Nianswers

Cocoa

Is there a cocoa ETF?

There is an iPath ETN that owns cocoa futures contracts and it trades under the symbol NIB.

What is the all time high cocoa price?

The all time high nominal cocoa price is $5,379 per metric ton, reached on July 18, 1977.

How large is the cocoa futures contract size?

Each cocoa futures contract represents 10 tonnes of cocoa.

How much is cocoa below its all time high adjusted for price inflation?

Cocoa reached an all time high adjusted for price inflation on 12/11/68 of $48,715.12 and at its 6/20/14 closing price of $3117 cocoa is 93.6% below it.

Which five agricultural commodities are the most undervalued with the largest upside?

As of June 20, 2014, the five agricultural commodities that are most below their all time highs adjusted for price inflation are: 1) Sugar -96.5%, 2) Cocoa -93.6%, 3) Coffee -92.3%, 4) Cotton -89.5%, and 5) Wheat -89.1%.

Coffee

Is there a coffee ETF?

There is an iPath ETN that owns coffee futures contracts and it trades under the symbol JO.

What is the all time high coffee price?

The all time high nominal coffee price is $3.375 per lb, reached on April 14, 1977.

What is the initial margin requirement for coffee futures?

The CBOE just raised initial coffee margin requirements by 50% to $9,900 per contract, up from their previous level of $6,600 per contract.

How large is the coffee futures contract size?

Each coffee futures contract represents 37,500 lbs of coffee.

How much is coffee below its all time high adjusted for price inflation?

Coffee reached an all time high adjusted for price inflation on 4/14/77 of $2,239.33 and at its 6/20/14 closing price of $173.25 coffee is 92.3% below it.

Which five agricultural commodities are the most undervalued with the largest upside?

As of June 20, 2014, the five agricultural commodities that are most below their all time highs adjusted for price inflation are: 1) Sugar -96.5%, 2) Cocoa -93.6%, 3) Coffee -92.3%, 4) Cotton -89.5%, and 5) Wheat -89.1%.

Corn

Is there a corn ETF?

There is a Teucrium ETF that owns corn futures contracts and it trades under the symbol CORN.

What is the all time high corn price?

The all time high nominal corn price is $834 per bushel, reached on August 22, 2012.

What is the initial margin requirement for corn futures?

The CBOE just lowered initial corn margin requirements by 14.3% to $2,025 per contract, down from their previous level of $2,363 per contract.

How large is the corn futures contract size?

Each corn futures contract represents 5,000 bushels of corn.

How much is corn below its all time high adjusted for price inflation?

Corn reached an all time high adjusted for price inflation on 7/20/73 of $3,433.90 and at its 6/20/14 closing price of $453.25 corn is 86.8% below it.

Cotton

Is there a cotton ETF?

There is an iPath ETN that owns cotton futures contracts and it trades under the symbol BAL.

What is the all time high cotton price?

The all time high nominal cotton price is $2.27 per lb, reached on March 7, 2011.

How large is the cotton futures contract size?

Each cotton futures contract represents 50,000 tonnes of cotton.

How much is cotton below its all time high adjusted for price inflation?

Cotton reached an all time high adjusted for price inflation on 9/24/73 of $841.56 and at its 6/20/14 closing price of $88.16 cotton is 89.5% below it.

Which five agricultural commodities are the most undervalued with the largest upside?

As of June 20, 2014, the five agricultural commodities that are most below their all time highs adjusted for price inflation are: 1) Sugar -96.5%, 2) Cocoa -93.6%, 3) Coffee -92.3%, 4) Cotton -89.5%, and 5) Wheat -89.1%.

Currencies

Is there anything that can prevent the dollar from experiencing a dramatic decline?

Janet Yellen would need to raise interest rates to 5% by year-end 2014. The current Effective Fed Funds Rate remains at just 0.1%. NIA sees a 0% chance of Yellen dramatically raising interest rates in the short-term. By the time she begins raising rates, price inflation will be much higher than it is today. NIA believes Yellen is unlikely to ever hike interest rates in an aggressive enough manner to prevent the upcoming U.S. currency crisis. Initially, she is likely to only raise rates to 0.5% and later to 1%, which means real interest rates will remain negative.

Energy

What energy commodity will perform better oil or natural gas?

Natural gas is extremely undervalued vs. oil just like silver is extremely undervalued vs. gold. Natural gas prices are very volatile, but over the next 3-4 years – natural gas has the potential to triple or quadruple the gains of oil.

Gold

What is the best type of physical gold to buy?

When buying physical gold, it is important to pay as close to the current gold spot price as possible. Stay away from rare numismatic gold coins that have a premium built in for their collectible value. You are buying the gold for the value of its gold content only, not the rarity of the gold coin itself. In the event of a currency crisis or hyperinflation, all gold of equal weight will be worth the same.

Typically you will find 1 oz gold rounds to be priced closer to the gold spot price than official government  gold coins. However, there is one advantage to government produced gold coins: they are instantly recognizable and are easier to barter with than a gold round that somebody might want to weigh and test the purity of before accepting as payment. NIA considers the 1 oz American Eagle to be the most recognizable/liquid gold coin, with the 1 oz American Gold Buffalo and 1 oz Canadian Maple Leaf tied for second, and the 1 oz South African Krugerrand and 1 oz Austrian Philharmonic tied the third.

They each contain 1 oz of gold. However, the American Eagle and South African Krugerrand both contain a small amount of silver and copper to make them more durable. The American Eagle and South African Krugerrand gold coins contain 91.67% gold, 3% silver, and 5.33% copper and have a total weight of 1.0909 oz. The American Gold Buffalo, Canadian Maple Leaf, and Austrian Philharmonic gold coins are each 99.99% pure gold and have a total weight of  1 oz.

What are the largest premiums over the spot price of gold that you would spend to purchase 1 oz gold coins?

The largest premium we would pay for a 1 oz American Eagle gold coin over the spot price of gold is 5%. The largest premium we would pay for a 1 oz American Gold Buffalo, 1 oz Canadian Maple Leaf, 1 oz South African Krugerrand, or a 1 oz Austrian Philharmonic is 4%. The largest premium we would pay for a 1 oz gold round is 2%.

How much gold was mined worldwide in 2013?

Total global gold production in 2013 reached 2,770 tonnes or 89.06 million ounces up 2.97% from 2,690 tonnes or 86.49 million ounces in 2012.

Do you recommend buying fractional gold coins that weigh less than one ounce?

Stay away from 1/2 oz, 1/4 oz, and 1/10 oz gold coins. You might have to pay a premium of 10%-40% over the spot price of gold to purchase these “fractional” gold coins, and it is unlikely that you will end up receiving as large of a premium when you sell them or barter with them. When the U.S. dollar becomes worthless, instead of using fractional gold coins to barter for smaller items it will be easier to barter with 1 oz silver coins, which will rise in value by a much larger percentage than gold coins anyway.

What is the current concentrated gold short position?

