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Why Indians buy gold

June 8, 2015

Here is an article written by our friend Jayant Bhandari that was recently published in the Northern Miner. Click here to visit the Northern Miner website for other great articles.

At around $1,200 per ounce as of May 19, gold has remained relatively steady over the last year and a half. Buying in physical gold markets has helped prevent further slides.

India in particular has been a major purchaser of physical gold. In 2009, the Indian government made headlines by purchasing 200 tons of gold from the IMF1 and Indian savers have been major buyers of gold on international markets.

Jayant Bhandari emigrated from India at age 36. Since then, he has kept a close eye on India’s economy and markets.

Earlier this year, he made a prescient call in Sprott’s Thoughts that the Indian stock market was likely to come down.

What is Jayant’s take on India’s demand for gold, and what does it mean for us?

Jayant sees gold becoming much more important in North America and Europe going forward, mirroring its role in India’s troubled economy.

Jayant writes:

People in India buy gold as a store of value. In my view, they don’t care about appreciation. In fact, they may not mind losing part of their purchasing power. They are desperately attempting to secure some of what they have.

Why are Indians turning to gold?

Individuals in India are recognizing that real yields from stocks, bonds, and real-estate will likely be negative. Gold offers a store of value that pays no yield, but when real yields are negative, gold becomes competitive.

Property, stocks, bonds, and gold

A whopping two thirds of India’s household savings are in property and gold.2 The middle class dumps savings into property to store wealth. Rental yields have been driven down to around 2% in Delhi and 3.5% in Mumbai as of 2013.3

A lot of the housing supply sits empty in the hands of middle-class savers.4 They won’t rent out property because they lack legal protection against tenants or illegal squatters.

Regular Indians face restrictions on taking their money outside of the country, so they tend to put savings into the Indian stock market for lack of options. Like property markets, Indian stocks pay paltry dividend yields of around 1.4%, according to the S&P BSE Sensex Index, which tracks India’s largest publicly-traded companies.5

Foreigners have entered a stock market that was already expensive, attracted by the appeal of the new Prime Minister, Narendra Modi. Many have viewed him as an economic savior, and driven share prices even higher.

Meanwhile, bond yields on ‘risk-free’ government bonds are around 8%,6 which shows how compressed the yields on stocks and real-estate have become.

The rupee is losing ground against the dollar by around 9% per year.7 Indian price inflation runs at around 9% per year as well.8 Yields are clearly too low to maintain purchasing power.

Until recently, shares and property prices were rising in real terms, so that savers were compensated for low income on investments with rising valuations.

Recently, stock market prices have begun to weaken. The Sensex is down around 7% from its highs in late January 2015.9

Without rising asset prices, stocks and real-estate fail to protect purchasing power for Indian savers. Bond yields are hovering around the inflation rate. This leaves gold as an alternative destination for savings.

Gold generates no yield. When yields overall are looking negative in real terms, the absence of yield is no longer a deterrent.

Besides the risk of falling asset prices, corruption runs rampant and the business environment is extremely challenging. You’re constantly under threat from fraud and extortion by authorities. This creates an additional need for keeping wealth out of harm’s way.

Indians aren’t speculators or ‘gold bugs.’ They buy gold because they’re willing to accept the absence of yields in order to preserve their wealth. Gold in rupees has not produced substantial returns yet, but Indians keep buying in order to move their wealth into a safer place.

‘Barbarous Times’ Ahead

Some call gold a ‘barbarous relic,’ after famed economist John Maynard Keynes used this term to describe the gold standard in the first half of the 20th century.

They’re right. Gold is a barbarous relic, but these are also ‘barbarous times.’

When risks outstrip potential returns, you’re more likely to lose money in investing than make money.

You’re willing to forgo returns, or even suffer losses, in order to preserve your wealth.

We’re beginning to see this behavior in the West too. In the last year, we’ve seen negative interest rates in Europe, despite a weakening euro.10

As economic growth stagnates in the West, asset price appreciation should also falter. The general investing population may realize that there is no growth, and that once the transitory phase of asset appreciation is over, real positive returns are likely to become scarce.

