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1.23.15 - The Ironies of Switzerland

Gold last traded at $1,292 an ounce. Silver at $18.30 an ounce.

"Gold is Money, everything else is credit." -JOHN PIERPONT (J.P.) MORGAN, 1915 Congressional Testimony

There's a certain irony in the air as the uber-wealthy elite land their 1,700 private jets in Davos, Switzerland to discuss solving the world economic problems; including what President Obama referred to in his State of the Union speech as the greatest threat facing posterity - climate change.

Meanwhile this week, the world witnessed European leaders announce they will follow in the failed footsteps of the Federal Reserve by creating a $1.1 Trillion money printing scheme to help lift the EU economy out of recession. The euro currency has been falling ever since.

This week Swiss America released our 2015 newsletter, THE TRUTH ABOUT MODERN BANKING, which is packed with important news and perspectives about what to expect this next year. The forecast in 2015 is for increasing market volatility and rising gold prices (already up 7%).

As Swiss America CEO Dean Heskin states: "This year will hold many financial challenges, unexpected risks and potentially great rewards. The key is to grasp the basics of economics, seek wise counsel and then take action diversifying assets for safety."

We believe 2015 will finally expose the truth about gold, which is; Gold is neither a commodity nor an investment – it is the world's one and only trustworthy form of money ... just like J.P. Morgan once said!

Here's another irony which could be good news for you: Our sources report European banks, desperate to raise cash, are selling off a portion of their vast U.S. gold coin holdings at fire-sale prices - to the potential benefit of Swiss America clients. Call 800-289-2646 and ask your representative about this classic 'double-play' opportunity.

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1.22.15 - ECB Launches Bond Buying Program

Gold last traded at $1,300 an ounce. Silver at $18.36 an ounce.

Gold is once again on the move after the European Central Bank (ECB) launched a multi-billion euro bond-buying program aimed at reviving a sagging euro zone economy.

President Mario Draghi said the ECB would print money to buy up 60 billion euros ($69 billion) worth of sovereign bonds a month.

Gold has risen about 10% since the beginning of January partially driven by the economic and political uncertainties in the euro zone.

Gold's strength could continue for some time according to Barron's technical analyst Michael Kahn.

"With no inflation in sight and the U.S. dollar still soaring, there is no real fundamental reason for gold and silver to move higher. Yet, that is exactly what they have been doing ," Kahn wrote.

"Price and volume continue to surge suggesting growing investor interest, and all of this is taking place as the dollar continues to rally itself. Since gold is priced in dollars, there is usually an inverse relationship between the two. Therefore, when both move higher together we can only surmise that there are more than currency factors at work," he argued.

"The bottom line is that the technicals tell us that metals are back despite the fundamentals and the sentiment surrounding them."

The moves by foreign central banks to loosen their monetary policies has some observers predicting it will let the Fed off the hook. There were thoughts that the Fed would begin raising interest rates as soon as mid-2015, but that would only occur if the US economy was clearly healthy.

The latest data doesn't particularly indicate a robust economy.

According to the Labor Department today, initial claims for unemployment benefits missed expectations for the 4th week in a row, holding above 300,000 for the 3rd week in a row (for the first time since July). At 307,000, this week's report is well above the 300,000 level economists were expecting.

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1.21.15 - Central Banks Move to Loosen

Gold last traded at $1,293 an ounce. Silver at $18.19 an ounce.

World central banks appear set to loosen monetary policies, a change that will undermine their currencies, even though the financial markets will initially cheer it.

In a surprise move, Canada's central bank today announced it is lowering its "target for the overnight rate by one-quarter of one percentage point to 3/4 per cent."

The Canadians cited financial stability and downside inflation risks due to the collapse in the price of oil. The Bank is projecting real GDP growth in Canada will slow to about 1.5%.

The Canadian move is just the beginning.

Soon the world will feel the impact when the European Central Bank makes official its intentions to embark upon a massive Quantitative Easing bond buying program.