As of April 15th, four commercial banks were short a net 9,978,579 ounces of gold, which is equal to 41 days of production.

What is the best Gold ETF?

The SPDR Gold Shares ETF owns physical gold and trades under the symbol GLD. It is by far the largest and most liquid Gold ETF, with a total net asset value of $33.42 billion as of July 25, 2014.

Are there any Gold ETFs that are leveraged to make double or triple the gains/losses of gold?

The PowerShares DB Gold Double Long ETN, which trades under the symbol DGP, is leveraged to make double the gains/losses of gold futures.

The VelocityShares 3x Long Gold ETN, which trades under the symbol UGLD, is leveraged to make triple the gains/losses of gold futures.

What is the all time high gold price?

The all time high nominal gold price is $1,920.80 per ounce, reached on September 6, 2011.

What is the HUI?

The HUI Index aka NYSE Arca Gold BUGS Index is a modified equal dollar weighted index of companies involved in gold mining. It is listed under the symbol “HUI” and was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years.

When was the HUI first listed and at what price?

The HUI Gold Stock Index was first introduced on March 15, 1996, at an initial base value of 200.

What is the HUI’s all time high and low?

The HUI Gold Stock Index reached an all time low on November 16, 2000, of $35.31 and afterwards made an 11-year gain of 1,709% to an all time high on September 9, 2011, of $638.59. It then declined 70.5% to a low on December 19, 2013, of $188.39. Afterwards, it bounced 38.7% to a short-term peak on March 14, 2014 of $261.36. As of July 25, 2014, the HUI is $239.13, down 8.5% from its 2014 high.

What are the current HUI components and weightings?

1) Barrick Gold (ABX) 16.49%, 2) Goldcorp (GG) 16.2%, 3) Newmont Mining (NEM) 9.89%, 4) Agnico Eagle Mines (AEM) 4.61%, 5) Compania de Minas (BVN) 4.5%, 6) Sibanye Gold (SBGL) 4.47%, 7) AngloGold (AU) 4.25%, 8) Randgold (GOLD) 4.09%, 9) Kinross Gold (KGC) 4.05%, 10) B2Gold (NTG) 3.97%, 11) AuRico Gold (AUQ) 3.95%, 12) Yamana Gold (AUY) 3.93%, 13) Eldorado Gold (EGO) 3.91%, 14) New Gold (NGD) 3.84%, 15) Alamos Gold (AGI) 3.51%, 16) Harmony Gold (HMY) 3.3%, 17) Gold Fields (GFI) 3.22%, 18) IAMGOLD (IAG) 3.12%

How large is the gold futures contract size?

Each gold futures contract represents 100 troy ounces of gold.

How much is gold below its all time high adjusted for price inflation?

Gold reached an all time high adjusted for price inflation on 1/21/80 of $4,291.36 and at its 7/25/14 price of $1,295.50 gold is 69.8% below it.

Why did gold prices decline in 2013?

Too many people had become bullish on gold too soon and there needed to be a shakeout of all the “technical” traders who bought gold solely due to momentum, without understanding the true fundamentals of gold or the dollar. The gold momentum traders are long gone and have all moved into bitcoins, which will keep them distracted for a while. Historically, the largest upward moves in any asset class, began with a sharp move to the downside. This usually convinces the majority to believe the wrong thing and the average investor to position themselves in the totally wrong way (ie: buying bitcoins instead of gold).

Remember, gold’s biggest 4-year rally in history from $103.50 per oz to $850 per oz for a gain of 721.3%, began with a sharp 47% decline from $195 per oz down to $103.50 per oz. The majority of the population today is overwhelmingly bearish on gold and won’t become bullish again until they see gold break $2,000 per o

How do you know the Dow/Gold ratio’s 2011 low of 5.78 wasn’t its secular bear market bottom?

The Dow/Gold ratio‘s bounce from a low of 5.78 on August 22, 2011 to a high of 13.80 on December 31, 2013 – is very similar to the Dow/Gold ratio’s medium-term bounce from a low of 3.05 on December 30, 1974 to a high of 9.48 on Septemer 1, 1976 – before it crashed 89% in 41 months to a secular bear market low of 1 on January 21, 1980. The Dow/Gold ratio bounced in 2011 after declining 87% from its 1999 peak, very close to its 1974 bounce point of 89% below its 1966 peak.

Going back 110 years – the median Dow/Gold ratio has been 5.83 – meaning there has been approximately 13,800 trading days with a Dow/Gold ratio of above 5.83 and 13,800 trading days with a Dow/Gold ratio of below 5.83. It was natural for the Dow/Gold ratio to bounce at its long-term median, but the bounce has clearly run out of stream. The Dow/Gold ratio has been above its median for the last 25 consecutive years. During the last cycle, the Dow/Gold ratio remained above its median from 1949 through 1974, a period of 25 years.

There is zero chance of 5.78 holding as the bottom. Bubbles always overcorrect to the downside, they never bottom at median/average levels. Historically, the Dow/Gold ratio has always bottomed between 1 and 2 – and we are coming off of the biggest U.S. stock market bubble in history.

How long will it take for the Dow/Gold ratio to decline back below its 2011 low of 5.78?

The soonest we see it happening is 12 months from now. We doubt it will take much longer than 24 months. Our guess is, somewhere near the end of 2015.

Does NIA still expect silver to outperform gold?

We currently have a gold/silver ratio of 63, which means silver is being valued as an industrial metal only and receiving no monetary premium – but as inflation starts becoming a larger worldwide concern – the gold/silver ratio will begin trending sharply downward. Ultimately, we believe the gold/silver ratio will bottom between 15 and 16 – at about the same time the Dow/Gold ratio bottoms between 1 and 2.

Back when gold and silver were widely used as money, the gold/silver ratio held steady between 15 and 16 for hundreds of years. A return to a gold/silver ratio of 15-16 is inevitable. Those who own silver will see their purchasing power quadruple, while those who own less volatile gold will see their purchasing power remain stable – as Americans with dollar-denominated assets go broke.

Inflation

What is the current official rate of U.S. price inflation?

The official rate of U.S. price inflation based on June’s consumer price index (CPI) on a year-over-year basis is 2.075%. On a month-to-month basis, June’s CPI increased by 0.2573%, which equals 3.088% on an annualized basis.

What is the current real rate of U.S. price inflation?

The U.S. Bureau of Labor Statistics (BLS) implemented CPI methodology changes 1988 that were designed to understate U.S. price inflation in order to keep Social Security cost of living adjustment (COLA) increases as low as possible. NIA currently estimates on an extremely conservative basis that real U.S. price inflation is 2% above the current official price inflation rate, which would put real U.S. price inflation today at 4.075%. To see the dramatic difference just a 2% price inflation understatement makes to Real U.S. GDP, go to: http://inflation.us/realgdp Instead of Real U.S. GDP having grown 27.97% since the 1Q of year 2000, it has really declined 3.027%.

What are real interest rates and why are they important?

