Financial Sense Newshour on Metals

Jim welcomes back Russell Napier, Consultant with CLSA Asia-Pacific Markets. Russell makes the case that faltering economic growth in the emerging markets, weaker commodity prices, a falling yen and strengthening dollar are warning signs of a deflationary shock ahead. Russell believes that the rally in developed-world equities will not last much longer as emerging market growth slows. He is bearish on gold shorter term, but bullish longer-term as both structural and cyclical forces turn in gold’s favor. Russell sees the current falling gold price as a sign that the global reflation is failing and we are nearing a deflationary shock.

Jim welcomes Ronald Stoeferle, publisher of the respected annual report, “In Gold We Trust”, and a gold fund manager in Vienna, Austria. Ronald tells Jim that we were close to a run on the bullion banks during the recent chaotic drop in gold. He also sees a growing movement to remove gold from the financial system, as paper gold is creating too much counterparty risk, as witnessed by the Dutch bank ABN Amro’s recent gold default. Ronald sees the divergence between paper gold plunging in price and record demand for physical gold as a loss of confidence in the banking system by the public. The next issue of “In Gold We Trust” will be published in June.

Jim welcomes Frank Holmes, CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in gold, natural resources and emerging markets. Frank believes the two main factors determining gold demand are the Fear Trade (of inflation or economic crisis) and the Love Trade (gold jewelry demand- primarily from India and China). Frank also discussed why gold stocks have underperformed the metal; the old model of acquisition and production is broken. Frank sees a new model emerging, one that is more shareholder-friendly. After the recent hard landing, Frank sees the price of gold likely to remain in a consolidation period, until demand overwhelms supply.

Jim welcomes renowned geologist Keith Barron, PhD to the program. Keith was co-founder of Ecuadorian gold explorer Aurelian Resources Inc. and made the colossal Fruta del Norte gold discovery in 2006. Keith is currently founder and Exploration Geologist at U308 Corp. Keith and Jim discuss the new “gold stock paradigm” that is emerging, where companies are becoming more investor-friendly, relying less on the old “acquisition of ounces” model, and more on increasing shareholder value through cost controls, and emphasis on quality over quantity.

In this segment of the Big Picture Jim looks at the large decline in gold and silver, and gets into the reasons behind the carnage, as well as the huge difference between “physical gold & silver” and “paper gold & silver”.  Jim notes that investors should know why they own gold, understand it, and then leave it alone. Also, Kathy Derbes CFA, and CEO of KDerbes Precious Metals LLC, joins Jim in this segment. She notes the current record buying of physical precious metals, last seen during the Lehman crisis, and says her firm is “completely out” of Silver Eagles. Kathy is not even taking orders for more Eagles, as it may take six to eight weeks or more to acquire them.

Jim welcomes back Craig Johnson CMT CFA, a Principal and Senior Technical Research Analyst at Piper Jaffray. Craig sees the S&P reaching 1700 by years end, although he notes that investors are still skeptical and only reluctantly long. Craig sees the next great catalyst to launch the market higher will be the shift from bonds and bond funds into stocks, as interest rates begin to climb. Also this week, Ryan Puplava wraps up this week in the markets, and Chris Puplava joins the program to discuss the volatile gold market. Rob Bernard looks at interest rates and the fixed income market this week.

Jim is pleased to welcome back Grant Williams, Portfolio & Strategy Advisor at Vulpes Investment Management in Singapore, and author of the popular investment letter, “Things That Make You Go Hmmm…”. Grant discusses the recent policy change in Japan, which is now printing massive amounts of Yen to raise inflation and weaken the currency. Grant notes that it didn’t work in the 1930’s for Japan, and it won’t work this time. He does see a coming Asian currency war in response however. Grant also speaks in some detail about gold and gold equities. He believes the world is struggling with accepting gold as a currency. But Grant notes that at some point deficits matter and excessive money printing will eventually drive the price of gold significantly higher.

In this week’s first Big Picture topic “Wash, Rinse and Repeat – that was then, this is now” Jim looks at a repeat of the Petro Business Cycle pattern for the fourth year in a row. The familiar economic scenario features a strong start to the year, then the LEI’s roll over and the economy starts to slow, which is followed by more Federal Reserve stimulus, which leads to a strong finish to the year. Wash, rinse and repeat. The next topic, “Has the glitter faded? Why gold prices can go higher” is in response to the weak precious metals market. Jim continues his thesis that you don’t need a Doomsday scenario to see rising gold prices in the future. This topic also leads into Jim’s in-depth conversation with John Kaiser on gold in the next segment of the program. Jim also answers some of your Q-calls in this segment.

Jim welcomes back Axel Merk, founder and portfolio manager at Merk Investments LLC. This week Axel discusses some of the downside of currency wars, including a loss of competitiveness in domestic economies, growing social unrest, and in extreme cases, war. Axel also sees the Eurozone as less capable of debasing its currency than other countries, which will ultimately strengthen the Euro. He sees gold in a transition phase, but believes that the US, Japan and the UK will drive gold prices higher eventually.