rear view mirror...

Good morning folks and welcome to another wonderful Wednesday! Can you believe it? September is all but history. Time seems to be really speeding up for us. I woke this morning with Beverly Bremers singing her hit from 1972 “Don’t Say You Don’t Remember.”

So when I say September is basically in the rear-view mirror and we are talking precious metals, the entire month seems to be all but nonexistent. Gold and silver closed up at $1,320 and $17.54 on August 31st and last night they closed at $1,293 and $16.79 respectively. A whole month gone by and nothing to show for it.

Silver December futures were selling as low as $15.245 and gold futures are selling on the COMEX currently in the $1,290 range, it looks bleak for either to gain much traction at the moment. I believe that both metals are being held back by Janet Yellen’s latest speech where she stated "My colleagues and I may have misjudged the strength of the labor market, the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation." However, a paper released this week from the San Francisco Fed stated that many economists are worried that a lower neutral rate is limiting their monetary policy options and that a rate increase before the end of the year needs to be kept on the table to give them a way to fight a recession.

Have you watched the movie “The Big Short?” We watched it on Netflix the other night and its great movie about the shorting of the housing bubble back in 2008 and how some investment firms profited by the collapse of the market. Today, you find the big investments banks shorting precious metals. Yes, they buy futures on the precious metals exchanges betting that the price will continue to fall. They do this with what is called “paper gold” and “paper silver.” It’s precious metal without the metal. Ha!

Back in 2015, there were 293 ounces of “paper gold” for every ounce of physical metal. In 2016 that number had climbed to 542 ounces of “paper gold” and today it has skyrocketed to over 1000:1. Silver is no different. Both metals are used as investment vehicles and although initially the metal had to be reconciled to the paper at month-end, that’s no longer the case. Today there are hundreds of gold and silver stocks based only on paper. It’s really a scary situation when you consider all of the gold in the entire world would only fill three Olympic size swimming pools and yet 346,000 contracts worth 34,600,000 ounces of gold traded hands yesterday! It is freakin magic!

So, in a nutshell, I’m not seeing any support for gold and silver prices through the end of the year. Yes, we can have a “flash” as we saw the week of September 8th where the prices looked to be gaining traction, but losing it again in subsequent days.

Let’s hope for a better October. Without a Scary Halloween!