By Steve St. Angelo
CRITICAL FACTOR #5: Nationalization & Monetization of Precious Metals
Unfortunately, the majority of the public gets their news from the TV and mainstream media. From this perspective, gold is only something to be hocked at the pawn shop or to be sold to those rip-off gold dealers advertised on late night TV. Silver, on the other hand, is totally off their radars altogether. Very few individuals understand the real reason to buy and hold precious metals.
Currently, the world is witnessing the disintegration of the global fiat monetary system. The 40+ year experiment in the global reserves status of the US Dollar is presently experiencing serious side effects. China and India have decided to ignore the U.S. sanctions on Iran by going around the international SWIFT system of monetary transactions, by purchasing oil with gold. That’s right, using the worst four-letter swear word in the book according to the Federal Reserve – G.O.L.D.
As the world continues to go down the path of printing its way out of debt, the fundamentals of gold and silver become even more important. Countries that have a great deal of foreign investment and ownership in their domestic gold and silver mines may be forced to rethink these arrangements when the world fiat monetary system finally dries up and blows away.
Some have seen the writing on the wall and have taken necessary measures already. In 2011, Hugo Chavez nationalized the gold mines in Venezuela and at the same time, repatriated all Venezuelan gold from foreign banks. Argentina has decided to gain control of its energy resources by taking a 51% interest in YPF, a Spanish oil and gas company – the largest in the country.
Furthermore, Indonesia announced a 25% increase in export taxes earlier this year on foreign coal and base mining companies that could jump to 50% by 2013. Again, as the global financial situation becomes grimmer in the future, countries may be forced to nationalize their resources as the global economy switches its system from exchanging paper money for goods to trading goods for goods.
If we look at the global production of silver in 2011, we can see that the majority of its supply comes from countries that may be the most at-risk in nationalizing their resources in the next several years.
Mexico and the countries in South America produce the lion’s share of the world’s silver production (366 million oz). Anyone who has been investing in and reading about gold and silver for the past several years knows who Hugo Salinas Price is and what he is attempting to do in Mexico. Hugo has been gaining support in his effort to introduce the Silver Libertad as a form of competing currency in Mexico to help protect its citizens from the ravages of high inflation in its Peso.
Mexico is the number one silver producer in the world, supplying 153 million oz in 2011. The majority of this silver is exported, but that could change rather quickly if its citizens’ faith in fiat money disappears.
China and Russia have been the predominant suppliers of government silver sales over the past several years. However, in 2011 this supply declined substantially to only 11.5 million oz compared to 44.2 million oz the previous year.
In reality, no country is safe against the threat of nationalization when the central banks of the world are no longer capable of kicking the fiat can down the road. At some point in time, more of these countries shown in the chart above may be forced to nationalize their resources; making the availability to acquire cheap silver a thing of the past.
Conclusion and Final Remarks
There is a war going between those who favor gold-silver and others who are clinging onto the last remnants of the US Dollar. The tactics utilized by the fiat monetary authorities in this campaign have been strategic dumping of massive gold and silver contracts, as well as the control of market sentiment by negative hit pieces put out by MSM analysts.
While the conspiracy to manipulate the precious metal markets is more than likely being accomplished by only a select few, the majority of the damage is taking place in computer algorithm trading programs and through clueless analysts who get paid to regurgitate the information that is spoon-fed to them.
One of the examples to persuade investors that the price of silver will be heading lower is a chart showing increased COMEX silver inventories. I proved why this theory was faulty by providing historical examples where these changes resulted in no significant changes whatsoever.
I went into detail explaining several different factors that will impact silver in the future. I believe the most important factor will be the peaking of global oil supplies and declining net oil exports. As world oil production declines along with net exports, significant stress will put on an industry that is reliant on diesel to power its operations.
Another factor relating to the energy situation is the phenomenon of falling average ore grades. As mines age, average ore grades also decline necessitating the mining company to consume more diesel just to keep silver production stable. This may seem insignificant when we consider a few operations, but becomes a great deal when realized as a global phenomenon.
Analysts spend a great deal of time putting together metal reports that forecast silver production that will occur in the next decade(s). They produce these reports from the information obtained from mining companies that have proven reserves and resources in the ground along with a timeframe to reach commercial production. There is little or no effort in analyzing on whether or not the industry will have the required energy to run their operations.
Even though global silver production is forecasted to increase in the next decade, there is growing evidence that there may not be the adequate future diesel supplies to enable the mining industry to attain this goal. This will be discussed in greater detail in my following article that focuses on energy consumption in the gold and copper mining industry.
Finally, as the lights continue to go out for the world’s reserve currency, the US Dollar; trade wars escalate and threats of nationalization and the monetization of the precious metals become increasing probabilities. All these are critical factors that will impact silver in a negative and positive way – negative for those who hold a sweaty palm of Federal Reserve Notes and positive for those who have decided to own the precious metals.
In reality the best tactic for those who put their faith in the oldest forms of money in the world is to purchase and take delivery of the physical metal.
Read the whoe article:
http://www.tfmetalsreport.com/blog/3738/guest-post-critical-factors-will-impact-silver
No comments:
Post a Comment