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Mike Gleason: It is my privilege now to welcome back Michael Pento, president and founder of Pento Portfolio Strategies and author of the book, The Coming Bond Market Collapse: How to Survive the Demise of the U.S. Debt Market. Michael is a well-known money manager and a fantastic market commentator, and over the past few years, has been a wonderful guest and one of our favorites here on the Money Metals Podcast. We always love getting his highly-studied Austrian economist viewpoint.
Michael, welcome back, and thanks for joining us again.
Michael Pento: Thanks for having me back on, Mike.
Mike Gleason: Well, Michael, we were struck by one statistic in particular in the latest edition of your always great Pentonomics commentary and we urge people to sign up for your email list, so they can start getting those themselves, if they’re not doing that already. But in that piece, you referenced Chapter 11 bankruptcy spiking 63% in March versus the same month a year ago. This is a dramatic move, and it tells a very different story than the one people are hearing all day long on CNBC these days. You also mentioned the carnage in the retail sector, rising delinquencies in the subprime auto loans and other indicators, which are back to levels we last saw just before the 2008 financial crisis.
Meanwhile, the talking heads are going on about how strong the U.S. economy is, and to be fair, they can point at statistics such as unemployment, strong performance in the equities, at least until recently, consumer sentiments, and other positive signs. At this point, most Americans think the U.S. economy is in better shape and likely to get stronger, but we know at key turning points in the markets, most people wind up being wrong. Now, you are certainly sounding the alarm here, Michael, so give us your thoughts on the real state of the U.S. economy, and what are a couple of the key indicators, and what are those indicators telling you about what we should expect in the months ahead?
Michael Pento: Well, Mike, first of all, this kind of reminds me a little bit of maybe late 2007, early 2008. And I want to remind all your listeners that the economy entered a recession officially, for NBER rates recessions, in December of 2007. We were already in a recession at the end of 2007, but nobody really knew it. The stock market was still doing okay. And if you look at the metrics, some of the metrics that you quoted in that question still looked very well and fine and dandy, but underneath that ersatz construct, the economy was eroding very quickly. The yield curve had already inverted. Bank lending was drying up. And home prices were already in the process of rolling over. You fast-forward to today, and you can point to many things that will make you think the economy …read more
By Stefan Gleason, Money Metals Exchange
President Donald Trump recently took to Twitter to boast, “The U.S. has an increased economic value of more than 7 Trillion Dollars since the Election. May be the best economy in the history of our country. Record Jobs numbers. Nice!”
“We ran out of words to describe how good the jobs numbers are,” reported Neil Irwin of the New York Times, amplified in a Trump retweet.
If you believe the headline numbers, joblessness is at a generational low with the economy booming.
Trillions in nominal value added to the stock market since Trump’s election. GDP up over 3% in the second quarter. 223,000 jobs added in May. Unemployment at an 18-year low of 3.8%.
On the surface, this all paints a beautiful picture for the economy and stock market. But dig a little deeper, and the numbers aren’t quite as bright they appear. All that glitters is not gold.
Headline Unemployment Number Is Fake News
Donald Trump himself put his finger on one of the main flaws with the unemployment number back when he was a private citizen.
“Unemployment rate only dropped because more people are out of labor force & have stopped looking for work. Not a real recovery, phony numbers,” he posted on September 7th, 2012.
The headline unemployment number isn’t any less phony in 2018. Though it has improved under Trump’s presidency – in large part because of his pro-growth tax cuts and deregulation – the statistic is still derived from a dubious formula.
Back in 2012, Trump rightly pointed to the large numbers of workers who had dropped out of the labor force but weren’t counted among the ranks of the unemployed.
The labor force participation rate currently comes in at just 62.7%. That means 33.7% of the population is currently not employed in the labor force. The vast majority of these jobless Americans aren’t among the 3.8% officially “unemployed.”
A healthier labor force participation rate of more than 66% prevailed before the Great Recession. It’s lower today not just because more people are retired. It’s also lower because the share of Americans aged 25 to 54 who are working still hasn’t risen back up to pre-2008 levels.
Among working-age males, only about 69% are currently working – closer to a record low than a record high for this cohort.