If investors discover that they are unlikely to earn positive returns on investments in stocks, bonds, or real-estate, the alternative of owning gold will become more attractive.

In a non-growth world, you can’t expect to make money on investments, so you need to look for ways of getting your wealth out of harm’s way.

As we’re seeing in India, gold can shine in these ‘barbarous’ times.

P.S.: Jayant Bhandari is never afraid to speak his mind about the corruption and sometimes ‘backwards’ culture he has come across in India, which he says create a risky business environment.

Jayant discusses these issues and more with a cast of speakers including our own Rick Rule in his yearly Capitalism and Morality get-together. Jayant’s mini-conference occurs August 1st in Vancouver, the day after the Sprott-Stansberry Vancouver Natural Resource Symposium. To find out more about this event, click here.

Many people try to find correlation between inflation and gold price, often using the U.S. dollar as their base currency. They ignore that the biggest gold consumers — in rural parts of India and China—are not driven by inflation in the U.S – See more at: http://www.northernminer.com/news/commentary-for-indians-gold-a-barbarous-relic-for-barbarous-times/1003661823/?&er=NA#sthash.pfavIrls.dpuf

Many people try to find correlation between inflation and gold price, often using the U.S. dollar as their base currency. They ignore that the biggest gold consumers — in rural parts of India and China—are not driven by inflation in the U.S., if at all they can conceptualize what and where the U.S. is. They are driven by their local circumstances.

Others “calculate” the value of gold by dividing the total fiat currency in circulation by all the known-gold above ground or the gold in the vaults of the central banks. The ranges of gold values they get are wild. Some have “calculated” values as high as US$30,000 per oz., or even higher.

Those who attempt to value gold based on the amount of fiat currency seem to cherry-pick a couple of variables from what is an extremely complex world of monetary transactions. What kind of fiat-money should you consider: M1, M2, M3 or M4, and why? What velocity of currency should you use? Would you use only one currency or the total of over 100 currencies in circulation around the world? How would you account for paper gold (including futures, options, etc.), the supply of which is limitless in comparison to physical gold?

Finally, there are people who chart the price of gold over a period of time, to show that the U.S. dollar has lost around 97% its value over the last century. While this is true, it is deceptive. To compare on a like-to-like basis, you must incorporate and compound the risk-free interest when charting the value of currency. You should also account for storage cost of gold.

So what is the prime-driver of the value of gold?

Perhaps the answer lies in understanding the minds of the biggest buyer of gold — Indians — and why they keep a very large amount of their savings in non-yielding or even deteriorating assets?

Gold, property and cattle

A whooping two-thirds of India’s household savings get parked in properties and gold. Any middle class person worth his name buys several properties. A large number of houses sit forever empty, deteriorating away. If he rents, rental yield — before accounting for property taxes, maintenance and the huge risk of losing it to the tenant — is 2%, much lower than the bond-yield of about 8%, making Indian property market among the most expensive anywhere. In comparison, Vancouver, Hong Kong and Beijing properties start to look cheap.

The Indian stock market, the current darling of the world, is trading at close to its all-time high, given massive euphoria after Narendra Modi came to power last year. But a closer inspection of the returns tells a sobering reality. Earnings yield is about 5%, lower than bond-yield of around 8%, making Indian stock market from value-perspective among the most expensive in the world.

Returns on equity (ROEs) are rather abysmal, in big as well as small ventures. India has 280 million cattle. Factoring in costs, the average return from owning cows is negative 64%. Why would people invest in what will lose them money? At the aggregate level market forces should have removed the losses, even if rural people did not understand economics.

Indeed, despite negative yields, there are sound economic arguments behind all of the above. This also helps in understanding the recent advent of negative bond-yields in many western countries.

Intelligence behind the madness

Between 1966 and today, Indian rupee has devalued against the dollar (which itself is a devaluing currency) from Rs. 4.76 to Rs 64, while applying heavy taxes on any nominal interest. Indians abhor this instrument and distrust the government or whatever it touches.

If inflation were the only problem of the Indian economy, people would not have invested so heavily in non-yielding or negative-yielding instruments. At the core, the reason is that Indian economy mostly offers negative yields.

