GLOBAL GOLD OUTLOOK No.4

NOVEMBER 2013

Global Gold Inc.

Herrengasse 98640 RapperswilSwitzerlandTel. +41 58 810 1750Fax. +41 58 810 1751claudio.grass@globalgold.chwww.globalgold.ch

Claudio Grass, Managing Director at Global Gold AG

I am a big fan of Nassim Taleb’s work and ideas. One of these ideas concerns ‘NEWS’. To Taleb, news is not just diverting and useless, it is toxic. Constantly following the news is not only tiring; it adds no value to us.Taleb also believes that news consumption QHJDWLYHO\�DHFWV�RXU�GHFLVLRQ�PDNLQJ�process. We, at Global Gold, fully agree with this view.

Although our Outlook would probably not qualify as absolutely “news-free” DFFRUGLQJ�WR�7DOHEȇV�GHȴQLWLRQ��ZH�DUH�committed to concentrating on the big picture and writing about topics or issues, which are relevant today and will be just as relevant next year. In line with our commitment we are starting D�VHULHV�RI�ERRN�VXPPDULHV��7KH�ȴUVW�RQH��ZKLFK�\RX�ZLOO�ȴQG�LQ�WKLV�RXWORRN��is a jewel written by Murray Rothbard in 1984, a must read for anyone wanting to understand the intricacies of how the government and business world are intertwined.

We hope you enjoy our outlook and look forward to your comments and feedback.

Please feel free to contact us if you have any questions.

Between Tapering and US

Government Shutdown,

where did the gold go?

�����LV�D�ELJ�\HDU�IRU�ERWK�ȴQDQFLHUV�DQG�IRRWEDOO�IDQV��1RW�RQO\�will we enjoy 4 weeks of football in the world cup, but there is a possibility that we see a gradual withdrawal of a long and tough QE program. How are they related? The word “taper” is WKH�FRQQHFWLRQ��7R�WKH�ȴQDQFH�LQGXVWU\��LW�PHDQV�WKDW�WKH�)('�will reduce its asset buying program. To football players (and sports athletes) it means their training program will be reduced prior to their big event. Why taper? Well, the risk is to have athletes too tired or worn out at their big event where they are expected to launch and perform with a boost. Makes sense, ULJKW"� ΖI� ZH� DSSO\� WKH� SUHYLRXV� SHUVSHFWLYH� WR� WKH� )('ȇV� 4(�SURJUDP��ZKHQ� WKH�)('�EHJLQV� WR� WDSHU�� LW� LV� H[SHFWHG� WR�GR�VR� JUDGXDOO\�� L�H�� UHGXFH� LWV� 86'��� ELOOLRQ� PRQWKO\� VWLPXOXV�SDFNDJH�LQ�VWDJHV��%XW��ZKDW�QH[W"�/LNH�WKH�DWKOHWHV��WKH�)('�LV�likely to reintroduce another QE with full-throttle. The problem with this QE program is what we stated before: it created and continues to create asset bubbles. What we have now is a PDUNHW�ȊDGGLFWHGȋ�WR�WKLV�VWLPXOXV��$V�ZH�VDLG�EHIRUH��WKH�)('�LV�in a vicious cycle: any form of tapering will increase bond yields, and as a result increase the servicing costs of the massive debts of the US government. We therefore reiterate that it is possible WKDW� WKH� )('� ZLOO� VWDUW� WR� UHGXFH� LWV� DVVHW� SXUFKDVHV�� EXW� LW�FDQQRW� DRUG� KDOWLQJ� LWV� 4(� SURJUDP� HQWLUHO\� LQ� ����� DQG�recent years have shown they are likely to increase their programs.

'HEW� LV�WKH�NH\�ZRUG� LQ�WKLV�ZKROH� LVVXH�� LW�JUHZ�VR�PDVVLYHO\�that the US government was on the verge of default, and why the government partially shut down for two weeks in October. 1R�DJUHHPHQW�ZDV�UHDFKHG��EXW�D�WHPSRUDU\�ȴ[�WR�WKH�PDWWHU�which will eventually have to be settled in 2014. Both parties agreed on a temporary authorization of spending to January ��WK� Ȃ� WHPSRUDU\� ȴ[HV� VHHP� WR� KDYH� EHFRPH� D� VSHFLDOW\� RI�our politicians. How did the shutdown happen? Well, Congressfailed to enact legislation appropriating funds for 2014. On October 17th the debt limit would have been reached. Beyond this deadline the US Treasury would no longer be legally