Real interest rates are the Federal Funds Rate minus the rate of price inflation. To keep U.S. price inflation low and stable, the Federal Funds Rate must be higher than the current U.S. price inflation rate, which in other words means – real interest rates must be kept positive. When the U.S. had negative real interest rates for 13 consecutive quarters in the mid-1970s, it setup America’s worst price inflation crisis of the past century, causing gold to rise to a high in January 1980 of $850 per oz, which today is the equivalent of $2,550 per oz adjusted for the CPI and $4,291 per oz adjusted for NIA’s more accurate historical measure of U.S. price inflation.

The U.S. has now had negative real interest rates for a record 19 consecutive quarters. Therefore, NIA considers it a 100% certainty that gold prices will rise dramatically higher in the years ahead, while the dollar collapses.

Lean Hogs

Is there a Lean Hogs ETF?

There is an iPath ETN that is 45.74% invested into Lean Hogs futures and 54.26% invested into Live Cattle futures and it trades under the symbol LSTK.

What is the all time high lean hogs price?

The all time high nominal lean hogs price is $128.775 per cwt, reached on April 2, 2014.

How large is the lean hogs futures contract size?

Each lean hogs futures contract represents 50,000 lbs of lean hog (barrow and gilt) carcasses.

How much are lean hogs below their all time high adjusted for price inflation?

Lean hogs reached an all time high adjusted for price inflation on 8/13/73 of $546.96 and at its 6/20/14 closing price of $127.825 lean hogs are 76.6% below it.

Live Cattle

Is there a Live Cattle ETF?

There is an iPath ETN that is 59.76% invested into Live Cattle futures and 40.24% invested into Lean Hogs futures and it trades under the symbol COW.

What is the all time high live cattle price?

The all time high nominal live cattle price is $153 per cwt, reached on February 28, 2014.

How large is the live cattle futures contract size?

Each live cattle futures contract represents 40,000 lbs of live steers.

How much is live cattle below its all time high adjusted for price inflation?

Live cattle reached an all time high adjusted for price inflation on 8/13/73 of $525.48 and at its 6/20/14 closing price of $147.55 live cattle is 71.9% below it.

OJ

Is there an Orange Juice ETF?

No, the only way to invest into orange juice is through the futures market.

What is the all time high orange juice price?

The all time high nominal orange juice price is $2.13 per lb, reached on January 10, 2012.

How large is the orange juice futures contract size?

Each orange juice futures contract represents 15,000 lbs of orange juice.

How much is orange juice below its all time high adjusted for price inflation?

Orange juice reached an all time high adjusted for price inflation on 11/16/77 of $1,261.11 and at its 6/20/14 closing price of $158.15 orange juice is 87.5% below it.

Other Commodities

What undiscovered commodity do you expect to boom the most?

Tesla will soon be building a massive battery plant in the U.S. that will revolutionize the global automobile industry. The most important commodity to be used in Tesla’s batteries will be graphite. Very few people are talking about graphite at this time, but graphite will be the next commodity to boom.

Palladium

How much palladium was mined worldwide in 2013?

Total global palladium production in 2013 equaled 6.835 million ounces down 1.725% from 6.955 million ounces in 2012.

What companies are the world’s largest miners of palladium?

1) Norilsk Nickel (GMKN.RU/NILSY) with operations in Russia, 2) Anglo Platinum (AMS.ZA/AGPPY) with operations in South Africa and Zimbabwe, 3) Impala Platinum (IMP.ZA/IMPUY) with operations in South Africa and Zimbabwe, 4) Lonmin plc (LON.ZA/LNMIY) with operations in South Africa, and 5) Stillwater Mining (SWC) with operations in Montana, 6) Vale S.A. (VALE) with operations in Canada, 7) Aquarius Platinum (AQP.ZA/AQPTY) with operations in South Africa and Zimbabwe, 8) North American Palladium (PAL) with operations in Canada, 9) Northam Platinum (NHM.ZA/NOC.BE) with operations in South Africa, and 10) Glencore Xstrata plc (GLNCY) with operations in South Africa and Canada.

Are there any companies that primarily produce palladium?

Stillwater Mining (SWC) and North American Palladium (PAL) are the only two primary palladium producers in the world. However, SWC is the only financially sound primary palladium producer in the world. SWC is NIA’s #1 favorite palladium stock suggestion. SWC has a strong balance sheet with $496.02 million in cash and $310.7 million in debt, for a net cash position of $185.32 million. PAL has a poor balance sheet with $10.13 million in cash and $243.66 million in debt, for a net debt position of $233.53 million.

Excluding special income and charges, SWC reported a 2013 operating profit of $179.32 million vs. PAL reporting a 2013 operating loss of ($6.482 million). SWC generated $149.4 million in cash flow from operations, more than 24X larger than PAL’s $6.15 million in cash flow from operations. SWC reduced its debt by $166.19 million vs. PAL issuing $64.29 million in additional debt.

How much palladium is produced by Russia’s Norilsk Nickel?

Norilsk Nickel (NILSY) based in Russia is by far the world’s largest palladium miner and in 2013 produced 2.63 million ounces of palladium or 38.5% of global palladium production, down from its 2012 production of 2.73 million ounces of palladium or 39.3% of global palladium production.

How do you know Russia’s Palladium stockpiles have dried up?

For many years, demand for palladium has been surging while Russian palladium production from mining has been declining. Since 2010, palladium demand has surpassed the total amount of palladium produced from mining and recycling, but palladium prices have been held artificially low due to the Russian government selling off its palladium stockpile – allowing the growing palladium deficit to be filled.

It is estimated that over the last 8 years, the Russian government has sold off a total of 6.8 million ounces of palladium from its stockpile – an average of 850,000 ounces per year. However, it is believed that Russian palladium stockpile sales have declined from 1.3 million ounces in 2008, to 1.1 million ounces in 2009, 0.8 million ounces in 2010 and 2011, 0.25 million ounces in 2012, and only 0.1 million ounces in 2013. This is a strong sign that its palladium stockpile has been exhausted.

What is the best Palladium ETF?

ETFS Physical Palladium Shares owns physical palladium and trades under the symbol PALL. It is by far the largest and most liquid Palladium ETF, with a total net asset value of $530 million as of July 25, 2014.

What is the all time high palladium price?

The all time high nominal palladium price is $1,090 per ounce, reached on January 26, 2001.

How large is the palladium futures contract size?

Each palladium futures contract represents 100 troy ounces of palladium.

How much is palladium below its all time high adjusted for price inflation?

Palladium reached an all time high adjusted for price inflation on 1/26/01 of $1,908.14 and at its 7/25/14 price of $875 palladium is 54.1% below it.

Which precious metal is the most undervalued and which is the most overvalued?

From a long-term perspective, silver is the most undervalued and is currently 91.6% below its all time high adjusted for price inflation. Historically, silver has been the most volatile precious metal – consistently making the largest percentage gains during periods of high inflation, but consistently making the most dramatic percentage declines when inflation becomes less of a concern.