India is a very uncompetitive economy. Investment opportunities are very few and far between, with the ever existing risk of losing everything. An Indian — educated or uneducated — instinctively knows that his wealth will erode away slowly.

I have no memory of an honest public servant in India. Corruption and bureaucracy is endemic. You must agree to being flogged, demeaned, and be treated like cattle. You almost never get what — based on rational ethics — belongs to you. Might-is-right is the over-riding, pre-rational ethic.

Formal businesses get lost in legal quagmire. The kind of people who can get into them need corrupt connections. Even if they can make money (which does not necessarily have a correlation with wealth-generation) such political hacks cannot be trusted to treat their investors with honesty and integrity.

But the state is only the tip of the iceberg. The underlying society is no different.

People do not rent their houses for the risk of never getting them back is extremely high. Corruption and dishonesty even in private enterprise is endemic. Socially if you can get away with occupying other people’s property, it is seen as fair game.

Workers are very badly trained, even when they carry advanced formal degrees. Absenteeism and low work-ethic is the norm. This is a result of superstitions and religion that completely dominate their thinking from an early age. With this as foundations, even advanced education can only sit in their minds as a set of beliefs, making it of limited value for creativity. Even in manual, routine work, productivity and quality to the utter frustration of trainers, stays at a fraction of what is expected. Such is the handicap created by pre-empting rational thinking through religious indoctrination.

Even after paying a mere $100 a month, one must ask if the productivity is worth such a “high” salary. The result is that in my city in central India, the shops are packed with Chinese goods.

The individual exists in a barbaric system, where everyone is after his money — and he is after other people’s money. In such a system, the concept of dishonesty is only seen as a legal handicap. The general conception of making money is not through wealth-creation.

I find it extremely difficult to find investment opportunities in India. Risk-adjusted returns are very uncompetitive, the reason why the government does not allow capital to leave the country, or it would in a heartbeat.

For the individual the thought often is not how to increase his wealth but how to lose the least.

The result is that the individual “invests” his money where he might lose the least. A non-yielding asset is better than those with negative-yields.

In a barbarous system one of the major choices is the “barbarous relic”, gold. This is what explains Indians’ propensity to buy gold, not some mythical expertise they have in monetary economics.

Why gold will become increasingly important in the West

Those in the investment community in the West have found themselves surprised by the recent advent of negative bond-yields in several countries in Europe.

Increased occurrences of riots in the U.S. to protest capitalism, to ask for increased welfare payments and more regulatory controls on businesses is nothing but a marked departure from the rational ethics of the West.

There is nothing special about India. What happens in India is increasingly happening in the West, as the latter is regressing to its pre-rational past.

There is a huge welfare system and a growing sense of entitlements, which after a few generations have come to be seen as “natural rights.” Environmental and liberal arts education has indoctrinated western kids to hate development. At a deeper level, this has increasingly made the societies in the west irrational and hypocritical. This harms their integrity and work ethic.

Over-taxed and over-regulated, and most importantly, with its rational underpinnings increasingly weakened, the Western world’s growth rate is falling to a meaningless number, even before you account for the huge risks that off-the-balance-sheet liabilities, and structural problems created by massive personal and public debts.

The risks on your wealth are increasing, so are regulatory controls over it. Most of what we own today is in electronic form and can be — and will be — frozen at a flip of an electronic switch.

No doubt Swiss bonds got sold at a high negative-yield, as people acclimatize, albeit unconsciously — as Indian cattle-owners do — to the new reality that losing a bit of your money to preserve the rest is “a good deal.” For the same reason, Euro-savers in search of liquidity have rushed to the over-priced US dollar.

Eventually, once the big money and technical momentum has over-priced the most liquid assets, it will start to over-flow into gold. People will then be thinking that no-yield is better than negative yields.

Jayant Bhandari is a mining analyst and an advisor to institutional investors. He writes often on political, economic and cultural issues and runs a yearly seminar in Vancouver called Capitalism & Morality. An expanded version of this article is available in the “Sprott’s Thoughts” section of www.sprottglobal.com. For more, visit www.jayantbhandari.com.