GLOBAL GOLD OUTLOOK No.4

NOVEMBER 2013

authorized to borrow money. The US Treasury had reached its GHEW�FHLOLQJ�RI�DERXW�86'���WULOOLRQ�LQ�0D\�DQG�KDG�VLQFH�WKHQ�been paying the bills via extraordinary measures. The whole ȴDVFR�VXUURXQGLQJ�WKH�JRYHUQPHQW�VKXWGRZQ�DQG�GHEW�FHLOLQJ�was extremely hyped in the media and the commentators were actually implying the real possibility of a default of the United States.

But really, can the US really default on its debt? Or was there nothing else that the government could do bypass the debt ceiling? What is the way out of this situation? Well, there is the rational and conventional one: cutting expenses and raising taxes. The problem is, however, that expenses are so much greater than revenues that this isn’t doable, at least politically.

There is another suggestion questioning why have a debt FHLOLQJ�DOWRJHWKHU"�:H�DUH�FRQȴGHQW�WKH�86�JRYHUQPHQW�ZRXOG�GR� HYHU\WKLQJ� LQ� LWV� SRZHU� WR� ȴQG� D� ZD\� WR� FLUFXPYHQW� LWV�GHIDXOW��'HVSHUDWH�WLPHV�FDOO�IRU�GHVSHUDWH�PHDVXUHV�DQG�WKH�absurdity of government “ideas” has no boundaries! Anyone UHPHPEHU�WKH�VXJJHVWLRQ�RI�WKH�7ULOOLRQ�'ROODU�&RLQ"�7KH�LGHD�was as follows: Well, the US Treasury has the authorization to mint platinum coins. Any other form of coins or printing money LV�WKH�)('ȇV�UHVSRQVLELOLW\��%XW�KRZ�GRHV�WKLV�KHOS"�%\�PLQWLQJ�D�86'��WULOOLRQ�SODWLQXP�FRLQ�� WKH�7UHDVXU\�ZLOO�KDQG� LW� WR� WKH�)('�� ZKLFK� ZRXOG� LQ� WXUQ� FUHGLW� WKH� 7UHDVXU\ȇV� DFFRXQW� ZLWK�86'��WULOOLRQ��0RQH\�RXW�RI�WKLQ�DLU��ZKLFK�WKH�)('�FDQ�YLUWXDOO\�

China’s hunger for gold seems to be unstoppable. The price volatility is not scaring the Chinese, quite on the contrary, they are buying on the dips and continuously increasing their gold imports.

China’s hunger for gold!

GLOBAL GOLD OUTLOOK No.4

NOVEMBER 2013

VSHQG�RQ�DQ\WKLQJ�LW�ZDQWV��+RZ�LV�WKLV�GLHUHQW�IURP�LVVXLQJ�bonds? Well, you’re not issuing more debt! These are the magic words. Measures like these might reduce the debt burden EXW� ZRXOG� KDYH� OHG� WR� HYHQ� PRUH� LQȵDWLRQ�� ΖW� LV� QRW� HYHQ� D�VROXWLRQ�WR�WKH�XQGHUO\LQJ�SUREOHP��'HEW��:H�GRQȇW�QHFHVVDU\�think the government would have issued a trillion dollar FRLQ�� KRZHYHU�� ZKHQ� SROLWLFLDQV� ȴQG� WKHLU� EDFNV� DJDLQVW�the wall there is no telling what they will do.

How did gold react to all this? Initially, the downward trend continued along with other equities and commodities, DV� ZHȇYH� VHHQ� HDUOLHU� WKLV� \HDU� LQ� WKH� PDUNHW� VHOO�RV��The gold price reacted rationally in our view. The market did not actually expect a default, although some yields around the 17th of October increased. The increase ZRXOG� KDYH� ORRNHG� VXEVWDQWLDOO\� GLHUHQW� LI� D� GHIDXOW� ZDV�expected (and gold would have risen). Furthermore, most market participants thought (we disagree on this point) that the deadlock meant that the government might start massive spending cuts or at least be a bit more conservative. Once the “solution” was reached and it was clear that we were returning back to the “normal money printing” the gold price increased.