Civilian Labor Force Participation Rate among Men
The most cited unemployment measure (U3) doesn’t include people who have been unemployed for so long they have fallen off the unemployment insurance rolls.
“Discouraged workers” who are no longer looking for employment because they believe no jobs are available aren’t counted as unemployed by the Bureau of Labor Statistics; nor are partially-employed or under-employed workers.
They aren’t employed, but they aren’t officially “unemployed,” either. They are statistically invisible.
Phony government statistics on employment, inflation, GDP, national debt, and other key measures of the economy can cause investors to pursue the wrong strategy at the wrong time. Politically skewed data can cause investors to overestimate their expected returns from conventional financial assets and underestimate downside risk.
Inflation …read more
Gold has always been an important aspect of a country’s economy and has been sought out by many all over the world. Many countries have strived to maximize their production however gold production varies widely among different nations. Here we have compiled a list of the top 5 gold mining countries to show to you which nations have held the lead in Gold mining in the world.
China – 440 MT
China was the largest producer of gold in the world, mining 440 MT in 2017. China is also the number one consumer of gold, befitting a country whose development has pulled hundreds of millions of people out of poverty. Most mines sit in Shandong Province, located midway between Beijing and Shanghai, and roughly one fifth of output is controlled by the China National Gold Group. China has also held the top spot in the gold production industry for over a decade.
Australia – 300 MT
Gold production in the land down under, had another high-performing year, reaching 300 MT in 2017, up from 290 MT in 2016. The miners in Australia have been working steadily under their barren soils to yield a massive haul and earn second place on the list. Two-thirds of the total comes from mines in Western Australia, based out of Perth.
Russia – 255 MT
Russia’s was the third-largest producer of gold in 2017, with its output holding relatively steady at 255 MT. However, the country plans to increase output over the next decade or so. In 2016, it was reported that Russia is planning to raise its annual gold production to 400 MT by 2030. With roughly ⅙ of the world’s landmass, it is not surprising that Russia would be littered with gold. Over 5,000 tons are still sitting, mostly untouched, in the far eastern reaches of Siberia and beyond.
United States – 245 MT
US gold production rose in 2017. The US Geological Survey attributes the rise to increases in production from mines in Nevada and Colorado owing to increased average ore grades and ore placement and recoveries, respectively, and to the recent startup of two new mines.
Most gold in the country was produced at more than 40 lode mines, several large placer mines in Alaska and a number of smaller placer mines in the Western US. The top 26 operations in the country were responsible for 99 percent of American gold output.
Canada – 180 MT
Gold production in Canada rose noticeably in 2017, allowing the nation to become the fifth-largest producer. Last year, the country reported output of 180 MT of gold compared to 165 MT in 2016. The land of snow, oil, and precious metals. The majority of Canada’s gold is from Ontario, specifically Red Lake gold mine. Canada is so patriotic about its gold, in fact, that if you have a few hundred dollars laying around, you can get yourself a Canadian gold coin for several hundred dollars.
There are different methods by which gold mining companies are ranked. One is by their annual production, by their cash cost per ounce, that is, how much money it costs them to mine the gold. Since gold prices are the same everywhere, companies with lower costs per ounce make more profit. The most common method lists by market capitalization which considers the total value of capital holdings by that company. Also considered when comparing companies is their market capitalization per ounce of gold equivalent which takes the market value and total reserves and resources for each company as well as the price of gold into consideration. The figures for each company can be used to determine the value the stock market gives to each company’s reserves on an ounce to ounce basis. Here we present to you the top 5 mining companies.
According to the World Gold Council primary gold production hit another record in 2017 after nine years of growth in output, although at a much slower pace. Global gold production totalled roughly 105m troy ounces in 2017. The output is up 525 tonnes or nearly 17m ounces since the start of the decade.
Barrick Gold – 5.32 MOZ ( Million Ounces)
Barrick Gold Corporation is the largest gold mining company in the world, with its headquarters in Toronto, Ontario, Canada. The company has mining operations in Argentina, Australia, Canada, Chile, the Dominican Republic, Papua New Guinea, Peru, Saudi Arabia, the United States and Zambia. Barrick is the gold mining leader, both in terms of size and low operating costs. Company guidance calls for all-in sustaining costs (AISC) of just $765 to $815 per ounce for 2018. Barrick’s output could slide by more than 10% this year. Barrick’s gold production peaked at 7.7m ounces in 2010 and 2011.