– See more at: http://www.northernminer.com/news/commentary-for-indians-gold-a-barbarous-relic-for-barbarous-times/1003661823/?&er=NA#sthash.pfavIrls.dpuf

Many people try to find correlation between inflation and gold price, often using the U.S. dollar as their base currency. They ignore that the biggest gold consumers — in rural parts of India and China—are not driven by inflation in the U.S., if at all they can conceptualize what and where the U.S. is. They are driven by their local circumstances.

Others “calculate” the value of gold by dividing the total fiat currency in circulation by all the known-gold above ground or the gold in the vaults of the central banks. The ranges of gold values they get are wild. Some have “calculated” values as high as US$30,000 per oz., or even higher.

Those who attempt to value gold based on the amount of fiat currency seem to cherry-pick a couple of variables from what is an extremely complex world of monetary transactions. What kind of fiat-money should you consider: M1, M2, M3 or M4, and why? What velocity of currency should you use? Would you use only one currency or the total of over 100 currencies in circulation around the world? How would you account for paper gold (including futures, options, etc.), the supply of which is limitless in comparison to physical gold?

Finally, there are people who chart the price of gold over a period of time, to show that the U.S. dollar has lost around 97% its value over the last century. While this is true, it is deceptive. To compare on a like-to-like basis, you must incorporate and compound the risk-free interest when charting the value of currency. You should also account for storage cost of gold.

So what is the prime-driver of the value of gold?

Perhaps the answer lies in understanding the minds of the biggest buyer of gold — Indians — and why they keep a very large amount of their savings in non-yielding or even deteriorating assets?

Gold, property and cattle

A whooping two-thirds of India’s household savings get parked in properties and gold. Any middle class person worth his name buys several properties. A large number of houses sit forever empty, deteriorating away. If he rents, rental yield — before accounting for property taxes, maintenance and the huge risk of losing it to the tenant — is 2%, much lower than the bond-yield of about 8%, making Indian property market among the most expensive anywhere. In comparison, Vancouver, Hong Kong and Beijing properties start to look cheap.

The Indian stock market, the current darling of the world, is trading at close to its all-time high, given massive euphoria after Narendra Modi came to power last year. But a closer inspection of the returns tells a sobering reality. Earnings yield is about 5%, lower than bond-yield of around 8%, making Indian stock market from value-perspective among the most expensive in the world.

Returns on equity (ROEs) are rather abysmal, in big as well as small ventures. India has 280 million cattle. Factoring in costs, the average return from owning cows is negative 64%. Why would people invest in what will lose them money? At the aggregate level market forces should have removed the losses, even if rural people did not understand economics.

Indeed, despite negative yields, there are sound economic arguments behind all of the above. This also helps in understanding the recent advent of negative bond-yields in many western countries.

Intelligence behind the madness

Between 1966 and today, Indian rupee has devalued against the dollar (which itself is a devaluing currency) from Rs. 4.76 to Rs 64, while applying heavy taxes on any nominal interest. Indians abhor this instrument and distrust the government or whatever it touches.

If inflation were the only problem of the Indian economy, people would not have invested so heavily in non-yielding or negative-yielding instruments. At the core, the reason is that Indian economy mostly offers negative yields.

India is a very uncompetitive economy. Investment opportunities are very few and far between, with the ever existing risk of losing everything. An Indian — educated or uneducated — instinctively knows that his wealth will erode away slowly.

I have no memory of an honest public servant in India. Corruption and bureaucracy is endemic. You must agree to being flogged, demeaned, and be treated like cattle. You almost never get what — based on rational ethics — belongs to you. Might-is-right is the over-riding, pre-rational ethic.

Formal businesses get lost in legal quagmire. The kind of people who can get into them need corrupt connections. Even if they can make money (which does not necessarily have a correlation with wealth-generation) such political hacks cannot be trusted to treat their investors with honesty and integrity.

But the state is only the tip of the iceberg. The underlying society is no different.

People do not rent their houses for the risk of never getting them back is extremely high. Corruption and dishonesty even in private enterprise is endemic. Socially if you can get away with occupying other people’s property, it is seen as fair game.

