Gold Club Asia

Much has been made recently of the news that the BIS last year completed a 380-tonne gold swap with an unnamed commercial bank. This BIS transaction intuitively strikes me as being hugely important. Unfortunately, the BIS and the bank involved have disclosed too little information for any of us outside the inner circle of central bankers to truly understand what is happening behind the scenes.

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Two months ago I stated that silver is inching closer to an upside breakout. It turns out that “inching” was the right word because since then silver has been moving at a snail’s pace. Nevertheless, the huge accumulation pattern that silver has been building over the past three years remains intact, as can be seen on the following chart.

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If the investment choice is between mining stocks and physical bullion, it is essential to remember that these are different asset classes with entirely different risk/reward attributes. Mining stocks and bullion perform quite differently when the global economic environment is in turmoil, as is the case today. Banking crises, trillion-dollar deficits and the accelerating depreciation of many of the world’s major currencies do not create positive conditions for equity markets, which is why investors are fleeing to the safety of physical bullion.

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The Fear Index has risen to a 16-year high. As of June 30th, the Fear Index is 2.35%, based on M3 data made available by shadowstats.com.

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