Newmont – 5.27 MOZ
One of the world’s largest gold producers with assets or operations on five continents, Newmont is an industry leader in safety & sustainability. Newmont Mining Corporation is based in Greenwood Village, Colorado, USA and is a mining company that traces its roots to the diversified holding company William Boyce Thompson established in 1916. Incorporated in 1921, it has active gold mines in Nevada, Indonesia, and Peru. Holdings include Santa Fe Gold, Battle Mountain Gold, Normandy Mining, Franco-Nevada Corp and Fronteer Gold. Newmont also has many joint venture relationships and is the second largest mining company next to Barrick Gold.
AngloGold Ashanti – 3.76 MOZ
AngloGold Ashanti Limited is a global gold mining company. It was formed in 2004 by the merger of AngloGold and the Ashanti Goldfields Corporation. This Gold company is now a global gold producer with 21 operations on four continents. The company is listed on the New York, Johannesburg, Accra, London and Australian stock exchanges, as well as the Paris and Brussels bourses. As at 1 March 2018, AngloGold Ashanti has 14 mines and 3 projects in ten countries.
Kinross Gold – 2.67 MOZ
Kinross Gold overtaking Canadian peer Goldcorp to take the fourth spot as the Vancouver company …read more
The gold market has been continuously booming over the past few years. The demand of gold has been significantly increasing and can be traced back hundreds of years. Nowadays, the demand is going higher and higher in tandem with the price. Understanding the price of gold saves you from losing money and increases your chance of profit. Buying gold isn’t as easy as eating a piece of cake. There are a lot of things to be considered despite the benefit that it brings. Looking back at everything, how much gold is bought and sold really in a month?
The amount of gold that is bought and sold every month cannot exactly be predicted as some people want to keep their purchases private, but there are estimations available based on evidences presented. The estimated monthly volume of gold transaction is somewhere over 6 billion dollars. The amount is likely to go higher form one month to another especially when the stock market is unpredictable. The price of gold sold is based on the current spot amount which is constantly changing since gold is viewed as the one of the most precious metals because of its properties.
People have a mindset that owning good is a representation of how wealthy they are, thus they purchase gold from time to time which increases the amount of gold being sold and bought. It’s capable of protecting investors against inflation and financial turmoil. The purchasing power of gold stays relatively constant as people encounter it almost every day, and as long as the dollar depreciates, the price of gold will likely go higher and gold transactions will likely rise as well.
The price of gold is constantly changing, and as it changes, the amount of gold being bought and sold fluctuates as well. Despite the speculations surrounding it, gold keeps its place as the most popular investment among all precious metals. It has been a symbol of value of wealth for the past centuries and the tag will not change over the coming years.
Gold plays a very important role as it is known as the safe haven when things get volatile. Investors mostly run into gold when the economy in on the edge of fluctuation, and they store it as an investment too. The supply of gold circulating in the market is limited, but what is the exact amount?
It has been said that the above ground amount of gold all over the world ranges from 120,000 to 140,000 tons. Of which, the US Reserve owns 6 percent or 8,000 tons of the total amount of gold. A total of 25 percent of above earth gold is publicly owned. They can be found in paper based international bond markets and central bank vaults.
Obviously, 75 percent of the total amount of gold is privately owned. They are on the hand of investors or not in the form of jewelry, bullion or coin.
The amount of privately owned gold is three times the amount of publicly owned gold. It can be clearly seen how powerful gold is as an investment against market volatility. They have been purchased from time to time no matter how high the price is as it serves as a great commodity in times of economic trouble.
Although it has been said that the supply of gold is limited, gold is continuously mined and refined every year no matter how difficult and risky the process is, thus the overall supply of gold is still increasing. The increase may not be as high as the demand, but the addition to the supply has a big impact on the gold industry.
Nobody can give the precise amount of gold in the world. The only possible thing to do is to give approximation based on presented data and evidences, but one thing is very clear – the price of gold will continue to increase regardless of how much is publicly owned and how much is privately owned.
