June 11, 2019
The Miles Franklin Newsletter
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From The Desk Of David Schectman
David's Commentary (In Blue)

Are you feeling queasy about the price of gold this week? It topped out at $1,342.70 last week and here it sits at $1,328.50, down $20. Should we be worried? As always, take a deep breath, take a step back and put things into perspective.
One thing stands out. At $1,328.50 gold has held its own in each of the above time frames for the last 10-years. Gold did very well considering most of the last 10 years were characterized by a strong economy, a strong stock market, low interest rates, low unemployment and lots of optimism with the onset of the Trump presidency.
 
We are talking about our financial insurance asset here, not a hit-or-miss speculation like Bitcoin or pot stocks, the most recent hot investment ideas. Back in the last decade, it was Uranium stocks and rare earth stocks that were the darling of the investment world. Catch them early and you can make a lot of money. I did with rare earths. But what the gods give the god’s can take away. And they always do.
 
Here is what gold looks like at its recent peak. A correction was overdue.
The MACD (the bottom of the graph) is very oversold. The RSI (top of the chart) is in oversold territory. Gold was due for a correction. A pullback. The thing I will watch carefully is whether the $20 drop stops here – or continues to correct further. But it is no surprise.
 
Here is another interesting chart. There are two things that stand out here. First, someone does not want gold to pass $1,350. Second, gold wants to pass $1,350 and you can see it by the higher lows as shown by the rising pink line on the bottom of the graph. Something has to give.
The reality in the financial markets rests on today’s headlines. Talk about a fickle market. The computer-driven funds rush in and out of stocks and sectors at "the drop of a hat" (otherwise known as), a comment by a Fed governor or a tweet by Donald Trump. One day it is tariffs on Mexico and stocks go down and gold goes up. The next day Trumps says a deal has been reached and stocks go back up and gold goes down. We are not talking about reality here – just comments that often are not based on facts or reality. Get used to the up down up ride in all the markets. 
 
Here is a quote I borrowed from the JSMineset website.
From Keynes’ dismissal of gold as a “barbarous relic” to Warren Buffett’s myopic assertion that gold is useless, we’ve seen smear campaigns before. None has made any material difference.
 
The truth is that gold does have many uses. This includes, as others have pointed out, its use in the electronics used to mine Bitcoin.
 
At the end of the day, reality matters, and the fact is that gold is valuable.
 
Beyond that, I don’t think it’s true that Millennials will never “get” gold. In fact, they’re quite used to the idea of gold being tangible value. It’s deeply entrenched in most cultures around the world. It’s in our movies and books. It’s in our wedding rings and gifts.
As long as I’m throwing out quotes, here is one from Doug Casey that makes the point that gold is the only financial asset that is not simultaneously somebody else’s liability.
The dollar is literally an “IOU nothing.” It’s true that your grocer and your barber have to accept the dollar because of “legal tender” laws, and because they currently wouldn’t know what else to take in payment. But that’s not true of foreigners, who own something like six trillion dollars.
 
Paper money is an excellent means for governments to tax people indirectly, surreptitiously, through inflation. That’s one reason central bankers love paper money, but also, phony economic theories, like those of John Maynard Keynes, hold that the government not only can but should meddle with the economy, and the ability to print paper money gives them a means to do that.
 
In today’s world, not only do people around the world take it for granted that paper is money, but that it should be so.
 
But it’s all nonsense. After the current system collapses, as every paper money system in the past has collapsed, some form of money will have to replace it, and it’s almost certainly going to be gold.
And finally, one from Ed Steer
Despite the engineered price declined in gold and silver yesterday, I'm still of the opinion that this sell-off is of a temporary nature -- and I was pleased the way that the precious metal equities performed...all things considered.
 
But one shouldn't underestimate the treachery of JPMorgan et al -- and I suppose something worse can be envisioned, but somehow I don't think that's in the cards. But with the next FOMC meeting a week away...who knows. As always, we'll just have to wait some more.
We are surrounded by illusions. Low inflation, low unemployment, a strong economy, no interest in gold, and here is one that is actually worth paying attention to:
Gold is out of favor with the general public but central banks are in a buying frenzy now. The rush to gold is led by China, Russia and lately Turkey. This bodes well for the long-term demand of gold and will bolster its position as a store of value. 
 
China mines more gold than any other country and doesn’t sell any of it. Plus, they are buying many tonnes of gold on the open market. Perhaps they understand that we are already in the early stages of the coming currency crisis and know that gold and silver are the ultimate safe havens, worldwide.
 
