The Gold Market Discussion with Jim Clark, 3-29-15

The Gold Market Discussion with Jim Clark, 3-29-15

Jim Clark


War often drives the price of precious metals, and the drums of war certainly drove the price last week. Volatility in the Middle East has pushed gold back up to $1,200 after seeing a drop to $1,145 last week, and silver is back up above $17 dollars. The dollar strengthened Friday after a selling during much of the week, down almost 4%.

The initial phase of a military campaign against Yemen has been taking place with airborne assaults. The AP reported that the turmoil in Yemen grew into a regional conflict with Saudi Arabia and a coalition bombing Shiite rebels allied with Iran. Now that movement is escalating with the Saudi deployment of 150,000 troops on the border with Yemen. Egyptian military and security officials told the AP that military intervention will go further with a ground assault into Yemen by Egyptian, Saudi, and other forces once airstrikes have sufficiently diminished the Houthis and Saleh’s forces. They said the assault will be by ground from Saudi Arabia and by landings on Yemen’s Red and Arabian Sea coasts.

And this could just be the beginning. Egyptian officials said the force is planned to include some 40,000 men backed by jet fighter, warships and light armor. Iran denounced the Saudi-led air campaign, saying it “considers this action a dangerous step,” and oil prices jumped in New York and London after the offensive.

The locals in Yemen are not all happy about the prospect of foreign troops entering the country uncontested. Anger against the airstrikes, which flattened a dozen homes and killed at least 18 civilians, lead to thousands gathering in protest and chanting against Saudi Arabia and the United States.

It looks like the US will intervene at a point in the near future, with its own military assets. A US amphibious assault ship carrying 2,000 marines is currently located just off the coast of Yemen.

The escalating conflict sent gold and silver higher as heavy buying came in on safe haven demand.

Meanwhile in Asia, Chinese appetite for gold looks insatiable. Here is a chart of physical gold withdrawals from Shanghai. As you can see, as gold prices have been falling since 2012, physical withdrawals are only increasing.


Another war, the war on cash, is intensifying as authorities both here and abroad attempt to crack down on cash withdrawals from banks. Cash withdrawal is increasingly being looked at as a suspicious event. New measures in France have been introduced to restrict French citizens from making cash payments over 1,000 Euros. This regulation, introduced in the name of fighting terrorism, will also see cash deposits of over 10,000 Euros during a single month reported to anti-fraud authorities. In the UK customers are being restricted from cash withdrawals of 5,000 Pounds or more.

Back here in America, banks are also making it harder for customers to withdraw and deposit cash. Chase Bank is imposing capital controls that mandate identification for cash deposits and ban cash being deposited into another person’s account. Chase also instituted policies which banned international wire transfers while restricting cash activity for business customers. Banks are required to file ‘suspicious activity reports’ on their customers, with threats of fines and jail time for directors if financial institutions don’t meet quotas. As investor and financial blogger Simon Black points out, according the handbook for the Federal Financial Institution Examination Council, such suspicious activity includes, “Transactions conducted or attempted by, at, or through the bank and aggregating $5,000 or more….” Last week, assistant attorney general Leslie Caldwell gave a speech in which he urged banks to “alert law enforcement authorities about the problem” so that police can “seize the funds” or at least “initiate an investigation”.

More and more, banking regulations are making it difficult to have access to and control your own money.  Gold is still trading at 5% below mining costs and silver at 10% below cost, making both still an attractive acquisition.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”