Workers are very badly trained, even when they carry advanced formal degrees. Absenteeism and low work-ethic is the norm. This is a result of superstitions and religion that completely dominate their thinking from an early age. With this as foundations, even advanced education can only sit in their minds as a set of beliefs, making it of limited value for creativity. Even in manual, routine work, productivity and quality to the utter frustration of trainers, stays at a fraction of what is expected. Such is the handicap created by pre-empting rational thinking through religious indoctrination.

Even after paying a mere $100 a month, one must ask if the productivity is worth such a “high” salary. The result is that in my city in central India, the shops are packed with Chinese goods.

The individual exists in a barbaric system, where everyone is after his money — and he is after other people’s money. In such a system, the concept of dishonesty is only seen as a legal handicap. The general conception of making money is not through wealth-creation.

I find it extremely difficult to find investment opportunities in India. Risk-adjusted returns are very uncompetitive, the reason why the government does not allow capital to leave the country, or it would in a heartbeat.

For the individual the thought often is not how to increase his wealth but how to lose the least.

The result is that the individual “invests” his money where he might lose the least. A non-yielding asset is better than those with negative-yields.

In a barbarous system one of the major choices is the “barbarous relic”, gold. This is what explains Indians’ propensity to buy gold, not some mythical expertise they have in monetary economics.

Why gold will become increasingly important in the West

Those in the investment community in the West have found themselves surprised by the recent advent of negative bond-yields in several countries in Europe.

Increased occurrences of riots in the U.S. to protest capitalism, to ask for increased welfare payments and more regulatory controls on businesses is nothing but a marked departure from the rational ethics of the West.

There is nothing special about India. What happens in India is increasingly happening in the West, as the latter is regressing to its pre-rational past.

There is a huge welfare system and a growing sense of entitlements, which after a few generations have come to be seen as “natural rights.” Environmental and liberal arts education has indoctrinated western kids to hate development. At a deeper level, this has increasingly made the societies in the west irrational and hypocritical. This harms their integrity and work ethic.

Over-taxed and over-regulated, and most importantly, with its rational underpinnings increasingly weakened, the Western world’s growth rate is falling to a meaningless number, even before you account for the huge risks that off-the-balance-sheet liabilities, and structural problems created by massive personal and public debts.

The risks on your wealth are increasing, so are regulatory controls over it. Most of what we own today is in electronic form and can be — and will be — frozen at a flip of an electronic switch.

No doubt Swiss bonds got sold at a high negative-yield, as people acclimatize, albeit unconsciously — as Indian cattle-owners do — to the new reality that losing a bit of your money to preserve the rest is “a good deal.” For the same reason, Euro-savers in search of liquidity have rushed to the over-priced US dollar.

Eventually, once the big money and technical momentum has over-priced the most liquid assets, it will start to over-flow into gold. People will then be thinking that no-yield is better than negative yields.

Jayant Bhandari is a mining analyst and an advisor to institutional investors. He writes often on political, economic and cultural issues and runs a yearly seminar in Vancouver called Capitalism & Morality. An expanded version of this article is available in the “Sprott’s Thoughts” section of www.sprottglobal.com. For more, visit www.jayantbhandari.com.

– See more at: http://www.northernminer.com/news/commentary-for-indians-gold-a-barbarous-relic-for-barbarous-times/1003661823/?&er=NA#sthash.pfavIrls.dpuf

For Indians, gold a barbarous relic for barbarous times – See more at: http://www.northernminer.com/news/commentary-for-indians-gold-a-barbarous-relic-for-barbarous-times/1003661823/?&er=NA#sthash.pfavIrls.dpuf
Commentary: For Indians, gold a barbarous relic for barbarous times – See more at: http://www.northernminer.com/news/commentary-for-indians-gold-a-barbarous-relic-for-barbarous-times/1003661823/?&er=NA#sthash.pfavIrls.dpuf
Commentary: For Indians, gold a barbarous relic for barbarous times – See more at: http://www.northernminer.com/news/commentary-for-indians-gold-a-barbarous-relic-for-barbarous-times/1003661823/?&er=NA#sthash.pfavIrls.dpuf
Discussion
41 Comments
    Jun 08, 2015 08:01 AM

    Jayant, you should read the daily news, amount of weddings in 2015 waaaay off

    http://www.bangkokpost.com/business/news/572731/demand-for-gold-in-india-seen-slowing

      Jun 08, 2015 08:50 AM

      Remember JJ

      You can’t trust the news because it’s all a conspiracy 🙂

        Jun 08, 2015 08:15 PM

        funny

        Jun 08, 2015 08:46 PM

        You can’t trust gold guru’s because its all based on conspiracy, lol

    Jun 08, 2015 08:15 PM

    You can’t trust a North American to tell you about the culture of gold and why it is an historical and cultural necessity in many nations,particularly India.