Our standpoint has not changed: Gold has not entered a bear market. We’ve said it in our last outlook, this crisis and the SUHYLRXV�VHOO��RV�ZHUH�127�GXH�WR�ODFN�RI�SK\VLFDO�GHPDQG��$V�PXFK�DV������KDV�VKRZQ�D�IUHQ]\�LQ�JROG�VHOO�RV��SDUWLFXODUO\�

The gold price is more or less dictated by the price of gold on COMEX. This is simply incomprehen-sible to me especially when one takes into account that there are hardly any physical transactions. The chart on the left shows the relation between registered gold to the open interest. For every contractworth 100 ounces, currently less than 2 ounces are physically available.

Gold’s Paper Price!

GLOBAL GOLD OUTLOOK No.4

NOVEMBER 2013

that of ETFs) in Western markets, the East kept on accumulat-ing the real thing, namely China, India, Hong Kong and Russia.

It will take time to see the upward trend in the gold cycle, and WR�UHFRYHU�IURP�WKH�ELJ�GLYH�LW�KDV�VXHUHG�LQ�������%XW�LQVWHDG�of dropping the metal altogether, as Western investors are doing, those in the East are grasping the opportunity to buy all the metals they can get their hand on at these low levels and DFFXPXODWH� WKH� PHWDO�� :H� DUH� FRQȴGHQW� WKDW� FXUUHQW� SULFH�levels are an attractive buying opportunity. Gold will always be a safe haven for investors! In fact, growth in physical demand LQ�$VLD��VXSSRUWHG�E\�WKH�GHOLYHU\�GHOD\V�UHSRUWHG�LQ�UHȴQHULHV��is a strong supporting factor that will support and drive up the gold price in the future.

GLOBAL GOLD OUTLOOK No.4

NOVEMBER 2013

Or are they?

Capital controls are here!

In October doomsayers proclaimed that capital controls were on the verge of being implemented in the United States, this so FDOOHG�ȊQHZVȋ�VSUHDG�OLNH�D�ZLOG�ȴUH��7KH�ZKROH�VWRU\�ZDV�VROHO\�based on one letter sent out by Chase to some of its clients. In the letter Chase mentioned that certain types of accounts (apparently this part of letter was ignored by many) would:

• no longer be able to send international wire transfers• have their limits regarding permissible cash activity (with-

draws and deposits) per cycle reduced

Scanned versions of this letter were being handed around as SURRI� RI� WKH� LPPLQHQW� FDSLWDO� FRQWUROV�� :KHQ� Ζ� ȴUVW� VDZ� WKH�letter I really didn’t understand what the fuss was all about. 7KH�ȴUVW� WKLQJ��ZKLFK� VKRXOG�KDYH� FDXJKW� DQ\RQHȇV� DWWHQWLRQ��is that there has NEVER been a preannouncement of capital controls. Logically an announcement would defy the point in WKH� ȴUVW� SODFH�� 7KH� VHFRQG� WKLQJ� LV� WKDW� Ζ� GHDO� ZLWK� SK\VLFDO�FXUUHQF\�P\VHOI� �UHDO�QRW�ȴDW�FXUUHQF\� WKDW� LV���VR� Ζ�NQRZ�WKDW�VWRULQJ�DQG�KDQGOLQJ�VRPHWKLQJ��HYHQ�ȴDW�FXUUHQF\��SK\VLFDOO\�is more complicated than “transferring” bits and bytes at the WRXFK� RI� D� EXWWRQ�� 7KHVH� EDQNLQJ� SDFNDJHV� LQ� JHQHUDO� RHU�free cash activity up to a certain limit, changing that limit is comprehendible, especially when the ever-expanding regulations are taken into consideration. A short email correspondence with Chase cleared up the last question regarding international wires; I was simply advised that a change of the banking package would allow me to continue to make these transfers.

One should always remember, that no matter where you

read something,one should be skeptical and use common

sense.

