Canadian Economy Next Black Swan for US?

Release Date: 
Friday, September 4, 2015

Gold and Silver Prices
Gold prices were somewhat range bound this week with the market closing lower on Friday as investors considered the mixed news in the most recent jobs report.

“For the third consecutive month, the U.S. labor market lost momentum, falling well below 200,000 and coming in below already lowered expectations, according to the latest employment data from the Labor Department…

“The unemployment rate remained fell to 5.1% last month. Economists were expecting to see the unemployment rate fall to 5.2%. Gold prices saw an initial push in reaction to the weaker employment numbers, with Comex December gold futures hitting a session high of $1,133.10 an ounce. Prices have come back down but still remain near the top end of their range; as of 8:38 a.m. EDT….” (“U.S. Economy Creates 173K Jobs In August,” Kitco News, 9/4/2015.)

Gold finished the week down $11.00, closing at $1,123.80. Silver prices closed the week at $14.68, down $0.02.

Canadian Economy Next Black Swan for US?
Kira Brecht, managing editor of TraderPlanet, warns that Canada’s failing economy may have a more devastating effect on the U.S. economy than China’s financial woes.

“As world stock markets plunge and rally driven by Chinese economic data and subsequent government actions to stave off equity market crisis, are traders getting caught up with the wrong risk factor? There is no denying the importance of the Chinese economy, now the second largest in the world. But, when it comes to direct trade with the Americans, the Canadian economy could matter more for economic growth prospects ahead…

“Let's take a look at Canada and how important it is to the U.S. economy. Strictly looking at the relationships on a trade basis, Canada is the U.S. largest export market, according to BNP Paribas. ‘When Canada hurts, U.S. exporters hurt too, BNP Paribas analysts wrote. U.S. exports to Canada make up about 19% of total exports versus exports to China total only 7%, BNP Paribas says…

“Economists are expecting the Canadian economy to register an official recession for the first half of 2015… ‘Things in Canada are currently bad and, while they are expected to improve some, the risk is that we get a much larger hit to growth that slows U.S. import demand markedly,’ wrote BNP Paribas analysts.

“What does this mean for gold? The yellow metal has stabilized and built a base above its July low around $1,080 per ounce. Gold remains a safe-haven, an alternative currency and will continue to garner on-going demand amid the sluggish and slow growth economic conditions that plague much of the advanced industrialized world… Economies are interconnected and interdependent. The U.S. economy is no island in the global economy. What happens overseas and what happens next door matters. Despite global central banker's best intentions, sub-par and below trend growth continues to unfold in the West. Gold will remain attractive in this environment as a safe-haven of surety in an uncertain world.” (“Is Canada The Next Black Swan For The US Economy?” Kitco, 8/28/15; original emphasis.)

US Mint Reports August Gold Coin Sales Up 400% From Year Before
According to data available from the U.S. Mint, August sales of gold bullion coins are up dramatically when compared to August the year before. Sales of the gold American Eagle coins rose from 25,000 ounces in August 2014 to over 100,000 ounces last month, an increase of 400%. Gold Buffalo coins saw a similar increase. Silver American Eagles more than doubled in August when compared to August 2014.  ("Bullion Sales/Mintage Figures.": Usmint.gov. N.p., n.d. Web. 02 Sept. 2015.) 

U.S. Gold Production Falls – On Track to Lowest Production In Three Decades
Independent researcher Steve St. Angelo and publishers of the SRSrocco Report, reports that gold production in the U.S. fell in May, signaling a worrisome trend which may result in the lowest gold production in nearly three decades.

“The lower price of gold has finally taken its toll on U.S. gold production.  Domestic gold mine supply fell considerably in May compared to the same period last year.  This is a significant amount as the United States is the fourth largest gold producer in the world.

“If current trends continue, U.S. gold production will fall below 200 mt in 2015… The last time U.S. gold production was below 200 mt was 28 years ago in 1987… Basically, U.S. gold production hasn’t been this low for nearly three decades…

“[T]he U.S. continues to export more gold than it produces and imports... Which is why the U.S. continues to show a trade deficit when it comes to gold. Unfortunately, Americans will be the last to realize the powerful monetary and store of wealth properties of gold.  As the Chinese and Indians continue to consume nearly 100% of global mine supply… there is very little left over for Western investors….” (“US Gold Production Finally Hit Hard Due To Low Price,” Gold-Eagle, 9/1/15.)

Silver Necessary to Protect our Assets from Bank Devaluation, Wealth Transfer- Christenson
Gary Christenson, the owner and writer for the contrarian investment site “Deviant Investor,” wrote that government debt and revenue will soon send silver prices higher.

“Does anyone care that silver and gold have been real money and a store of value for 3,000 years, or that all unbacked paper money has eventually been inflated into worthlessness?  While the central bankers and politicians distract the populace with Donald Trump stories, they prolong the game   …   and the wealth transfers.

“The US gross domestic product and US government revenues rise as the dollar is “over-printed” and devalued.  Does silver rise accordingly? Examine the 20 year graphs of the Silver to GDP ratio and Silver to US Govt. revenues…These graphs show 20 years of data and indicate that silver prices are at the low end of the ratios.  Expect higher silver prices in the next several years, probably soon.

“Population adjusted national debt shows a similar story.  Silver prices are at the low end of the 20 year range, about where they were in 2001.  Silver prices hit $4.01 in November of 2001 and rallied by over a factor of 10 in the next decade.  Some version of that will probably happen again…

“S.M.S.:  Silver Means Safety.  Debt increases exponentially.  Until we see action from credible politicians (not likely) demanding balanced budgets and debt reductions (not likely), debt, consumer prices, and silver prices will increase.  Silver will help protect our assets from the inevitable central bank devaluations and wealth transfers.” (“Silver and S.M.S.” Silverseek, 9/3/15.)

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†This material has been prepared for private use. Although the information in this commentary has been obtained from sources believed to be reliable, Goldline does not guarantee its accuracy and such information may be incomplete or condensed. The opinions expressed are subject to change without notice.

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