Palladium appears to be the most overvalued. Palladium reached its all time high adjusted for price inflation in January of 2001 vs. gold, silver, and platinum each reaching their all time highs adjusted for price inflation between January and March of 1980. Palladium is currently 56.9% below its all time high adjusted for price inflation, the least of all the precious metals.

However, palladium has the most short-term momentum behind it and just this month reached a new 13-year nominal high. Even if the South African mining strikes come to an end, palladium could still move higher in the short-term due to the Russian government’s palladium stockpile recently becoming depleted, which was used in recent years to fill palladium’s growing supply deficit.

Platinum

What is the best Platinum ETF?

ETFS Physical Platinum Shares owns physical platinum and trades under the symbol PPLT. It is by far the largest and most liquid Platinum ETF, with a total net asset value of $778 million as of July 25, 2014.

What is the all time high platinum price?

The all time high nominal platinum price is $2,308.80 per ounce, reached on March 4, 2008.

How large is the platinum futures contract size?

Each platinum futures contract represents 50 troy ounces of platinum.

How much is platinum below its all time high adjusted for price inflation?

Platinum reached an all time high adjusted for price inflation on 3/5/80 of $5,198.18 and at its 7/25/14 price of $1471.25 platinum is 71.7% below it.

Silver

What has been the long-term average gold/silver ratio?

Over the past 20 years, we have had an average gold/silver ratio of 61.52 vs. its current level on April 19, 2014 of 66.02. The gold/silver ratio has a 20-year range of 31.57 to 93.56. However, longer term during periods of high inflation, the gold/silver ratio has always declined to a low of between 15 and 16.

How much silver was mined worldwide in 2013?

The silver institute hasn’t yet released total 2013 silver production figures, but in 2012 the world produced 787 million ounces of silver up 4% from 757 million ounces of silver in 2012.

NIA calculates from publicly available data that in 2013, the top 26 producers of silver mined total silver of 295.9 million ounces down 2% from 301.9 million ounces in 2012.

What is the current concentrated silver short position?

As of April 15th, four commercial banks were short a net 244,896,460 ounces of silver, which is equal to 114 days of production.

What is the best Silver ETF?

The iShares Silver Trust ETF owns physical silver and trades under the symbol SLV. It is by far the largest and most liquid Silver ETF, with a total net asset value of $6.74 billion as of July 25, 2014.

Are there any Silver ETFs that are leveraged to make double or triple the gains/losses of silver?

The ProShares Ultra Silver ETF, which trades under the symbol AGQ, is leveraged to make double the gains/losses of silver futures.

The VelocityShares 3X Long Silver ETN, which trades under the symbol USLV, is leveraged to make triple the gains/losses of silver futures.

What is the all time high silver price?

The all time high nominal silver price is $50.36 per ounce, reached on January 18, 1980.

How large is the silver futures contract size?

Each silver futures contract represents 5,000 troy ounces of silver.

How much is silver below its all time high adjusted for price inflation?

Silver reached an all time high adjusted for price inflation on 1/17/80 of $250.59 and at its 7/25/14 price of $20.44 silver is 91.8% below it.

Which precious metal is the most undervalued and which is the most overvalued?

From a long-term perspective, silver is the most undervalued and is currently 91.6% below its all time high adjusted for price inflation. Historically, silver has been the most volatile precious metal – consistently making the largest percentage gains during periods of high inflation, but consistently making the most dramatic percentage declines when inflation becomes less of a concern.

Palladium appears to be the most overvalued. Palladium reached its all time high adjusted for price inflation in January of 2001 vs. gold, silver, and platinum each reaching their all time highs adjusted for price inflation between January and March of 1980. Palladium is currently 56.9% below its all time high adjusted for price inflation, the least of all the precious metals.

However, palladium has the most short-term momentum behind it and just this month reached a new 13-year nominal high. Even if the South African mining strikes come to an end, palladium could still move higher in the short-term due to the Russian government’s palladium stockpile recently becoming depleted, which was used in recent years to fill palladium’s growing supply deficit.

Does NIA still expect silver to outperform gold?

We currently have a gold/silver ratio of 63, which means silver is being valued as an industrial metal only and receiving no monetary premium – but as inflation starts becoming a larger worldwide concern – the gold/silver ratio will begin trending sharply downward. Ultimately, we believe the gold/silver ratio will bottom between 15 and 16 – at about the same time the Dow/Gold ratio bottoms between 1 and 2.

Back when gold and silver were widely used as money, the gold/silver ratio held steady between 15 and 16 for hundreds of years. A return to a gold/silver ratio of 15-16 is inevitable. Those who own silver will see their purchasing power quadruple, while those who own less volatile gold will see their purchasing power remain stable – as Americans with dollar-denominated assets go broke.

Soybeans

Is there a soybean ETF?

There is a Teucrium ETF that owns soybean futures contracts and it trades under the symbol SOYB.

What is the all time high soybean price?

The all time high nominal soybean price is $17.735 per bushel, reached on August 30, 2012.

What is the initial margin requirement for soybean futures?

The CBOE just raised initial soybean margin requirements by 20% to $4,050 per contract, up from their previous level of $3,375 per contract.

How large is the soybean futures contract size?

Each soybean futures contract represents 5,000 bushels of soybeans.

How much are soybeans below their all time high adjusted for price inflation?

Soybeans reached an all time high adjusted for price inflation on 6/4/73 of $10,968.07 and at its 6/20/14 closing price of $1,415.75 soybeans are 87.1% below it.

Stocks

What should I look for when analyzing a gold/silver company’s balance sheet?

You should first determine its total cash position – comprised of cash, cash equivalents, and short-term investments. Then you should determine its total amount of financial debt, by combining both its short and long-term debt. Then calculate its net cash position, by taking its total cash position and subtracting its total financial debt. Afterwards, calculate the company’s net cash per share – by dividing its net cash position by its total shares outstanding. If you take the company’s latest share price and subtract its net cash per share, you will determine what value is being given to the company’s actual business operations and non-cash assets.

Next, you should calculate the company’s “current ratio” by taking its total current assets and dividing by its total current liabilities. If a company has a current ratio of below 1, it means they don’t currently have enough liquid assets to cover their debts that are owed over the next 12 months. NIA has a strict rule of avoiding all stocks with a current ratio of below 1, because they could be at risk of going bankrupt. A current ratio of between 1 and 1.50 means the company could face a liquidity crisis if it has problems collecting on its accounts receivable. A current ratio of between 1.5 and 3 is healthy, and above 3 is strong!

You should then calculate the company’s “working capital” by taking its “current assets” and subtracting its “current liabilities”. You can also calculate the company’s “working capital per share” by dividing its working capital by the company’s shares outstanding. If the company’s working capital exceeds its net cash position, it means that after collecting its accounts receivable, selling its inventories, and paying off its accounts payable – its cash position will increase (or vice versa).

You should then calculate the company’s “book value”, by taking its “shareholders equity” and dividing it by the company’s shares outstanding. If the company’s shareholders equity isn’t displayed, you can calculate it by taking the company’s total assets and subtracting its total liabilities.