The program calls for bond purchases of 50 billion euros per month (about $58 billion) through 2016.

European and US stock markets are cheering this news, but other more sober observers are warning of the ramifications.

The former Bank for International Settlements chief economist warns that QE in Europe is doomed to failure and may draw the region into deeper difficulties.

"We are in a world that is dangerously unanchored," says William White, who is now the Swiss-based chairman of the OECD's Review Committee. "We're seeing true currency wars and everybody is doing it, and I have no idea where this is going to end."

White says the global elastic has been stretched even further than it was in 2008 on the eve of the Great Recession. The excesses have reached almost every corner of the globe, and combined public/private debt is 20% of GDP higher today. "We are holding a tiger by the tail," he explains.

He warns that QE in Europe is doomed to failure at this late stage and may instead draw the region into deeper difficulties. "Sovereign bond yields haven't been so low since the 'Black Plague': how much more bang can you get for your buck?"

"QE is not going to help at all. Europe has far greater reliance than the US on small and medium-sized companies and they get their money from banks, not from the bond market," White says.

"Even after the stress tests the banks are still in 'hunkering down mode'. They are not lending to small firms for a variety of reasons. The interest rate differential is still going up," he maintains.

Mr. White explains that QE is a disguised form of competitive devaluation. "The Japanese are now doing it as well but nobody can complain because the US started it," he says.

There is a significant risk that this is going to end badly because the Bank of Japan is funding 40% of all government spending. This could end in high inflation, perhaps even hyperinflation.

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1.20.15 - Gold: The Best is Yet to Come

Gold last traded at $1,294 an ounce. Silver at $17.96 an ounce.

Last week's turmoil in the currency markets - touched off by the surprise Swiss National Bank (SNB) decision to remove the Swiss franc's peg to the euro - pushed gold substantially higher.

But that surprise event is far from the only factor that may push gold higher still.

A soon to be announced move by the European Central Bank (ECB) to embark upon a Quantitative Easing (QE) bond buying program is expected to have a longer-term impact on gold prices; while economic conditions continue to add uncertainty to the financial markets, reducing investor confidence in paper assets.

It was on September 6th 2011 that the gold price hit its all-time high of $1,923 an ounce and on that date the SNB pegged the Swiss franc to the euro at 1.20. If the pegging was the event that sent gold prices into a long correction, then it will perhaps not be so surprising if this also works in reverse.

There is no doubt that the ECBs QE money printing program played the major role in the SNB's decision to remove the peg. Meanwhile, money printing on a very large scale usually means only one thing for gold prices; they move higher.

One thing seems likely; gold in euro terms will surge in value, and that should make it a much more attractive asset class to the 500 million people who live in the European Union. But this is not just about the eurozone, it is also about the countries who trade heavily with the eurozone.

With gold near $1,300, it appears investor demand for non-fiat currency will be growing.

Around the world, economies are slowing. According to the International Monetary Fund (IMF), previous forecasts for accelerating growth need to be pared back. The Fund's estimates for global economic growth are down 0.3 percentage points from its previous estimates.

Of particular interest and concern is China, which is considered a key engine for global economic growth. The IMF says the world's second-largest economy will continue its slowdown, with growth hitting 6.8% this year and 6.3% next year. Those numbers may seem comparatively robust, but they are anemic for recent Chinese history. China's economy grew 7.4% last year, its slowest rate since 1990.

Finally, in other news, President Obama will deliver his sixth State of the Union speech tonight and it will evidently focus on his administration's economic successes. That is a debate topic best reserved for other forums, but there is one undeniable statistic worth mentioning: Under President Obama, $7.5 trillion has been added to America's $18.1 trillion national debt.

Obviously, Mr. Obama didn't produce that debt on his own, he had plenty of help from both sides of the aisle, but it is important for investors to realize there is no scenario over the long-term in which that debt burden can be serviced or paid down without extreme economic and monetary stress.

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