As they say, timing is everything. This applies in almost everything especially in investing. Although the prices of precious metals are likely to remain stable, analyzing it for a longer time table is very important before taking further action. This year has been claimed as the golden year for precious metals. The increasing incomes will likely pull up the demand of precious metals too. As the law of supply and demand states, the limited supply and high demand of precious metals will likely push the prices of precious metals higher.
Gold Price for the Next Three Months
June – For the month of June, the predicted price of gold at the beginning is $1,266/oz with $1,301/oz as the highest price and $1,177/oz as the lowest price. When calculated, the average price is $1,246 dollars per ounce.
July – For July 2018, the expected price of gold at the beginning of the month is $1,239/oz. The average price is $1,226/oz since the highest price is $1,282/oz and the lowest possible price is $1,160/oz. The price of gold at the end of the month could hit up to $1,221/oz.
August – $1,221/oz is the estimated beginning price of gold for the month of August while $1,215/oz is the predicted price at the end of the month. The price of gold for the month is averaging at $1,217/oz with $1,276/oz as the highest price and $1,154/oz as the lowest price. Prices get harder to estimate the further out you project, so the actual values could be very different than shown. Unforeseen events, storms, political turmoil, etc. can impact the prices greatly.
The above data shows a decrease in the price of gold, nonetheless it is expected that it will change any time soon as the demand for it keeps on growing as months go by and the value that it holds never fades no matter how long the time is.
On the other hand, the price of silver will likely maintain its value and an increase is expected due to the demand of silver in different industries. It is predicted that the lowest price for silver could be $16/oz and the highest is $21.30/oz. This is due to the limited supply of silver, but the demand is amazingly high leading its price to likely increase within the next three months. Silver remains as an attractive and versatile option for people who cannot afford the prices of buying gold.
Like any other asset, the prices of gold and silver can sharply change from time to time, yet their importance will never go out of the way. Their importance will never change no matter what the price is in as much as their uses will never be wasted no matter what the form is.
Precious metals have become an integral part in man’s day to day living. Aside from being a commodity for market volatility and economic disturbances, precious metals are used in different industries to make different products that are widely used for the advancement and comfort of living. From electronic devices to medical and beauty products, precious metals are widely used. What other major areas are precious metals used?
Precious metals are some of the main components that are used in the aviation industry in order to manufacture aircraft engines. Commonly, precious metals are used in well over 20 parts of the aircraft engine including the blades, heat exchangers, vanes, etc.
Most household devices, like the refrigerator, mobile phones and computers contain precious metals. Sadly, the precious metals contained in these devices are disposable because once the device gets destroyed, recovery of the precious metal is almost impossible. The salvage and recovery industry is growing around disposing of old computer and phones, and then recovering the precious metals from the parts containing them. Also, catalytic convertors in automibiles.
Medical/ Pharmaceutical Advancement
The use of precious metals in the medical and pharmaceutical field can be clearly noticed in the past few years. This is because of the strong antibacterial properties which is extremely needed and useful especially in the medical field. They are used in a wide variety of medical and pharmaceutical products found in hospitals with the like of catheters, endotracheal tubes and hygienic coatings.
Surprisingly, the demand of precious metals used in the beauty industry is unwavering. Beauty products are embedded with precious metals, specifically gold because of its beautifying properties. Even makeups contain gold as the trend of glittering makeup is on the spot nowadays.
You read it right, there are foods that contain gold because of its healthy benefit. A restaurant in New York sells chicken coated in gold at a jaw dropping price, yet customers are still flocking into the store to have a taste of it.
Movie and Television Industry
Most costumes that are used in movies and televisions contain some level of precious metals. An example of this is the film Harry Potter wherein almost all costumes used greatly relied on precious metals.
Truly, precious metals are valuable assets in almost every walk of life. Their unending lists of uses is very evident especially in manufacturing and industry. It is not surprising that precious metals would continue to dominate the world be it as an asset or an investment. The use of precious metals in manufacturing processes and products has increased the sophistication and comforts of man’s living, thus the demand of precious metals will likely continue to increase.
Precious metals are treasures as old as time. Their significance has been known for a very long time. As time goes by, the demand for these precious metals keeps increasing, but the supply doesn’t tend to keep up with demand. Due to this, new and different methods have been employed to cater to demand.