    Jun 08, 2015 08:55 PM

    All these comments are TOO FUNNY,.

    Almost as good as the one about the kid robbing the store.

    Jun 09, 2015 09:11 AM

    When one talks about savings and return, one should keep their purchasing power uppermost in mind.

    Over the last five decades the Indian fiat rupee has lost 99.5% of its purchasing power. What cost one rupee back in 1970 now costs 200 rupees and counting while gold has retained its purchasing power. When one looks at a longer time frame since WWII when India took the rupee off the silver backing, its purchasing power has dropped to 1/1,000, making the picture even more dismal.

    Which is why it is no wonder that the Indian savers promptly convert their inherently worthless paper currency into gold although India’s own coterie of Keynesian economists try everything in their power to discourage them with every ineffectual and counterproductive method they can devise and then express surprise when they fail big time.

    Jun 09, 2015 09:28 AM

    Having exposure to monetary history would help some of the North American day traders here figure out the players,their intentions and how silver and gold was and is used to rule the world:
    ” To understand our present situation in gold and silver, you MUST KNOW what happened in the past. Charles Savoie describes in great detail how Indian silver was dumped on the market to depress the price instigating the Great Depression:”
    http://srsroccoreport.com/wrecking-the-silver-monetary-system-silver-suppressors-hidden-in-the-dark-part-2/wrecking-the-silver-monetary-system-silver-suppressors-hidden-in-the-dark-part-2/

    Jun 09, 2015 09:11 AM

    India likely to keep lead over China in gold consumption – WGC

    http://in.reuters.com/article/2015/02/12/gold-wgc-asia-idINKBN0LG0A120150212

      Jun 09, 2015 09:43 AM

      I remember well Shad shortly after gold broke $1525 all the buzz was how much gold India and China was buying as it was on sale, just because something is on sale doesn’t mean its a good buy, and obviously all that pumping of massive buying faded with golds price falling another $200

        Jun 09, 2015 09:12 AM

        Yes, I don’t think this is the cure to the declines in Gold, as I’ve been pretty consistent that I think PM prices will slide in the summer (June/July/early August) since the beginning of this year. I just thought the article was relevant to this blog topic, and they are getting ready for Indian Wedding season, where traditionally there is a purchase of gold jewelry (regardless of whether it is on sale or not).

          Jun 09, 2015 09:22 AM

          agree Shad its just that all this buying from India and China and Russia has done what for the price of gold?

            Jun 09, 2015 09:28 AM

            I think the Indian/Chinese/Russian buying has just provided a soft floor for Gold so it didn’t fall out of bed. Really it is investment demand that drives the price, not jewelry or electronics. The price is also set in the paper markets and not the physical markets at present.

            I think the jewelry and coin demand in these countries is only relevant as the more that physical metal is being transferred from the West to the East, where it likely won’t see the marketplace again. When investment demand does hit its stride in the West towards the end of this year and moving into 2016, it may pressure the price upwards when ETFS and have a harder time getting supply back into the West. I am also curious how some of the new Asian gold exchanges may tilt the dynamics a bit.

            Jun 09, 2015 09:35 AM

            The central bank buying is of more interest to me than the jewelry market, and the growing interest in governments repatriating their gold. Obviously they see some value in the ole relic 🙂

            Jun 09, 2015 09:37 AM

            Yes the Asian exchanges are going to be very interesting going forward, as we know the goldbugs suggest it will remove the manipulation of the west, but how do we know that the last 4 years China has been the big seller of paper contracts as they buy physical, sell paper buy hard

            Almost everything if not everything suggested buy the gold bulls these past 4 years has NOT produced higher highs and higher lows on the gold chart, complete opposite!

