Precious Metals Hammered, Base Metals Also Down

Smalltime is here to educate you, the layman, on what this means and we think there are two possible explanations to the gold price decline year to date. First, gold has been on a 10 year run, fueled by precious metals ETF's, which are like mutual funds. These paper instruments aren't gold, but being tied to miners, futures, and some physical gold caused money to rush into them over the last 10 to 12 years and now that stocks are roaring again it is a simple trade from high to low.

The second reason is that the central bank of Japan began "quantitative easing" of its own in December 2012 which has brought the Yen from 84 against the dollar to 99 Yen per 1 dollar, This strengthens the dollar and since gold is priced in dollars then the gold price goes down.

Smalltime thinks that both of these factors are at play and we also believe that Japanese central bank policy could be partially to blame for the North Korean rhetoric. Currency manipulation usually does not end well and we have WWII to look back on for that. At the end of World War II the US dollar became the worlds reserve currency via the Bretton Woods Accord in 1944, before that it was the British pound, what is next the bitcoin? Large wars are the result of currency wars and the largest war in human history could be on the horizon. That is my humble opinion but it is based on my observation of the marketplace, the past, and the various hot spots of potential conflict around the world like Pakistan and India, North Korea and Japan, China and Taiwan, US and Iran. I sure hope I am wrong.

Unfortunately for our scrapping friends the base metals have also been on a downturn since the beginning of 2013. A home building rebound could boost demand for copper this summer but as for the other base metals it could be a rough year. We still want to see all the metals that you find recycled even though prices are down and we still think you should accumulate scrap during price downturns. My strategy is to stockpile my scrap and wait for an upturn in the price.