“ BE VIGILANT, BUT DON’T PANIC. ”

GLOBAL GOLD OUTLOOK No.4

NOVEMBER 2013

• 3HWHU�6FKL• 'RXJ�&DVH\• +DUU\�'HQW• Mark Skousen

6RPH�RI�WKH�KLJK�SURȴOHV�names taking part in the

event:

&ODXGLR� *UDVV�� 0DQDJLQJ� 'LUHFWRU� RI� *OREDO� *ROG�� KDV� EHHQ�LQYLWHG�DV�D�VSHDNHU�DW�WKH�ȴUVW�/LEHUW\�)RUXP��ZKLFK�ZLOO�WDNH�SODFH� LQ� 6W�� .LWWV� EHWZHHQ� 'HFHPEHU� WKH� �WK� DQG� �WK�� 7KH�conference has a focus on asset protection, wealth SUHVHUYDWLRQ�DQG�WKH�SUHVHUYDWLRQ�RI�OLEHUW\��6RPH�R�WKH�FKDUW�VXFFHVVIXO� LQYHVWRUV�� PHWDOV� DQG� UHVRXUFH� H[SHUWV�� RVKRUH�service providers, and international legal and accounting professionals will be on hand to help with personal preservation VWUDWHJLHV��2QH�VSHFLDO�RHULQJ�RI�WKLV�LV�HYHQW�LV�WKDW�WKHUH�ZLOO�not only be several outstanding speeches, there will be many workshop where you can discuss your own circumstances ZLWK�WKH�H[SHUWV�WR�ȴQG�ȴWWLQJ�VROXWLRQV�IRU�\RXU�RZQ�FRQFUHWH�needs. There will also be enough time to have in-depth face-to-face discussions with the experts and other participants.

In his speech Claudio will be talking about the big picture and go into the details about the best and most secure ways of owning gold. He will also talk about the details of how the Global Gold solution functions and how its rock-solid implementation can help secure your assets in the turbulent times ahead.

:H�ZRXOG� EH� GHOLJKWHG� LI� \RX�ZRXOG� ȴQG� WKH� WLPH� WR� MRLQ� XV�at this one of a kind event. There are only a limited amount of spots available (max. capacity of 75 persons) so if you are interested, please make sure you book as soon as possible.For more information on the event and for booking information please follow this link.

The Liberty Forum in St. Kitts

Come join us at The Liberty Forum

GLOBAL GOLD OUTLOOK No.4

NOVEMBER 2013

Rothbard’s work is more relevant than ever

Wall Street, Banks, and American

Foreign Policy

-�3�� 0RUJDQ�� 5RFNHIHOOHU�� /HKPDQ� %URWKHUV�� &KDVH�� 'X� 3RQW��7KHVH� DUH� VRPH� RI� VHYHUDO� KLJK�SURȴOH� IDPLOLHV� ZH� KHDU�of in the American business community. They range from LQYHVWPHQW� ȴUPV�� ODUJH�VFDOH� LQGXVWU\� PDQXIDFWXUHUV� RU�top-notch corporate lawyers – but more importantly, they are the market makers, shakers and movers, and have been WKH�SRZHU�KRXVHV�RI�86�ȴQDQFH�VLQFH�WKH�����V��DQG�GHHSO\�entrenched in US political history.

Therefore, when we try to interpret today’s policy making, ZKHWKHU� GHFLVLRQV� PDGH� E\� WKH� )('� RU� IRUHLJQ� SROLF\�directions, we need to go behind the scenes. We need to not only understand who is behind them, but who WKH� EHQHȴFLDULHV� RI� WKHVH� GHFLVLRQV� DUH�� ΖQ� :DOO� 6WUHHW��Banks and American Foreign Policy, Murray N. Rothbard UHYHDOV� WKDW� WKH� ȴQDQFLDO� DQG� SROLWLFDO� VWDNHKROGHUV� DUH�one and the same, a web of connections that goes back to IDPLOLHV� RI� ȴQDQFLHUV� VWLOO� SUHVHQW� LQ� WRGD\ȇV� ZRUOG�� 5RWKEDUG�GRHV� D� PDJQLȴFHQW� MRE� LQ� WUDFLQJ� WKH� IDPLOLDO�� EXVLQHVV�connections, and friendly circles that fostered the creation RI� $PHULFDȇV� ȴQDQFLDO� SRZHUKRXVHV�� DQG� IDFLOLWDWHG� WKH�implementation of their plans for US policy making.

If you are interested in reading our detailed summary of Rothbard’s Wall Street, Banks, and American Foreign Policy please click here.

You can also download the complete book from the Mises Institute website under the following link.