Maybe its time to increase purchases beyond a “hedge” and position ourselves ahead of the rush to safe money that is coming. The recent move toward trade wars and tariffs and currency wars is just the beginning, the canary in the mineshaft.
 
In the post 2008 economy everything is bass-akwards. The stock market is dragging the economy along when it is supposed to be the economy that is dragging the stock market forward.
 
This is all the result of the Fed’s lose money and low interest-rate policies that were first unleashed by Greenspan and then picked up by Bernanke. The Fed will never see our markets as a “bubble.” They have convinced themselves that inflation is not a danger. All they want is more and faster growth and they are constantly telling us that inflation is too low. This has been going on for more than a decade.
 
Ten years ago when the Fed came up with a new financial concept, QE, Jim Sinclair said it will be QE forever. They cannot exit it. These policies can be implemented but can’t be exited. These “Geniuses” are clueless. It really is pretty frightening that we allow unelected bureaucrats to decide how to micro manage and run our economy. They have unleashed a series of never before tried monetary concepts – QE, NIRP, ZIRP, etc. and no one has a clue how these policies will play out or how long it will last. Do not assume that the Fed will do the obvious thing. They have shown that they do not have any common sense and are not acting in a rational manner. 
 
Recently the Fed tried to exit, but they can’t. They talked about 3% growth in the fourth quarter, but that was a lie. It was inventory build-up and when the economy started to roll over they started cutting rates (again). QE forever.
 
You can only imagine the shock that the younger people are in for because they only know success, which is riding on the Fed’s low interest wave for the last 10-years. They perceive the market as riskless and assume it will continue forever. And you wonder why the price of gold is so low? 
 
Low rates are here to stay because the Fed can’t raise them. People should be asking, “Why aren’t they working?” They were the Fed’s answer to all of the markets problems. One thing we do know; at some point the stock market will be ripped apart. My guess is that we will see it start sometime between this summer and the end of the year. The Fed will do what they always do, they will fight it. They will continue to monetize. Sooner or later people will catch on and they will react to the inflation that is knocking the door down. They will understand because they will see prices rising. They will finally understand what we already do, that the CPI is rigged and is not an indicator of the inflation that is really out there. At some point, the stock market will start to correct and the momentum will build on itself. Then, everyone will seek out “risk assets” - like gold.
 
I think we are on the same page as Peter Schiff. He said, “Everything the Fed said about normalizing rates was a lie.” “The Fed is going to give the addicts on Wall Street more of the heroin…except inflation is going to crash that party. A dollar collapse is going the crash that party.”
 
Meanwhile, China buys the most gold in over three years amid “Determined Diversification” from the dollar. China continued its renewed public gold-buying spree in May, adding almost 16 tons of gold to its reserves, the biggest monthly increase since January 2016.

China continued its renewed (public) gold-buying spree in May adding almost 16 tons of the precious metal to its reserve - the biggest monthly increase since January 2016.
 
"It's a diversification away from the U.S. dollar, particularly given the trade tensions and the potential technology cold war that's evolving," said Bart Melek, global head of commodity strategy at TD Securities.
 
"We have to remember that gold is nobody's liability."
 
This is the sixth straight month of buying since China's publicly reported pause.  
While this figure is hotly contested as being an underestimate of Chinese State's actual gold holdings, its the only figure available, and whatever the real number, its notable that the Chinese government has revived the trend of announcing physical gold purchases each and every month.
 
As  Bloomberg  reports, the rise reflects the government's "determined diversification" away from dollar assets, Argonaut Securities (Asia) Ltd. analyst Helen Lau said, adding that retail demand has also picked up. At this rate of accumulation, China could buy 150 tons in 2019, according to Lau.
 
Finally, as  BullionStar.com 's Ronan Many recently noted, with China in one of the driving seats of the world's physical gold market, along with India and Russia in the other, it is opportune then that the London Bullion market Association (LBMA) has chosen Shenzhen in China as the location for its annual conference this coming October where they should have plenty to talk about as China's gold market continues to fire on all cylinders. It also raises some questions such as why the international gold price continues to be established by the paper gold markets of London and the U.S. COMEX. Maybe China prefers it that way.
 
This is just more gold that China has had on its books for years -- and is now putting it into its official reserves in dribs and drabs...as I reported this time last month. This  gold-related  news item was posted on the  Zero Hedge  website at 11:15 a.m. EDT on Monday morning
And India joined the gold buying party too.
 