You should also calculate a company’s “tangible book value” by taking its “shareholders equity” and subtracting its “intangible assets” and “goodwill”, before dividing by the company’s shares outstanding. A company’s tangible book value provides a more realistic value of what shareholders would receive if the company shut down its operations, paid off its debts, sold off its assets, and paid out the proceeds to its shareholders.

Why is a stock’s tangible book value more realistic than normal book value?

If a company were to liquidate its assets, the odds are that its intangible assets and goodwill will be worthless. Most companies with intangible assets and goodwill on their balance sheets will eventually be forced to write down these values to zero, which often results in companies reporting large quarterly non-cash net losses.

How do you calculate a gold/silver exploration company’s cash burn rate?

To calculate a gold/silver exploration company’s cash burn rate you need to calculate its annual free cash flow. First, you need to access its latest quarterly cash flow statements. Under “Cash Flow – Operations” you need to look for its total quarterly “operating cash flow” (aka “cash flow from operations”). Afterwards, under “Cash Flow – Investing” you need to look for its quarterly “capital expenditures”. Simply add these two numbers together to calculate the company’s latest quarterly free cash flow, which for an exploration company with no revenues – will be negative, and will equal its latest quarterly burn rate.

Afterwards, we suggest doing the same for the previous three quarters – then adding together its total free cash flow during the company’s four most recent quarters – to calculate its trailing twelve month burn rate. As an alternative, if the company recently implemented cost reductions or increased its quarterly expenditures – you can simply annualize its latest quarterly burn rate by multiplying it by four.

Then we suggest taking the company’s net cash position and dividing by its annual burn rate, to calculate how many years worth of cash the company currently has on its balance sheet.

How many years worth of cash is it good for a gold/silver exploration stock to have?

Generally, if a company’s cash position is enough to last for 5 years or more – you won’t have to worry about substantial short-term dilution, unless the company intends to raise the funds necessary to bring its project into production. If the company only has enough cash to last 12-24 months, there is high risk of short-term dilution and you should only consider the stock as a short-term swing trade. If the company doesn’t have enough cash to last 12 months, substantial short-term dilution is practically guaranteed – and the stock should be avoided. Companies with 2-5 years worth of cash will typically be patient and seek to raise money on favorable terms, such as after a large rally to a new multi-year high.

What is the burn rate of Minco Silver (TSX: MSV) and how long will its cash position last?

MSV has a trailing twelve month burn rate of $3.564 million. MSV’s cash position of $60.02 million is enough to last for 16.84 years.

What is the burn rate of Levon Resources (TSX: LVN) and how long will its cash position last?

LVN has a trailing twelve month burn rate of $5.45 million. LVN’s cash position of $41.69 million is enough to last for 7.65 years.

What is a stock’s “current ratio” and how is it calculated?

A company’s “current ratio” is their current assets divided by current liabilities. If a company has a current ratio of below 1, it means they don’t currently have enough liquid assets to cover their debts that are owed over the next 12 months. NIA has a strict rule of avoiding all stocks with a current ratio of below 1, because they could be at risk of going bankrupt. A current ratio of between 1 and 1.50 means the company could face a liquidity crisis if it has any trouble collecting on its accounts receivable. A current ratio of between 1.5 and 3 is healthy, and above 3 is strong.

Are cash equivalents the same as cash?

NIA automatically considers cash equivalents to be a part of a company’s total cash position. Cash equivalents usually consist of highly liquid assets that can easily be converted into cash, such as government treasury bills (tbills) and certificates of deposit (CDs).

Does NIA consider a company’s short-term investments to be cash?

NIA will usually consider a company’s short-term investments to be a part of its total cash position, but not always. It is important to read a company’s filings to see exactly what their short-term investments consist of. It can sometimes be the stock of another publicly traded company and it’s possible that the value of those shares made a meaningful gain/loss following the company’s latest quarterly results filing.

How do you know the Dow/Gold ratio’s 2011 low of 5.78 wasn’t its secular bear market bottom?

The Dow/Gold ratio‘s bounce from a low of 5.78 on August 22, 2011 to a high of 13.80 on December 31, 2013 – is very similar to the Dow/Gold ratio’s medium-term bounce from a low of 3.05 on December 30, 1974 to a high of 9.48 on Septemer 1, 1976 – before it crashed 89% in 41 months to a secular bear market low of 1 on January 21, 1980. The Dow/Gold ratio bounced in 2011 after declining 87% from its 1999 peak, very close to its 1974 bounce point of 89% below its 1966 peak.

Going back 110 years – the median Dow/Gold ratio has been 5.83 – meaning there has been approximately 13,800 trading days with a Dow/Gold ratio of above 5.83 and 13,800 trading days with a Dow/Gold ratio of below 5.83. It was natural for the Dow/Gold ratio to bounce at its long-term median, but the bounce has clearly run out of stream. The Dow/Gold ratio has been above its median for the last 25 consecutive years. During the last cycle, the Dow/Gold ratio remained above its median from 1949 through 1974, a period of 25 years.

There is zero chance of 5.78 holding as the bottom. Bubbles always overcorrect to the downside, they never bottom at median/average levels. Historically, the Dow/Gold ratio has always bottomed between 1 and 2 – and we are coming off of the biggest U.S. stock market bubble in history.

How long will it take for the Dow/Gold ratio to decline back below its 2011 low of 5.78?

The soonest we see it happening is 12 months from now. We doubt it will take much longer than 24 months. Our guess is, somewhere near the end of 2015.

Sugar

Is there a sugar ETF?

There is an iPath ETN that owns sugar futures contracts and it trades under the symbol SGG.

What is the all time high sugar price?

The all time high nominal sugar price is $0.66 per lb, reached on November 21, 1974.

How large is the sugar futures contract size?

Each sugar futures contract represents 112,000 lbs of sugar.

How much is sugar below its all time high adjusted for price inflation?

Sugar reached an all time high adjusted for price inflation on 11/20/74 of $506.81 and at its 6/20/14 closing price of $17.92 sugar is 96.5% below it.

Which five agricultural commodities are the most undervalued with the largest upside?

As of June 20, 2014, the five agricultural commodities that are most below their all time highs adjusted for price inflation are: 1) Sugar -96.5%, 2) Cocoa -93.6%, 3) Coffee -92.3%, 4) Cotton -89.5%, and 5) Wheat -89.1%.

Top NIAnswers

What is the best type of physical gold to buy?

When buying physical gold, it is important to pay as close to the current gold spot price as possible. Stay away from rare numismatic gold coins that have a premium built in for their collectible value. You are buying the gold for the value of its gold content only, not the rarity of the gold coin itself. In the event of a currency crisis or hyperinflation, all gold of equal weight will be worth the same.

