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Gold Up-Date

Precious Metal Investment Expert
October 29, 2013

You can choose to Trust Politicians and Central Bankers or alternatively, you can choose to take Action Yourself to protect your Hard Earned Wealth.

Gold prices have extended last weeks’ gain as investors continue to accumulate the physical metal. The price of the yellow metal gained by almost 3% last week as the dollar trended lower against most other major currencies after the release of soft initial jobless benefit claims data out of the US and some upbeat manufacturing data out of China.

Macroeconomic data released last week, strengthened hopes the Federal Reserve will continue with its quantitative easing program for the near future which augurs well for gold prices.

In economic news from the US, the Labour Department said initial jobless claims dropped to 350,000 in the week ended October 19, a decrease of 12,000 from the previous weeks revised figure of 362,000. Economists expected claims to fall to 340,000 from the 358,000 originally reported for the previous week.

In a separate report, the US Commerce Department showed the US trade deficit in August ticked up to USD38.8 billion from a revised USD38.6 billion in July. Economists expected a wider deficit of USD40.0 billion from the USD39.1 billion originally reported for the previous month. The value of imports were virtually unchanged at USD228.0 billion, while the value of exports edged down to USD189.2 billion from USD189.3 billion.

China's manufacturing growth hit a seven-month high in October, with the flash manufacturing Purchasing Managers' Index rising more-than-expected to 50.9 from 50.2 in September, a survey by HSBC and Markit Economics showed Thursday.

From the Eurozone, reports showed that the Eurozone, PMI manufacturing index increased to 51.3 in October, slightly below expectations of 51.4. And, the Eurozone PMI services unexpectedly dropped to 50.9. German PMI manufacturing was up to 51.5 versus market expectations of 51.4. French PMI manufacturing is still below 50 at 49.5, versus expectations of 50.1.

Germany's private sector economy expanded at the slowest pace in three months during October, as the slowdown in services growth offset improvement in manufacturing, preliminary data from Markit Economics showed. The flash composite output index dropped to a three-month low of 52.6 from 53.2 in September

The precious metal made impressive gains during the week after the weak jobs data renewed speculation that the Federal Reserve will maintain its bond-buying stimulus program -- rather than taper it.  

"Gold's ascent above $1350, to one-month highs, has been driven by investor interest," says a note from Barclays Capital, pointing to the "largest daily increase" in exchange-traded gold funds, which give investors exposure to the metal's price without them taking physical ownership, since January.

For many years I have been very vocal about the liars, deception, and outright theft committed by politicians around the world. Most of them have no interest in the improvement of their citizens and merely use their positions to enrich themselves. And, while they may proclaim that holders of offshore bank accounts are hiding billions from the tax payers, the governments themselves are the true thieves of wealth. They have looted billions from tax payers and are immune to the same type of prosecution imposed on law abiding individuals. The entire system is corrupt.

Only now, it has become evident that the NSA has been spying on its allies in Europe. Recently, European leaders attended a summit which was overshadowed by reports of widespread US spying on its allies, allegations German Chancellor Angela Merkel said had shattered trust in the Obama administration and undermined the crucial trans-Atlantic relationship.

France, which also vocally objected to allies spying on each other, asked that the issue of reinforcing Europeans' privacy in the digital age be added to the agenda of the two-day summit.

After summit talks on Thursday that lasted until after midnight, Herman Van Rompuy, European Council president, announced at a news conference that France and Germany were seeking bilateral talks with the US to resolve the dispute over "secret services" electronic spying by the end of this year.

"What is at stake is preserving our relations with the United States," French President Francois Hollande told reporters at his own early-morning news conference. "They should not be changed because of what has happened. But trust has to be restored and reinforced."

"It's become clear that for the future, something must change, and significantly," Merkel said. "We will put all efforts into forging a joint understanding by the end of the year for the cooperation of the [intelligence] agencies between Germany and the US, and France and the US, to create a framework for the cooperation."

An endless stream of disclosures has pushed Washington into an inextricably awkward predicament. Fresh reports in Britain’s Guardian newspaper, the first to have published Snowden’s leaks, suggest the telephones of 35 world leaders have been monitored by the NSA. The bugging of Chancellor Angela Merkel’s mobile phone is particularly embarrassing. Friends don’t do this sort of thing, Berlin says, while the US has been desperately emphasising the importance of its friendship with Germany.

This only goes to show how these political leaders have lied to each other, just as they lied to citizens of the world about the need to eliminate cash from society as it encourages terrorism. In reality by creating an electronically controlled banking system, governments have control of individuals’ financial transactions. It has nothing to do with trying to curb money laundering, arms smuggling and terrorism. In other words, first they want to implement capital controls to ensure that everyone's money is trapped. Then they want to make a grab for people's bank accounts, just like they did in Cyprus. France and Italy already have limits on cash transactions. In Venezuela, it is almost impossible to buy foreign currencies and money in the bank is being quickly eroded. This is something I have been warning readers about for years. It's now reality.

And, while governments coerce individuals to comply with these absurd restrictions, banks have also been lying and cheating their own customers. While many banks have been involved in this, JPMorgan Chase, one of America’s largest and most highly regarded banks, has now had to pay out several billion dollars to settle lawsuits from consumers and regulators.

In the past few years, JPMorgan Chase has been party to a series of very expensive legal settlements. In many recent quarters, as it rang up big profits, the bank was forced to set aside hundreds of millions of dollars to deal with litigation. Joshua Rosner, a financial analyst and co-author of Reckless Endangerment, in March estimated that the company’s litigation expenses since 2009 have totalled $16 billion!

