September 8, 2011
By Kevin Michael Grace
In the bad old days, it was popularly believed that the monarch’s touch could cure scrofula. Thank goodness we have put such superstition behind us. Our modern rulers believe merely that their words can cure the economy. Responding to the decision of the Republican Party to not offer a rebuttal to President Obama’s jobs speech today, former Speaker Nancy Pelosi retorted that this “silence” would “speak volumes about their lack of commitment to creating jobs.”
Lest this space be accused of partisanship, it should be pointed out that the Republicans share the delusional Democratic belief that not a sparrow falls to the ground without some politician’s blessing. At last night’s Republican debate, Rick Perry and Mitt Romney went at it hammer and tongs over the question of which of them had triumphed in “creating jobs” in their respective states.
Zero Hedge contrasts the inanity of the 2011 Republicans with the stirring words of Ronald Reagan in his TV address for Barry Goldwater. Yet for all his talk of limited government in 1964, in 1980 candidate Reagan famously affirmed his belief that the economic prosperity of the United States of America was the personal gift of the sovereign. “Are you better off than you were four years ago?” he taunted Jimmy Carter. “Is there more or less unemployment in the country than there was four years ago?”
That this hubris is a worldwide phenomenon can be demonstrated with reference to the European Union, which began in 1958 as a simple free-trade zone but now threatens to become the United States of Europe. Former Chancellor Gerhard Schröder’s bellicose demand is certain to reinforce memories of an earlier Chancellor’s New Order, but all the king’s horses and all the king’s men will not be able to put European fiscal union together. They will try, even as their political support collapses, but they will fail. And this is good news for gold.
As Mike Shedlock writes, “Gold has been inversely correlated with the dollar most days, reacting to credit stress news in Europe and Swiss franc gyrations more than anything else… If the crisis in Europe is over, gold will pull back hard, regardless of what the dollar does and regardless of what Bernanke does.”
Of course the Eurozone Crisis will not end until the Euro collapses, or the PIGS are expelled. In the meantime, the casualties mount. Proud Switzerland has been forced to yoke its franc to the Euro donkey, leading George Maniere to exclaim, “With the Swiss stepping down as the world’s safe haven currency, gold is now the de facto safe haven currency. Lest there be any confusion there is now one king— gold. So I say, ‘Long Live the King.’”
At press time, gold traded at $1,870.50 per ounce, with silver at $42.40. Gold has almost entirely recovered from the mini-crash that followed news suggesting “the crisis in Europe is over”— or at least quelled. That gold fell just as the Swiss abjured the safe-haven crown struck some as suspicious. Hinde Capital CEO Ben Davis said, “Why was it [gold] selling off just ahead of a really bullish announcement? You have to believe that there was some coordinated action. When I say that, the central banks will all have been in on knowing ahead of time that the Swiss were going to announce this. So there was central bank selling because they really didn’t want the price of gold to skyrocket on what is incredibly bullish news for gold.”
No doubt there are many who believe talk of “gold suppression” fits its speakers for tin-foil hats. The Chinese government, for what it’s worth, disagrees. GATA reports that Wikileaks has released a 2009 cable from the US Embassy in Beijing to Washington summarizing official Chinese opinion: “The US and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the US dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the US in maintaining the US dollar’s role as the international reserve currency.”
Or as Marc Faber told Bloomberg Tuesday, “When you buy gold, it’s an insurance against systematic failure and problems in the financial markets.”
For those who wonder when gold miners will begin to profit from this insurance, that time may be at hand. The International Business Times reports that, according to CIBC, the “pendulum has swung in favor of equities instead of bullion.” Analyst Tom Wallis predicts, “Lag effects associated with equities in past rallies suggest that the market will start to discount operational risk when the market risk of the underlying commodity is high. We are approaching these levels.” Specifically, “Wallis says the best performers will be smaller-capitalization gold miners. In that vein, he upgraded San Gold and Banro to Sector Outperformer.”
At Minyanville, Jeb Handwerger chimes in, “Promising explorers…will grow increasingly attractive as acquisition targets for the older majors.” Ivan Lo at Equedia agrees, “Once the majors get rolling, the juniors will follow as buyouts and takeover rumours begin. The majors will take advantage of beat up juniors, and this will fuel speculation into that market segment. Then the triple digit returns will begin.”
Seeking Alpha features Osisko Mining, Allied Nevada and First Majestic Silver and concludes that the first “has one of the best management teams in the gold sector,” of the second, “For the next several years this stock is likely a winner” and that the outlook for the third is “very bullish.”
And at the Globe and Mail, Dave Price’s September 8 small-cap stocks to watch include Silvercorp Metals, which has rebounded as it rebuts an anonymous accusation of fraud, Aurizon Mines and Pacific North West Capital.
Finally, the Sun News Network’s always entertaining Ezra Levant laments the media’s failure to pay more attention to President Obama’s “exotic” extended family. Be careful what you wish for, Ezra. Obama’s Auntie and Uncle are already in the US of A. Bring over Granny Sarah from Kenya and half-brother Mark from China, and you’d have enough Obamas for a reality show. From the press release, “E! Network is proud to present a new show of Capitol importance, debuting November 8: Obama’s Family Hood. Can four Presidential relatives live together without driving each other crazy?”