Typically you will find 1 oz gold rounds to be priced closer to the gold spot price than official government  gold coins. However, there is one advantage to government produced gold coins: they are instantly recognizable and are easier to barter with than a gold round that somebody might want to weigh and test the purity of before accepting as payment. NIA considers the 1 oz American Eagle to be the most recognizable/liquid gold coin, with the 1 oz American Gold Buffalo and 1 oz Canadian Maple Leaf tied for second, and the 1 oz South African Krugerrand and 1 oz Austrian Philharmonic tied the third.

They each contain 1 oz of gold. However, the American Eagle and South African Krugerrand both contain a small amount of silver and copper to make them more durable. The American Eagle and South African Krugerrand gold coins contain 91.67% gold, 3% silver, and 5.33% copper and have a total weight of 1.0909 oz. The American Gold Buffalo, Canadian Maple Leaf, and Austrian Philharmonic gold coins are each 99.99% pure gold and have a total weight of  1 oz.

What are the largest premiums over the spot price of gold that you would spend to purchase 1 oz gold coins?

The largest premium we would pay for a 1 oz American Eagle gold coin over the spot price of gold is 5%. The largest premium we would pay for a 1 oz American Gold Buffalo, 1 oz Canadian Maple Leaf, 1 oz South African Krugerrand, or a 1 oz Austrian Philharmonic is 4%. The largest premium we would pay for a 1 oz gold round is 2%.

How much gold was mined worldwide in 2013?

Total global gold production in 2013 reached 2,770 tonnes or 89.06 million ounces up 2.97% from 2,690 tonnes or 86.49 million ounces in 2012.

Do you recommend buying fractional gold coins that weigh less than one ounce?

Stay away from 1/2 oz, 1/4 oz, and 1/10 oz gold coins. You might have to pay a premium of 10%-40% over the spot price of gold to purchase these “fractional” gold coins, and it is unlikely that you will end up receiving as large of a premium when you sell them or barter with them. When the U.S. dollar becomes worthless, instead of using fractional gold coins to barter for smaller items it will be easier to barter with 1 oz silver coins, which will rise in value by a much larger percentage than gold coins anyway.

How much silver was mined worldwide in 2013?

The silver institute hasn’t yet released total 2013 silver production figures, but in 2012 the world produced 787 million ounces of silver up 4% from 757 million ounces of silver in 2012.

NIA calculates from publicly available data that in 2013, the top 26 producers of silver mined total silver of 295.9 million ounces down 2% from 301.9 million ounces in 2012.

How much palladium was mined worldwide in 2013?

Total global palladium production in 2013 equaled 6.835 million ounces down 1.725% from 6.955 million ounces in 2012.

What companies are the world’s largest miners of palladium?

1) Norilsk Nickel (GMKN.RU/NILSY) with operations in Russia, 2) Anglo Platinum (AMS.ZA/AGPPY) with operations in South Africa and Zimbabwe, 3) Impala Platinum (IMP.ZA/IMPUY) with operations in South Africa and Zimbabwe, 4) Lonmin plc (LON.ZA/LNMIY) with operations in South Africa, and 5) Stillwater Mining (SWC) with operations in Montana, 6) Vale S.A. (VALE) with operations in Canada, 7) Aquarius Platinum (AQP.ZA/AQPTY) with operations in South Africa and Zimbabwe, 8) North American Palladium (PAL) with operations in Canada, 9) Northam Platinum (NHM.ZA/NOC.BE) with operations in South Africa, and 10) Glencore Xstrata plc (GLNCY) with operations in South Africa and Canada.

Are there any companies that primarily produce palladium?

Stillwater Mining (SWC) and North American Palladium (PAL) are the only two primary palladium producers in the world. However, SWC is the only financially sound primary palladium producer in the world. SWC is NIA’s #1 favorite palladium stock suggestion. SWC has a strong balance sheet with $496.02 million in cash and $310.7 million in debt, for a net cash position of $185.32 million. PAL has a poor balance sheet with $10.13 million in cash and $243.66 million in debt, for a net debt position of $233.53 million.

Excluding special income and charges, SWC reported a 2013 operating profit of $179.32 million vs. PAL reporting a 2013 operating loss of ($6.482 million). SWC generated $149.4 million in cash flow from operations, more than 24X larger than PAL’s $6.15 million in cash flow from operations. SWC reduced its debt by $166.19 million vs. PAL issuing $64.29 million in additional debt.

How do you know Russia’s Palladium stockpiles have dried up?

For many years, demand for palladium has been surging while Russian palladium production from mining has been declining. Since 2010, palladium demand has surpassed the total amount of palladium produced from mining and recycling, but palladium prices have been held artificially low due to the Russian government selling off its palladium stockpile – allowing the growing palladium deficit to be filled.

It is estimated that over the last 8 years, the Russian government has sold off a total of 6.8 million ounces of palladium from its stockpile – an average of 850,000 ounces per year. However, it is believed that Russian palladium stockpile sales have declined from 1.3 million ounces in 2008, to 1.1 million ounces in 2009, 0.8 million ounces in 2010 and 2011, 0.25 million ounces in 2012, and only 0.1 million ounces in 2013. This is a strong sign that its palladium stockpile has been exhausted.

What is the best Gold ETF?

The SPDR Gold Shares ETF owns physical gold and trades under the symbol GLD. It is by far the largest and most liquid Gold ETF, with a total net asset value of $33.42 billion as of July 25, 2014.

Are there any Gold ETFs that are leveraged to make double or triple the gains/losses of gold?

The PowerShares DB Gold Double Long ETN, which trades under the symbol DGP, is leveraged to make double the gains/losses of gold futures.

The VelocityShares 3x Long Gold ETN, which trades under the symbol UGLD, is leveraged to make triple the gains/losses of gold futures.

What is the best Silver ETF?

The iShares Silver Trust ETF owns physical silver and trades under the symbol SLV. It is by far the largest and most liquid Silver ETF, with a total net asset value of $6.74 billion as of July 25, 2014.

Are there any Silver ETFs that are leveraged to make double or triple the gains/losses of silver?

The ProShares Ultra Silver ETF, which trades under the symbol AGQ, is leveraged to make double the gains/losses of silver futures.

The VelocityShares 3X Long Silver ETN, which trades under the symbol USLV, is leveraged to make triple the gains/losses of silver futures.

What is the best Platinum ETF?

ETFS Physical Platinum Shares owns physical platinum and trades under the symbol PPLT. It is by far the largest and most liquid Platinum ETF, with a total net asset value of $778 million as of July 25, 2014.

What is the best Palladium ETF?

ETFS Physical Palladium Shares owns physical palladium and trades under the symbol PALL. It is by far the largest and most liquid Palladium ETF, with a total net asset value of $530 million as of July 25, 2014.

What is the HUI?

The HUI Index aka NYSE Arca Gold BUGS Index is a modified equal dollar weighted index of companies involved in gold mining. It is listed under the symbol “HUI” and was designed to provide significant exposure to near term movements in gold prices by including companies that do not hedge their gold production beyond 1.5 years.

What is the HUI’s all time high and low?

