though this important new application for silver might not necessarily become a major factor in demand for silver as early as next year, it promises to become a very sizeable marketplace, he suggests. And especially for automobiles.

Notably, China is forecast to become a huge adopter of electric cars to curtail its rising dependence on foreign oil and to reduce its air pollution. In fact, electric cars and hybrid plug-ins will account for more than half the auto market in China by 2020, according to Dr. Wolfgang Bernhart, an auto industry expert with the international think tank, Roland Berger.

Furthermore, silver-zinc batteries are destined to generate major market share as they are said to be much safer, more environmentally-friendly and far more energy-efficient than lithium-ion batteries (which currently dominate the markets for smart cars and portable electronics).

Also, the ever-expanding industrial sector for silver now includes LCD/plasma television screens, solar panels, water purification and even medical and superconductivity applications. It is also finding a critical new use in biocides (which use silver in chemical agents to kill dangerous bacteria, including superbugs).

GFMS, a renowned London precious-metals consulting firm, concurs that overall fabrication demand (which also includes the photography, jewelry silverware sectors) is expected to rebound to “normal levels” in 2010. And the emergence of key new markets for silver is sure to help power this recovery, according to Neil Meader, research director at GFMS.

“It is becoming an increasingly industrial metal and novel new uses will also likely assist the recovery in silver’s demand,” he says.

However, the restocking of inventories for more of silver’s traditional uses will likely be the most powerful demand driver in the near-term, Meader suggests. It may even help propel silver prices into new territory to the extent that “a peak (in prices) could occur late this year or early next year.”

The revitalization of industrial demand is an inevitable consequence of silver’s growing importance as a high tech metal. In fact, this has grown year on year since 2001 to the onset of the financial crisis. And it only dipped a meager 1.4% to 447 million ounces in 2008.

This long-term growth trend is set against a backdrop of a multi-year rally in silver prices during this time frame, with gold’s poorer cousin refusing to be upstaged. It actually tripled in value to average US $15 in 2008 (in spite of its short-lived collapse to around $9). And it is continuing to trend higher this year now that supply/demand dynamics are beginning to reflect a return to a normal economy. All of this clearly demonstrates the price inelasticity of industrial demand.

Ironically, investment demand is also mostly shrugging off higher prices. Not only is there strong physical demand for silver bullion coins and bars, but the recent emergence of silver exchange-traded funds like the iShares Silver Trust is also creating strong additional demand.

Parikh notes that silver offers a safe haven in times of economic upheaval, while it also has the potential for significant investment returns.

“Silver is a unique metal that wins whether the economy is going well or is in bad shape,” he says. “In the latter, the investor buys it as a hedge against the downturn in the economy and the markets. And if the economy improves, then the industrial demand increases.”

All of this is music to the ears of silver miners, who are already ramping up production to satisfy newly resurgent industrial demand for silver. One company on the frontlines of this push for greater output is Vancouver-headquartered Great Panther Resources (TSX: GPR), which has been operating its Guanajuato and Topia mines in Mexico since 2006.

Notably, Great Panther is one of only a small handful of companies in the world that are primary silver producers, since the vast majority of this precious metal comes as a by-product of mines that are mostly focused on extracting lead and zinc or copper.

Company President Bob Archer says that he believes that higher silver prices next year will significantly boost the company’s ever-improving bottom line. Great Panther became cash flow positive earlier this year after producing 1.8 million silver equivalent ounces (silver plus by-product metals, including gold, lead and zinc) in 2008.

Archer has now set his company’s sights on generating over US $50 million in revenues by 2012 (based on a projected output of over 2.6 million silver ounces and 12,600 gold ounces, as well as minor base metals credits which translates into 3.8 million silver equivalent ounces).

“Our output is growing steadily. We just had our best quarter ever in the third quarter of this year. And we’re in the process of completing a $10 million equity financing to accelerate our three-year growth strategy to capitalize on higher silver prices.” Archer says.

“In fact, we’re quite bullish on silver prices for 2010. I believe that investment demand will be the biggest driver for higher silver prices next year. That said, I’m sure there will also be an increase in industrial demand going forward.”

Inside the Global Gold Frenzy

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