India, the world's second-biggest consumer of gold, bought almost 50% more gold in May than it did a year earlier,  Scrap Register  reported Friday. According to the report, India imported 116 tonnes of gold, compared to 78 tonnes a year earlier. In value terms, India's gold imports rose to $4.78 billion in May 2019 from $3.48 billion a year ago, according to an anonymous government official.
 
According to  Scrap Register  report, the heightened imports were dictated by local festivities that led to a surge in retail gold demand. Retail gold prices increased by 1,000 rupees ($14,41) per 10 grams, hitting 32,834 rupees level ($473) per 10 grams, according to  Reuters  report.
 
The market is currently in recoil, with retail demand very low due to high prices and retail sellers making discounts, a  Reuters  report says. Throughout the week, dealers offered 50 cent discounts per ounce compared to official prices, compared to a 50-cent premium last week.
 
Heightened prices on gold motivated customers in India and China - the world's biggest consumer of gold - to sell their gold, flooding the market with scrap, according to  Reuters .
 
I'm still waiting for Nick to update India's gold import numbers for April, which I understand was a big import month as well. This   brief news item put in an appearance on the  sputniknews.com  Internet site on Saturday -- and I found it on the  Sharps Pixley  website. 
Here is a recent interview on USAWatchdog featuring our longtime friend David Morgan.  David says there is no place else to go but gold and silver. I believe that.
Precious metals analyst and financial writer David Morgan says precious metals won’t go much lower but are going much, much higher in price.
 
Morgan explains, “If we see the equity market start to fall off in a major correction, I’m talking more than 20%, I think you will see a run to gold and a confirmation in the silver market. In my analysis, I’d say we are on our way up to the largest move in the precious metals market I have probably ever seen in my lifetime.
 
There will be a run into gold because the bond market is really not a safe haven as it is touted to be. How safe is something that there is $43 trillion ($22 trillion official federal debt and $21 trillion ‘missing’) in debt that cannot be repaid in any way, shape or form?
 
You’re going to pay it off in dollars, and you will just print the money up and you will have it worth less, and worth less, and worth less, and then it’s worthless. Or, you are going to have to see these bonds default where you are going to get 60 cents on the dollar, or 50 cents on the dollar or 20 cents on the dollar. That’s more unlikely.
 
The most likely case is that they will just print their way out of it, which means you are defaulting on the currency itself. Once that psychology hits the market, there will be a run to gold that will be unbelievable.
 
There will be no place else to go.” Morgan warns, “I think you have three to five years at the most where you see this blow off, where you see things go back to the mother nature of finance. These things will get reset.
 
What does that mean? It means everything will get repriced: the stock market, bond market, housing market, commodities market, money itself, interest rates, everything.
 
Everything that has to do with the way we operate in the financial sector gets repriced.” Rapid inflation will come at some point, and Morgan says, “That is what the banking establishment fears the most. Once that happens, it means they have lost control.”
 
Here is a big-picture view of gold and silver by Jim Dines.
We have been waiting patiently for the Super Major Uptrend of Wave III to resume. A rise to $1,350 would be an Upside Breakout. No Short-Term stops, for bullions. The Intermediate-Term “Buy” signal was flashed at $919 on 15 Dec 2008; still bullish, “Sell stop” $920. Long-Term “Super Major Buy” was flashed in TDL at $288 on 25 Sep 2001; still bullish, no stop yet, and still projecting Long-Term targets to at least the $3,000 to $5,000 levels that we expected at $35 gold.
 
Still bullish with no stop. We advise that some gold and silver be held patiently as a “haven” in all long-term portfolios. Silver is another “haven,” held along with gold, and tends to rise counter to the stock market. Longer-term, we predict silver will soar above $300/oz, and our very long targets will see silver prices above gold’s, believe the unbelievable or not.

This is the widespread Mass Media outlook right now. It believes the Fed is omnipotent over the stock market. It is not.

This goes farther than closing America’s unsustainable half- trillion dollar trade deficit with China. This is a struggle for world leadership, between capitalism and socialism.
Are you aware…

Several weeks ago we pointed out that there was an anomaly in the pricing of Certified numismatic double eagles, both Liberties and Saint Gaudens, and we suggested that you trade bullion gold coins (Gold Eagles and Buffalos) for the older and more valuable numismatic coins. The pricing, we said, was very attractive. Andy and I each exchange over 70 ounces. Well, as of today, the numismatic coins we urged you to consider have moved back up to where they should have been, and are up over $100 a coin at the wholesale level from where we recommended them. When we point out a market anomaly, it really is a terrific opportunity for you.
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About Miles Franklin

Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.

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