            Jun 09, 2015 09:45 AM

            Yes. I agree with you there on the overall macro 4 year bear in PMs. However, there were counter-trend moves to the upside buried within this 4 year bear where things like the Swiss un-pegging from the Euro, the Canadian/Australian surprise rate cuts, and some of the gyrations in the currency & bond markets have provided short windows of opportunities for swing trading.

            The hard truth was that Gold and the miners got ahead of themselves in 2011 and I figured it would be a 3-4 decline to shake off the excesses. However, I’ve had a many great trades using PM stocks and ETF technicals to get in and get out to the upside and downside. This is the first timing period (ie this summer) where I feel there may be a probable bottom in the PM sector. I’ve been overall bearish for the last few years, with short periods of bullishness as warranted, and play both the upside and downside in the miners.

            Longer term, I am bullish on commodities in general and have been building positions lately in Uranium miners, Base metals like Copper, Tin, Zinc, Lithium & battery plays, and will be interested again in Oil once it pulls back a little further. Really I’d like to see to what depth we get a washout here, and where the dollar and bonds go over the next few months for better direction.

            Jun 09, 2015 09:50 AM

            I’m not smart enough to assume uranium as an example will produce great % gains so I trade the swings, long and short.

            Jun 09, 2015 09:59 AM

            I’ve been investing in the Uranium space for about 6 years, and the bear market there has been more brutal than the PM one, but it wasn’t based on investment demand or jewelry or coins or gurus or economists. It was the Fukushima disaster that threw a wrench in the nuclear power renaissance. It is my perspective that we have already bottomed in this commodity, and there are major supply/demand metrics here that will be coming into play over the next few years.

            I’ve posted lately that there are 3 different merger and acquisitions that I am part of in the Uranium space all at the same time at present, and this foretells the bigger players going bottom fishing for assets, reserves, and insitu-mines.

            The spot pricing in the $28-$38 range has not made it economic for any mine to put out “un-hedged production”, but most of the producers like Cameco, Areva, Uranium One, Energy Fuels, Uranerz, and Ur-Energy have spot contracts in the $52-$60 range (that all expire in 2016 or 2017). We’ll see a sudden jump in Uranium spot price next year as a result, and I want to be positioned properly before that happens.

            Jun 09, 2015 09:02 AM

            Jump to 30:15 into the interview above and hear Marin Katusa’s thoughts on the Uranium Sector (5 minutes….and it is followed by a few minutes on Oil). Very good overview of the sector, reactors coming online in Japan, China, United Arab Emirates, his addressing several countries in their uranium outlook and World Nuclear Fuels Market conference. Good stats in that section of the bright future of nuclear energy and the uranium demand picture. His pick of the litter is Uranium Energy Corp (UEC) which is unhedged and has the most upside to higher prices, and it is really far more liquid than any other Uranium miner other than Cameco.

            Marin Katusa: On Leaving Casey Research & Why Speculating Is All About Private Placements — BY COLLIN KETTELL ON JUNE 07, 2015

            http://palisaderadio.com/marin-katusa-on-leaving-casey-research-why-speculating-is-all-about-private-placements/

            Jun 09, 2015 09:03 AM

            Sorry, I had posted that link in another piece above those comments. The link to Marin Katusa was at the bottom. Go to 30:15 seconds in.

            Jun 09, 2015 09:05 AM

            Seems Sprott is a pumper in every sector as he had an anal’yst suggesting $250 U308 and then $500 uranium far before the Japan accident it was around $125 U308 years ago.

            I’m a momentum trader so until the street is behind uranium again I’ll watch, seen far too many investors years ahead of the heard sitting in dead money waiting for the street hedgies to join in, good luck

            Jun 09, 2015 09:17 AM

            Keep an eye on the miners (not Uranium Participation Corp or ETF URA).

            Cameco, Uranium One, Uranium Energy Corp, Energy Fuels (merging with Uranerz this month), Ur-Energy, Paladin, Denison, Uranium Resources are the main players. Fission is the most loved explorer, but there are other good takeover targets.