GLOBAL GOLD OUTLOOK No.4

NOVEMBER 2013

Although it is possible that in the short term we see some volatility in the gold price, our long term fundamental outlook remains unchanged regarding the world has not changed! We therefore remain bullish on gold.

OUR CONCLUSION

OUR SCENARIOS

How we think the world will develop in the coming months and years

We don’t have, nor do we claim to have, a crystal ball. What you will be reading in this section is our view about the direction politics and economic developments are going to take us. We use our common sense and refrain from using complicated models, which no one understands. In each issue we will introduce three scenarios. Each scenario will be explained and we will discuss how probable we think each of the scenarios is and how this could impact your gold investment.

Under our “status quo” scenar-io, governments will continue essentially as they have so far, delaying any real problem solving. They will continue to “moderately” LQȵDWH� FXUUHQFLHV�� EDLORXW� EDQNV�etc.. Furthermore real economic growth rates will stay low.

In this scenario, central banksworldwide abandon their current monetary policy and return to a more prudent approach. This is coupled with higher real economicgrowth in the world.

&ULVHV� FDQ� WDNH� RQ� PDQ\� GLHUHQW�forms, such as a complete collapse RI� WKH� ȴQDQFLDO� DQG� PRQHWDU\�system, a world war, civil unrest or many others.

We think that this scenario is the most likely for the coming months and possibly years. Governments can’t and won’t tackle any real problems, they will follow their “muddle through” policy as they have done so far. Measures of ȴQDQFLDO� UHSUHVVLRQ� DUH� OLNHO\� WR�intensify.

'XH� WR� WKH� YHU\� KLJK�GHEW� OHYHOV� LQ�western economies, we hardly think that central banks can return to their normal monetary policy. The lack of any real growth impulses leads us to believe that this scenario is not a very realistic one for the foreseeable future. The ongoing “Abenomics” in Japan and the appointment of Yellen DV� WKH� QHZ� KHDG� RI� )('�PDNH� WKLV�scenario even less likely in the future.

Political developments in most parts of the western world are alarming. We think that our current ȴQDQFLDO� DQG� PRQHWDU\� V\VWHP� LV�not sustainable. We don’t, however, see the tipping point on the horizon quite yet. Although we are following the news from the Asian Peninsula, and the Middle East, we do not see the risk of a wide scale war for the time being.

As in recent years the current policies of governments positively impact gold prices. Although short-term volatility is to be expected.

A “back to normal” scenario would probably impact gold prices negatively. Historically gold has tended to perform negatively when real short term interest rates have exceeded 3%.

In a crisis scenario the price of gold would likely dramatically increase nominally. In real terms gold should be an ideal medium to store value over the long term.

Disclaimer: 7KH� IROORZLQJ� SXEOLFDWLRQ� UHSUHVHQWV� WKH� RSLQLRQ� DQG� DQDO\VLV� RI� *OREDO� *ROG� $*� �**��� EDVHG� RQ� GDWD� DYDLODEOH� WR� WKH� ȴUP�� DW� WKH�WLPH� RI� ZULWLQJ�� 7KLV� **� SXEOLFDWLRQ� LV� QRW� D� UHFRPPHQGDWLRQ�� RHU� RU� VROLFLWDWLRQ� WR� DFTXLUH� RU� GLVSRVH� RI� DQ\� VHFXULWLHV�� LQYHVWPHQWV� RU� DQ\�RWKHU� WUDQVDFWLRQ�� $V� WUDGLQJ� DQG� LQYHVWLQJ� PD\� LQYROYH� VHULRXV� ULVN� RI� ORVV�� **� UHFRPPHQGV� WKDW� \RX� FRQVXOW� ZLWK� D� TXDOLȴHG� LQYHVWPHQW�advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind RI�D� WUDQVDFWLRQ�ZLWK�ȴQDQFLDO� UDPLȴFDWLRQV��**�DVVXPHV�QR� UHVSRQVLELOLW\� IRU� WKH�FRQWHQW�� DFFXUDF\�RU� FRPSOHWHQHVV�RI� WKH� LQIRUPDWLRQ�SUHVHQWHG�

STATUS QUO BACK TO ‘NORMAL’ CRISIS

DESCRIPTION DESCRIPTION DESCRIPTION

PROBABILITY: 80% PROBABILITY: 10% PROBABILITY: 10%

IMPACT ON GOLD IMPACT ON GOLD IMPACT ON GOLD