The HUI Gold Stock Index reached an all time low on November 16, 2000, of $35.31 and afterwards made an 11-year gain of 1,709% to an all time high on September 9, 2011, of $638.59. It then declined 70.5% to a low on December 19, 2013, of $188.39. Afterwards, it bounced 38.7% to a short-term peak on March 14, 2014 of $261.36. As of July 25, 2014, the HUI is $239.13, down 8.5% from its 2014 high.

What are the current HUI components and weightings?

1) Barrick Gold (ABX) 16.49%, 2) Goldcorp (GG) 16.2%, 3) Newmont Mining (NEM) 9.89%, 4) Agnico Eagle Mines (AEM) 4.61%, 5) Compania de Minas (BVN) 4.5%, 6) Sibanye Gold (SBGL) 4.47%, 7) AngloGold (AU) 4.25%, 8) Randgold (GOLD) 4.09%, 9) Kinross Gold (KGC) 4.05%, 10) B2Gold (NTG) 3.97%, 11) AuRico Gold (AUQ) 3.95%, 12) Yamana Gold (AUY) 3.93%, 13) Eldorado Gold (EGO) 3.91%, 14) New Gold (NGD) 3.84%, 15) Alamos Gold (AGI) 3.51%, 16) Harmony Gold (HMY) 3.3%, 17) Gold Fields (GFI) 3.22%, 18) IAMGOLD (IAG) 3.12%

How much is gold below its all time high adjusted for price inflation?

Gold reached an all time high adjusted for price inflation on 1/21/80 of $4,291.36 and at its 7/25/14 price of $1,295.50 gold is 69.8% below it.

How much is palladium below its all time high adjusted for price inflation?

Palladium reached an all time high adjusted for price inflation on 1/26/01 of $1,908.14 and at its 7/25/14 price of $875 palladium is 54.1% below it.

How much is platinum below its all time high adjusted for price inflation?

Platinum reached an all time high adjusted for price inflation on 3/5/80 of $5,198.18 and at its 7/25/14 price of $1471.25 platinum is 71.7% below it.

How much is silver below its all time high adjusted for price inflation?

Silver reached an all time high adjusted for price inflation on 1/17/80 of $250.59 and at its 7/25/14 price of $20.44 silver is 91.8% below it.

Which five agricultural commodities are the most undervalued with the largest upside?

As of June 20, 2014, the five agricultural commodities that are most below their all time highs adjusted for price inflation are: 1) Sugar -96.5%, 2) Cocoa -93.6%, 3) Coffee -92.3%, 4) Cotton -89.5%, and 5) Wheat -89.1%.

Which precious metal is the most undervalued and which is the most overvalued?

From a long-term perspective, silver is the most undervalued and is currently 91.6% below its all time high adjusted for price inflation. Historically, silver has been the most volatile precious metal – consistently making the largest percentage gains during periods of high inflation, but consistently making the most dramatic percentage declines when inflation becomes less of a concern.

Palladium appears to be the most overvalued. Palladium reached its all time high adjusted for price inflation in January of 2001 vs. gold, silver, and platinum each reaching their all time highs adjusted for price inflation between January and March of 1980. Palladium is currently 56.9% below its all time high adjusted for price inflation, the least of all the precious metals.

However, palladium has the most short-term momentum behind it and just this month reached a new 13-year nominal high. Even if the South African mining strikes come to an end, palladium could still move higher in the short-term due to the Russian government’s palladium stockpile recently becoming depleted, which was used in recent years to fill palladium’s growing supply deficit.

What should I look for when analyzing a gold/silver company’s balance sheet?

You should first determine its total cash position – comprised of cash, cash equivalents, and short-term investments. Then you should determine its total amount of financial debt, by combining both its short and long-term debt. Then calculate its net cash position, by taking its total cash position and subtracting its total financial debt. Afterwards, calculate the company’s net cash per share – by dividing its net cash position by its total shares outstanding. If you take the company’s latest share price and subtract its net cash per share, you will determine what value is being given to the company’s actual business operations and non-cash assets.

Next, you should calculate the company’s “current ratio” by taking its total current assets and dividing by its total current liabilities. If a company has a current ratio of below 1, it means they don’t currently have enough liquid assets to cover their debts that are owed over the next 12 months. NIA has a strict rule of avoiding all stocks with a current ratio of below 1, because they could be at risk of going bankrupt. A current ratio of between 1 and 1.50 means the company could face a liquidity crisis if it has problems collecting on its accounts receivable. A current ratio of between 1.5 and 3 is healthy, and above 3 is strong!

You should then calculate the company’s “working capital” by taking its “current assets” and subtracting its “current liabilities”. You can also calculate the company’s “working capital per share” by dividing its working capital by the company’s shares outstanding. If the company’s working capital exceeds its net cash position, it means that after collecting its accounts receivable, selling its inventories, and paying off its accounts payable – its cash position will increase (or vice versa).

You should then calculate the company’s “book value”, by taking its “shareholders equity” and dividing it by the company’s shares outstanding. If the company’s shareholders equity isn’t displayed, you can calculate it by taking the company’s total assets and subtracting its total liabilities.

You should also calculate a company’s “tangible book value” by taking its “shareholders equity” and subtracting its “intangible assets” and “goodwill”, before dividing by the company’s shares outstanding. A company’s tangible book value provides a more realistic value of what shareholders would receive if the company shut down its operations, paid off its debts, sold off its assets, and paid out the proceeds to its shareholders.

How do you calculate a gold/silver exploration company’s cash burn rate?

To calculate a gold/silver exploration company’s cash burn rate you need to calculate its annual free cash flow. First, you need to access its latest quarterly cash flow statements. Under “Cash Flow – Operations” you need to look for its total quarterly “operating cash flow” (aka “cash flow from operations”). Afterwards, under “Cash Flow – Investing” you need to look for its quarterly “capital expenditures”. Simply add these two numbers together to calculate the company’s latest quarterly free cash flow, which for an exploration company with no revenues – will be negative, and will equal its latest quarterly burn rate.

Afterwards, we suggest doing the same for the previous three quarters – then adding together its total free cash flow during the company’s four most recent quarters – to calculate its trailing twelve month burn rate. As an alternative, if the company recently implemented cost reductions or increased its quarterly expenditures – you can simply annualize its latest quarterly burn rate by multiplying it by four.

Then we suggest taking the company’s net cash position and dividing by its annual burn rate, to calculate how many years worth of cash the company currently has on its balance sheet.

How many years worth of cash is it good for a gold/silver exploration stock to have?

Generally, if a company’s cash position is enough to last for 5 years or more – you won’t have to worry about substantial short-term dilution, unless the company intends to raise the funds necessary to bring its project into production. If the company only has enough cash to last 12-24 months, there is high risk of short-term dilution and you should only consider the stock as a short-term swing trade. If the company doesn’t have enough cash to last 12 months, substantial short-term dilution is practically guaranteed – and the stock should be avoided. Companies with 2-5 years worth of cash will typically be patient and seek to raise money on favorable terms, such as after a large rally to a new multi-year high.

What undiscovered commodity do you expect to boom the most?