            For the balance of 2015 and heading into 2016 I expect the pace to pick up in the space and have been watching it daily for the last 6 years. Once the news of Japanese reactor restarts solidifies, it’s on.

            Jun 09, 2015 09:25 AM

            Good luck to you, CCJ chart, that’s why I trade everything, what was support is resistance in play now

            http://stockcharts.com/h-sc/ui?s=CCJ&p=W&yr=4&mn=0&dy=0&id=p86614805704&listNum=1&a=411577714

            Jun 09, 2015 09:36 AM

            Yep, I just got part of that move from the mid $16s to the lower $17’s in Cameco, but then took profits and got right back out anticipating that drop. I’m much more interested in leverage of the smaller producers though. Cameco is like the GoldCorp of Uranium and is a bit tame for my tastes.

            Jun 09, 2015 09:45 AM

            Global demand for yellowcake needs to be very, very strong as Cameco is going to be ramping up production of Cigar Lake BIG time over the next few years supplying all the U308 the world needs

            This situation is not nuclear positive, what a continued mess

            http://www.zerohedge.com/search/apachesolr_search/fukushima

            Jun 09, 2015 09:50 AM

            Did you listen to the audio segment from Marin Katusa up above. The demand is going to be insane over the next few years, and Cigar Lake is not even going to come close to being enough for global demand.

            Here is another article the Marin posted last month, the bottom half is all about Uranium supply demand metrics.

            The Clintons, the New York Times, Uranium and the Truth

            http://katusaresearch.com/the-clintons-the-new-york-times-uranium-and-the-truth/

            Jun 09, 2015 09:57 AM

            This one is not as thorough as the ones above, but it has a few good points in it.

            Marin Katusa: Focus on North American Uranium Stocks

            http://uraniuminvestingnews.com/22154/marin-katusa-uranium-stocks-north-america-cameco-fission-brazil-resources-areva-uec.html

            Jun 09, 2015 09:28 AM
            Jun 09, 2015 09:32 AM
          Jun 09, 2015 09:06 AM

          Sorry Shad as I’m not saying this because everyone here thinks I disagree with everyone else, lol

          Your making a great bullish case and even if you were making a bearish case my approach is the same I trade the chart, CCJ is the GG of the U space, like gold its making lower highs and lower lows

          Good luck to you!

          http://stockcharts.com/h-sc/ui?s=CCJ&p=D&yr=2&mn=0&dy=0&id=p17361217157&listNum=1&a=411583369

    Jun 09, 2015 09:03 AM

    Just because you are told ad infinitum that the dollar is ‘as good as gold’ and that Fort Knox actually has relevance does not mean it is true. Just because you are told that American stock markets go up forever and the Fed Fiat unit is going to remain the world’s reserve currency does not mean it is true.Just because India,Russia and China are buying all the gold the western banks will dump does not mean the price does not fluctuate. What it does suggest is that common sense is in short supply by westerners,in particular,in large part because they have not yet suffered and been turned over like most of the rest of the world has been.

      Jun 09, 2015 09:20 AM

      Matt in all honesty what it tells me is everything you mention means a lot and it means nothing. There are a 1000 reasons why gold should be higher and a 1000 reasons why it should be lower, I don’t invest off reasons, I invest off price action on the charts, if it suggests gold is going higher I’m long, lower I’m short. It leaves all the common sense out of trading as those applying that to gold these past 4 years have been very disappointed as those in India and China since $1525 fell no very well common sense means nothing, price is everything!

    Jun 09, 2015 09:37 AM

    JJ, I am privy to the #1 Gold Market Timer’s recommendations (as per Timer’s Digest).
    Just because gold is in the process of bottoming now does not mean I am a trader. What it means is that I buy more.The gold I bought before at higher prices I do not and have not sold. Why? Because gold is the one form of portable,globally accepted currency that will allow me and my loved ones to survive should calamity befall us all. History dictates this is so,common sense tells me not to think that this time,meaning here and now,is any different than any other time in history.

      Jun 09, 2015 09:47 AM

      And that’s the only difference between you and me Matt, you buy fire insurance/gold, I trade it all the way up and all the way down.

      Hope you never need your insurance!