What is refining?
Refining is the process of purifying an impure metal. It differs from calcining and smelting since in refining, the final material is commonly similar chemically to the original one, only with a purer final product. On the other hand, calcining and smelting involves chemical changes to raw materials.
Why refine precious metals?
You can have total control over your precious metals. Refining precious metals can actually be done at home, thus you can save money while having the overall control on what form you want your precious metal to be in. Most miners do not refine the metal themselves, but it is somewhat common for mining companies to melt down their isolated metals into crude bars which are more pure than the raw metals. Then those crude bars can be sold to a legitimate refinery who will further purify, measure, and smelt into precisely measured bars.
What are the methods of refining precious metals?
Low Mixed Content (Sweeps) Refining
This refers to precious metals with scrap that are mixed with organic or mineral components. These residues cannot undergo the process of melting, thus it requires a special process in order to refine it. The process involves the incineration of residue in a specialized ash producing furnace to eliminate the organic compounds through vapors. After which, the scraps are grinded and screened to separate the metals containing ash particles. It is then followed by homogenizing the precious metals with ash which is used to determine the exact precious metal content.
This process involves dissolving precious metals in aqua regalis to extract its content. Through their unique properties, these precious metals are then utilized when separated and recovered from the liquid.
This is the combination of specially made organic solvent which can facilitate extraction in a more efficient and effective method of refining.
Chemical refining is used as a refining process which makes use of the old way of separation methods like dissolving, precipitation, filtration and washing. Unlike any other refining method, chemical refining does not involve any representative sample but it involves the use of electrolytes and rinse water to determine the amount of precious metals contained in the scrap.
Precious metals can be considered as the most recycled commodity that ever existed. Their value is unceasingly evident all through nations and generations that every piece of it is important. The processes of refining are centuries old, yet it seems to remain as a secret to many. Recovering precious metals from scraps is of growing importance nowadays because of the increasing demand. It cannot be denied that precious metals will continue to carry high value come what may, thus the process …read more
Precious Metals and Oil have a History
Precious metals, especially gold, have long been known for their incredible value and powerful purchasing power all over the globe. They are considered the standard of value for any currency that is used anywhere in the world. They are often referred to as crisis commodity as people flock into them especially in times of economic and geopolitical turmoil as they serve as inflationary and deflationary protection.
Over the years, studies between the correlation of precious metals and other commodities such as oil have been a hot topic, which has been further ignited with recent global developments. Currently, the financial markets have become extremely complicated as new financial market strategies were introduced. This complexity lead to the correlation between prices of oil and precious metals. The price of oil keeps climbing higher due to the “artificial scarcity” of oil supply created by the Organization of Petroleum Exporting Countries (OPEC) and Russia despite the fact that the U.S. oil producers are exporting record levels of oil. What then is the relationship of the price of oil and precious metals? How does the price of oil influence precious metals?
First and foremost, oil and precious metals are both commodities that are greatly affected by inflation, dependent on the economic standing and the value of U.S. dollar. Moreover, the price of oil is somewhat accountable with inflation and the demand and prices of precious metals. On the other hand, it is affected by inflation which means that an increase in the price of oil signifies an increase in the prices of precious metals. In easier terms, these two have an inflationary relationship. A rise in the price of oil can lead to a rise in inflation. This is where precious metals enter the scenario, as they serve as a good hedge against inflation. Relatively, the prices of precious metals increase as inflation begin to rise, thus the prices of precious metals and oil have a direct relationship.
Politically and economically speaking, precious metals have played a very crucial role in the stock market. Precious metals, altogether with oil products are known as the two most important indicators in international markets – their prices as well as the demand for them significantly affects the economy and indicates whether the economy is healthy or not. Precious metals are known as the “run-to” assets of investors when inflation is gradually increasing and an economic and political instability is expected. An increase in the prices of oil even pressures inflation which causes precious metals to inflate as well. Hence, when then prices of oil fluctuate, a movement in precious metal prices is expected too.
The correlation between the two is strong.