And it’s not over yet. Along with a current investigation as to whether it failed to alert authorities to suspicions about Ponzi scheme Bernie Madoff, The New York Times reported that at least eight federal agencies are currently investigating the bank. A few of the cases include the following:

In 2011 JPMorgan was one of several banks called out in a class-action lawsuit for over charging or wrongfully foreclosing on active-duty US military personnel. The company apologized, paid out $27 million in cash, cut interest rates on home loans and returned houses that were wrongfully foreclosed upon.

In the same year, The Securities and Exchange Commission sued JP Morgan for misleading buyers by allegedly failing to inform investors that a hedge fund assisted in picking and betting against securities in a collateralized debt obligation JPMorgan had sold in 2007.

In 2012, after being sued by pension funds and investors for investing their funds in a risky structured investment vehicle that failed at the height of the global financial crisis in 2008, JPMorgan settled the suit without admitting wrongdoing.

And, again in the same year, the Securities and Exchange Commission charged JPMorgan with misleading investors about the quality of mortgages that underlay mortgage-backed securities it sold. The bank settled the charges without admitting or denying guilt.

During this, year, JPMorgan Chase agreed to return $546 million to former customers of MF Global Holdings, the investment firm run by former New Jersey governor Jon Corzine that collapsed in 2011. While it did not admit wrongdoing, JPMorgan had been threatened with a lawsuit if it didn’t return the cash that had been transferred from MF Global during the firm’s chaotic final days.

In South Africa, the situation is just as dire. Politicians have enriched themselves through swindling tenders and abusing tax payers’ money. Ever since the ANC came in to power, the level of corruption and theft has escalated to new unimaginable new heights. Practically, every minister and senior public official in all spheres of government has abused tax payers’ money. They have bought expensive cars, enjoyed a lavish life style and spent money on personal belongings while amassing small fortunes for themselves. As these government officials looted the nations’ wealth, services in the public sector declined dramatically. But, finally, on Wednesday, Finance Minister, Pravin Gordhan, announced far-reaching cuts to these perks.

Mr Gordhan said that the cost-cutting measures would come into effect by December 1.

He said these measures would affect officials including members of the national executive, provincial governments and local municipalities.

The cost of cars is to be standardised, although the brands could be selected, and Mr Gordhan said the maximum amount would be the equivalent of a BMW 530 saloon.

He also said the government would consider bulk buying of cars, although security features would be considered.

Office bearers would no longer be allowed to claim for using their personal cars for official business.

International flights would be limited to taking business class, with first-class travel banned.

The number of ministers’ assistants who accompany them on a trip would be limited to two, and the size of delegations would also be limited.

The shortest routes would be mandatory for travelling to a destination.

Ministers would be accommodated in self-catering apartments and not hotels when waiting for their official houses.

Even more bad news for many government office bearers is that the Cabinet has imposed an immediate ban on the serving of alcohol at most official functions, while official credit cards are to be withdrawn.  

The markets are now watching the US central bank which begins a two-day meeting on Tuesday, announcing its monetary policy on Wednesday. Many analysts now expect it to stick with $85 billion of monthly quantitative easing.

It is my opinion that we have seen the end of the recent intermediate bearish trend in both gold and silver, and now we are seeing the beginning phase of a new positive trend. However, prices will remain relatively volatile. The US dollar will continue to decline as the U.S. government attempts to address its budget issues as well as it burgeoning debt. As far as I am concerned the U.S. dollar has no other direction to go but down. It's already broken a two-year uptrend line which is very significant. And, as the greenback falls further, the price of gold will continue to rise. Also from a technical perspective, since gold has been in a downtrend all year, now that it has broken this trend, the yellow metal has its best chance to outperform towards the end to the year.

While I maintain that one of the key driving forces behind higher gold prices will be the loss of confidence in the current global monetary system, in the medium term, gold will also be supported by cyclical events. The price of gold tends to do well between October and the end of the year due to greater physical demand on account of the Indian wedding season, holiday seasons in U.S. and a lot of other countries resulting in ramped up demand for gold jewellery. Ownership of gold is more important than trying to use the precious metal as means to obtain a high return on one’s investment. It is a hedge against the declining value of currencies and is an insurance against the corrupt global monetary system.

Not only are we seeing money printed on an unprecedented scale, politicians and bankers lie, cheat and steal on an unprecedented level. And, if you believe that your government or banker has your interest at heart, you may as well believe in the tooth fairy. The deterioration of our society is directly attributable to those people who we would usually rely on for order and leadership.

You can choose to acknowledge the overwhelming evidence and reduce your exposure to these bankrupt western countries that will make every effort to lie, cheat, and steal whatever they can from you... just to keep the party going a little while longer.

You can choose to trust these politicians and central bankers to do the right thing or alternatively, you can choose to take action yourself to protect your hard earned wealth buy owing physical gold.

You only have yourself to rely on. Not the system. Not the government. And, for sure, you certainly cannot trust the bankers.

Technical Analysis

Gold prices are now hovering around the $1350/oz. level, and have pierced through the 50 day MA. I expect to see a further move to the upside and a re-test of $1400/oz. in the medium-term.


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Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment as of this date and are subject to change without notice.

David Levenstein is a leading expert on investing in precious metals. Although he began trading silver through the LME in 1980, over the years he has dealt with gold, silver, platinum and palladium. He has traded and invested in bullion, bullion coins, mining shares, exchange traded funds, as well as futures for his personal account as well as for clients.

His articles and commentaries on precious metals have been published in dozens of newspapers, publications and websites both locally as well as internationally. He has been a featured guest on numerous radio and TV shows, and is a regular guest on JSE Direct, a premier radio business channel in South Africa. The largest gold refinery in the world use his daily and weekly commentaries on gold.

David has lived and worked in Johannesburg, Los Angeles, London, Hong Kong, Bangkok, and Bali.

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