Tesla will soon be building a massive battery plant in the U.S. that will revolutionize the global automobile industry. The most important commodity to be used in Tesla’s batteries will be graphite. Very few people are talking about graphite at this time, but graphite will be the next commodity to boom.

What is the current official rate of U.S. price inflation?

The official rate of U.S. price inflation based on June’s consumer price index (CPI) on a year-over-year basis is 2.075%. On a month-to-month basis, June’s CPI increased by 0.2573%, which equals 3.088% on an annualized basis.

What is the current real rate of U.S. price inflation?

The U.S. Bureau of Labor Statistics (BLS) implemented CPI methodology changes 1988 that were designed to understate U.S. price inflation in order to keep Social Security cost of living adjustment (COLA) increases as low as possible. NIA currently estimates on an extremely conservative basis that real U.S. price inflation is 2% above the current official price inflation rate, which would put real U.S. price inflation today at 4.075%. To see the dramatic difference just a 2% price inflation understatement makes to Real U.S. GDP, go to: http://inflation.us/realgdp Instead of Real U.S. GDP having grown 27.97% since the 1Q of year 2000, it has really declined 3.027%.

What are real interest rates and why are they important?

Real interest rates are the Federal Funds Rate minus the rate of price inflation. To keep U.S. price inflation low and stable, the Federal Funds Rate must be higher than the current U.S. price inflation rate, which in other words means – real interest rates must be kept positive. When the U.S. had negative real interest rates for 13 consecutive quarters in the mid-1970s, it setup America’s worst price inflation crisis of the past century, causing gold to rise to a high in January 1980 of $850 per oz, which today is the equivalent of $2,550 per oz adjusted for the CPI and $4,291 per oz adjusted for NIA’s more accurate historical measure of U.S. price inflation.

The U.S. has now had negative real interest rates for a record 19 consecutive quarters. Therefore, NIA considers it a 100% certainty that gold prices will rise dramatically higher in the years ahead, while the dollar collapses.

Is there anything that can prevent the dollar from experiencing a dramatic decline?

Janet Yellen would need to raise interest rates to 5% by year-end 2014. The current Effective Fed Funds Rate remains at just 0.1%. NIA sees a 0% chance of Yellen dramatically raising interest rates in the short-term. By the time she begins raising rates, price inflation will be much higher than it is today. NIA believes Yellen is unlikely to ever hike interest rates in an aggressive enough manner to prevent the upcoming U.S. currency crisis. Initially, she is likely to only raise rates to 0.5% and later to 1%, which means real interest rates will remain negative.

Why did gold prices decline in 2013?

Too many people had become bullish on gold too soon and there needed to be a shakeout of all the “technical” traders who bought gold solely due to momentum, without understanding the true fundamentals of gold or the dollar. The gold momentum traders are long gone and have all moved into bitcoins, which will keep them distracted for a while. Historically, the largest upward moves in any asset class, began with a sharp move to the downside. This usually convinces the majority to believe the wrong thing and the average investor to position themselves in the totally wrong way (ie: buying bitcoins instead of gold).

Remember, gold’s biggest 4-year rally in history from $103.50 per oz to $850 per oz for a gain of 721.3%, began with a sharp 47% decline from $195 per oz down to $103.50 per oz. The majority of the population today is overwhelmingly bearish on gold and won’t become bullish again until they see gold break $2,000 per o

How do you know the Dow/Gold ratio’s 2011 low of 5.78 wasn’t its secular bear market bottom?

The Dow/Gold ratio‘s bounce from a low of 5.78 on August 22, 2011 to a high of 13.80 on December 31, 2013 – is very similar to the Dow/Gold ratio’s medium-term bounce from a low of 3.05 on December 30, 1974 to a high of 9.48 on Septemer 1, 1976 – before it crashed 89% in 41 months to a secular bear market low of 1 on January 21, 1980. The Dow/Gold ratio bounced in 2011 after declining 87% from its 1999 peak, very close to its 1974 bounce point of 89% below its 1966 peak.

Going back 110 years – the median Dow/Gold ratio has been 5.83 – meaning there has been approximately 13,800 trading days with a Dow/Gold ratio of above 5.83 and 13,800 trading days with a Dow/Gold ratio of below 5.83. It was natural for the Dow/Gold ratio to bounce at its long-term median, but the bounce has clearly run out of stream. The Dow/Gold ratio has been above its median for the last 25 consecutive years. During the last cycle, the Dow/Gold ratio remained above its median from 1949 through 1974, a period of 25 years.

There is zero chance of 5.78 holding as the bottom. Bubbles always overcorrect to the downside, they never bottom at median/average levels. Historically, the Dow/Gold ratio has always bottomed between 1 and 2 – and we are coming off of the biggest U.S. stock market bubble in history.

How long will it take for the Dow/Gold ratio to decline back below its 2011 low of 5.78?

The soonest we see it happening is 12 months from now. We doubt it will take much longer than 24 months. Our guess is, somewhere near the end of 2015.

Does NIA still expect silver to outperform gold?

We currently have a gold/silver ratio of 63, which means silver is being valued as an industrial metal only and receiving no monetary premium – but as inflation starts becoming a larger worldwide concern – the gold/silver ratio will begin trending sharply downward. Ultimately, we believe the gold/silver ratio will bottom between 15 and 16 – at about the same time the Dow/Gold ratio bottoms between 1 and 2.

Back when gold and silver were widely used as money, the gold/silver ratio held steady between 15 and 16 for hundreds of years. A return to a gold/silver ratio of 15-16 is inevitable. Those who own silver will see their purchasing power quadruple, while those who own less volatile gold will see their purchasing power remain stable – as Americans with dollar-denominated assets go broke.

What energy commodity will perform better oil or natural gas?

Natural gas is extremely undervalued vs. oil just like silver is extremely undervalued vs. gold. Natural gas prices are very volatile, but over the next 3-4 years – natural gas has the potential to triple or quadruple the gains of oil.

Wheat

Is there a wheat ETF?

There is a Teucrium ETF that owns wheat futures contracts and it trades under the symbol WEAT.

What is the all time high wheat price?

The all time high nominal wheat price is $13 per bushel, reached on February 27, 2008.

What is the initial margin requirement for wheat futures?

The CBOE just raised initial wheat margin requirements by 7.1% to $2,025 per contract, up from their previous level of $1,890 per contract.

How large is the wheat futures contract size?

Each wheat futures contract represents 5,000 bushels of wheat.

How much is wheat below its all time high adjusted for price inflation?

Wheat reached an all time high adjusted for price inflation on 2/25/74 of $5,385.67 and at its 6/20/14 closing price of $585.25 wheat is 89.1% below it.

Which five agricultural commodities are the most undervalued with the largest upside?

As of June 20, 2014, the five agricultural commodities that are most below their all time highs adjusted for price inflation are: 1) Sugar -96.5%, 2) Cocoa -93.6%, 3) Coffee -92.3%, 4) Cotton -89.5%, and 5) Wheat -89.1%.

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