Precious metals will always be a valuable commodity come what may. They will always be the so-called safety sources amid inflation or deflation. Oil and precious metals boost each other and their relationship is expected to remain strong in the coming years. One connection between them is the actual process of mining precious metals. Oil …read more
The Iran nuclear deal, formally known as the Joint Comprehensive Plan of Action, offered Tehran billions of dollars in sanctions relief in exchange for agreeing to stop its nuclear program. The deal laid out a lengthy process spanning over 15-25 years that would be supervised by an eight-member committee, including Iran, the United States of America, Britain, France, Germany, Russia, China and the European Union. The agreed-upon nuclear deal aimed at limiting Iran’s ability to produce a nuclear weapon, in exchange for the removal of various sanctions imposed on it internationally.
This agreement signed in Geneva states that the P5+1 namely China, France, Russia, the United Kingdom, and the United States; plus Germany will not impose new sanctions on Iran and will remove existing sanctions on oil, precious metals, auto parts and petrochemical products. And therefore, President Donald Trump’s decision of leaving the deal will have adverse effects on the current markets as sanction will be reimposed.
Iran is one of the largest Oil exporters in the world. Before signing the deal, Iran was prohibited from exporting oil to the rest of the world, but now since the US has already pulled out on the Nuclear deal, The sanctions have been returned therefore causing oil prices to spike as approximately 500K barrels a day of Iranian oil will come off the market since Iran and the US can no longer do business together because of this decision. And with oil prices spiking, a lot of commodities will also be compelled to increase.
Gold prices also dropped after it was decided that Iran could once again export the precious metal. The decline in tension in the area reduces the risks of investing money in this region and supports global market stability. But because of the US pulling out of the deal, most experts predict an increase on the prices of Gold while others still await further information on how the Gold market will react to such a decision. But most likely Gold prices will surely rise as Iran will no longer be trading on precious metals with the US.
One factor that will likely influence Gold to increase is the rise of inflation due to the oil price hike. This will likely cause a cost-push inflation where the dollar loses value due to the fact that companies have to pay more for things (oil) so they pass those costs onto consumers, thus making products more expensive. Gold and other commodities that are priced internationally in US dollars automatically cost more because you’ll need more of the newly-devalued dollars to purchase the same amount of gold.
Historically, oil prices have moved in tandem with silver prices. A surge in oil prices will likely drive silver prices even higher in the near future. The news that the Israeli’s provided helped boost silver implied volatility slightly higher. This level of implied volatility means that traders believe prices will move 18% from the current levels over the next 12-months. So it’s a good deal for silver as its price will …read more
An investor at times must decide which precious metal to invest in: gold and silver. There are times when gold is a better investment, and there are times when silver is a better investment. Why do they invest in precious metals? First, they hope that prices will continue to increase in order to gain money and second, they believe that other investments will decrease in value in the hope that they will not lose money. Which then is a better investment today, gold or silver?
The price of gold and silver significantly changes from time to time. Looking back on the past years, it cannot be denied that the price of gold is considerably more expensive than silver despite the fact that there is more above-ground gold than above-ground silver circulating in the market. Gold is seen as a more alternative currency especially when inflation begins to rise. Currently, the situation of the U.S. economy is gradually affecting the price of gold due to the declining value of the dollar – the price is going higher and higher. This makes the global hoard of gold higher than silver which reduces its volatility and further stabilizes the value of the asset.
On the other hand, silver serves the same function as gold but in lower price and higher volatility which makes silver a ‘safe haven’ for risk takers thus, silver is considered as the poor man’s gold. Furthermore, silver has higher industrial use than gold making silver more susceptible to economic booms and busts. The demand for industrial uses of silver is high in a strong economy, and weaker in a when the economy deflates, but unlike gold, most industrial silver is consumed and then thrown away which limits the amount of silver that can return to the market through recycling.
All in all, silver is considered a short-term investment while gold is considered as a long-term investment. Both gold and silver are extremely volatile commodities at times, and investing in them is not for investors with a weak heart. They are not products that you can trade any moment you want yet their prices can swing tremendously from one moment to another. Owning gold and silver can be a valuable asset in times of economic instability and can be a go-to commodity to balance your portfolio, especially in terms of dollar risk.
With the facts presented above, it can be concluded that it is better to own gold if the economy is jittery and own silver if the economy is stable. This is because silver serves as a better speculative asset, while gold is a better means of saving and protecting wealth.
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