PREPARE FOR DOLLAR COLLAPSE WITH PHYSICAL ASSETS – RICKARDS

In an excellent interview with Bloomberg, Jim Rickards correctly states that the Fed is completely insolvent on a mark to market basis, that the stock market is up over gold since 2010 because The Fed is manipulating stocks up and gold down, and urges investors to prepare for a dollar collapse by rotating OUT of stocks, and into PHYSICAL assets.

Gold has eked out further gains today and is trading near its highest in 2 and a 1/2 weeks. It is on track for its best week in a month after equities fell sharply and due to renewed concerns that the U.S. Federal Reserve continuing their unprecedented ultra loose monetary policies.

Spot gold was steady at $1,322.10 an ounce by 11:37 GMT, after three straight days of gains. The precious metal is up 1.4% for the week, having hit a high of $1,324.40 on Thursday – its highest since March 24.

Gold looks set to continue its recovery from last year’s battering due to still robust demand from India, China and increased safe haven demand due to much more pronounced geopolitical risk. The technicals have reversed and they and momentum are favouring gold again.

Bullion, already supported by significant tensions between the West and Russia, got a further boost on Wednesday when the Fed’s March meeting minutes showed that the Fed are not keen on increasing interest rates straight after the wind-down of bond purchases.

Certain members of the Fed appear to realise that the economy and asset markets are now very dependent on near zero per cent interest rates and continuing debt monetisation.

Gold in U.S. Dollars – 2 Years (Thomson Reuters)

The Fed’s tapering is largely priced into the gold market. What is not priced in is the real possibility that a weakening U.S. and global economy will lead to the Fed having to increase QE to previous levels and possibly even increase QE above the $85 billion level. The market is completely discounting this and we believe that this is a not negligible risk.

Quarter ends appear to be a good time to buy as seen on June 28th 2013, December 31st 2013 and now on March 31st, 2014.

These anomalies would appear to more than coincidental. They may be due to traders painting the tape or manipulation through HFT and computer trading. Goldman Sachs have been very vocal in their bearishness on gold at quarter ends. It is worth considering whether there is an attempt to “jaw bone” gold prices lower.

Silver continues to be favoured by contrarian investors who see it as oversold and very undervalued vis a vis other assets, including gold.

Gold Silver Ratio – 1996 to April 2014 (Quarterly) – Thomson Reuters

The gold/silver ratio is now at 65, meaning that with one ounce of gold, one can buy 65 ounces of silver. The historic average throughout most of history is 15 to 1. Even in the 20th Century, the century in which silver was demonetised, the gold silver ratio averaged around 40.

We believe the ratio will revert to the mean average again in the coming years. There are a number of reasons that silver should revert to the long term historical mean but the two primary ones are the fact that geologically in the earth’s crust there are fifteen parts of silver to every one part of gold.