WASHINGTON (AP) -- The United States has lost its sterling credit rating from Standard & Poor's.   The credit rating agency on Friday lowered the nation's AAA rating for the first time since granting it in 1917. The move came less than a week after a gridlocked Congress finally agreed to spending cuts that would reduce the debt by more than $2 trillion -- a tumultuous process that contributed to convulsions in financial markets. The promised cuts were not enough to satisfy S&P.

http://finance.yahoo.com/news/SampP-downgrades-US-credit-apf-2107320979.html

Nixon closed the gold window in 1971 thereby severing the government's tether to any resemblance of fiscal sanity.  It was gold that restrained the government's ability to spend more than it collected in revenues via taxation.  With the international gold settlement system abandoned in favor of a pure fiat system backed solely by hot air and promises, the government was free to expand its size exponentially and it only could have done so because of its status as issuer of the world's reserve currency.

The move by Standard and Poor's to downgrade US credit from AAA to AA+ is a seminal and historic event.  Decades in the making, Congress and the previous administrations believed they could simply borrow and spend like druken sailors and push the ramifications of that wrecklessness onto the backs of future generations. Well, that future generation has arrived and it's US!  

The downgrade is such a big deal because it calls into question the entire foundation of the world economy.  Why the heck should the world store their wealth in dollars via treasuries if the government is not capable of paying it back? The answer is they shouldn't.  This move by S&P should have been made years ago and it should come as no surprise to any seasoned gold investor that this move was coming.

The largest holder of US national debt outside of the Federal Reserve, whom is the #1 holder of US debt by the way, is China.  China has been diversifying out of US debt the last few years and buying every commodity they can get their hands on.  This de facto default by the US in its failure to maintain its fiscal responsibilities have also led the Chinese to start doing bilateral trade with certain nations in the Renminbi and not the dollar.  Some of those nations include Turkey, Russia, Brazil, Malaysia and other neighboring Asian nations.  China is taking baby steps with their currency with the ambition of having it replace the dollar in world trade.

What should be remembered is that as the debt continues to mount in the United States, gold will continue to exert itself as the true world's reserve currency.  As the EU cracks up and the US "borrows" more from the Federal Reserve and leeches off the productivity of fiscally sound nations like China, the US population will continue to become poorer.  We're on the path to banana republic status and the only thing keeping this afloat is confidence in the dollar.  And remember that confidence in US debt is confidence in the dollar- they are inextricably linked.  S&P's shot across the bow has now officially shaken that confidence.  Folks, continue to hold onto your gold and silver as they will reassert themselves as the world's money once again as soon as the dust settles on the worldwide financial collapse.

Before I conclude this post, I wanted to mention that GATA's conference in London is in its last day today and if you haven't had an opportunity to attend, GATA will eventually be selling dvds of the event on their website.  This will be something worth getting.  The list of speakers at Gold Rush 2011 are some of the brightest in the world and include: Bill Murphy, Chris Powell, Eric Sprott, John Embry, Jim Sinclair, James Turk, Hugo Salinas Price, Reginal Howe, Brian Hinchcliffe, John Brimelow, Peter George, Jeff Dahl, Peter Grandich, James Rickards, Andrew Maguire, Ben Davies, Adrian Douglas, Ned Naylor-Leyland, Alasdair Macleod, Ed Steer, James McShirley, and Thom Calandra.

We wish all GATA attendees safe passage home as they leave the "belly of the beast."

    Barrick announced record quarterly earnings of 1.2 billion dollars.  Goldcorp’s released their earnings for the quarter and announced that they doubled from last year to 420 million dollars. Anglo American reported today that net profit in the first half nearly doubled from last year to $4 billion.

    Barrick mines approximately 8 million ounces a year and therefore must replace 8 million ounces in reserves.  The problem is that most large gold deposits have been found.  Junior miners account for most of the gold discoveries worldwide and they're just not finding the 10 million ounce plus deposits anymore.  The Seniors must now look to companies with deposits in the sub 10 million ounce range.

    The Seniors, whom are now cashed up more than ever due to record gold prices resulting in record earnings, are seeking to make investments in the most promising junior mining companies.  Agnico-Eagle just announced a $70,000,000 investment in Rubicon Minerals, representing 9.2% of Rubicon Minerals.  Rubicon has a massive land position in the Red Lake mining camp in Ontario, home of Goldcorp's famous Red Lake mine.  The Red Lake mine is the highest grade mine in the world with the lowest cash costs.

    During the bubble phase in the 1970s, we saw seniors buying out the juniors and the stock prices skyrocketing on the news.  We fully expect that before this cycle is over, history will repeat as the Seniors take their large cash holdings and take out the best juniors.

    The junior market is a crap shoot, that's why it's best to leave it to the professionals and even then, realize that its still a gamble.  That's also why it makes sense to have a basket of juniors so that if a few of them turn out to be duds, the gains you make on the others will more than make up for those losses.

Major gold producer of AngloGold Ashanti, on Tuesday shed over 3% from its share prices, signalling ivestors' concerns over lost output at mines ensnared in labour trouble.

 

The gold strike planned for Thursday could see 100 000 workers downing tools, taking about 16 000 oz/d out of global production. Other companies affected are Gold Fields and Harmony.

http://www.engineeringnews.co.za/article/sas-mediator-sees-possible-end-to-fuel-strike-2011-07-27

Harmony, GoldFields Intl., Anglogold Ashanti, and the other South African gold miners are about to face full work stoppages as the labor unions in South Africa's gold industry go on strike on Thursday.  All gold mining operations will stop during the strikes, thereby paralzying the industry and creating a floor under the gold price.

South African miners have already been affected by the striking oil workers which has entered a third week of strikes.  With energy being the main input into mining operations, oil stockpiles have been snapped up in a frenzy.  While a deal with oil worker unions may be at hand, the timetable for a settlement of grievances with gold worker unions is less clear.

South Africa is the world's 3rd largest gold producer, having produced 220 tons last year.  Once the world's largest producer of gold, South Africa's gold production has declined 5% year over year due to extensive mining of easily accessable surface gold. Gold mines in South Africa are the deepest in the world, as miners are forced to go deeper in search of the yellow metal.

It's estimated that South Africa will lose about 19,000 ounces per day when the strikes start tomorrow.  With gold prices already at record highs, it's reasonable to expect that gold prices are going to continue to hit new highs during the strikes.

The media is focused on the debt issue in the US, but very few are talking about the labor issue in SA.  On the bright side, weakness in the share price of SA gold miners during the mid-year bargaining period known as "strike season" might make for quick profits for the astute investor. Bottom fishing anyone?

Diamond Fields International Ltd. (TSX: DFI) ("DFI" or the "Company") is pleased to announce the world's first NI 43-101 compliant resource estimate for a marine sedimentary exhalative ("SEDEX") deposit, completed on the Company's Atlantis II sea-floor deposit, located in the Red Sea. The NI 43-101 report was compiled by ACA Howe International Limited ("ACA Howe").

 

Higher grade copper, zinc and silver mineralization is contained within the South West, West and Eastern sub-basins where metre core intersects of up to 22.47% zinc, 2.05% copper and 338 g/t silver have been obtained.

 

 

http://news.morningstar.com/all/pr-news-wire/20110726TO262/dfis-red-sea-silverzinccopper-polymetallic-deposit-becomes-first-marine-sedex-in-history-to-have-third-party-national-instrument-43-101-resource-report-completed.aspx

This is a landmark event because, for the first time, a underwater deposit has met the guidelines that are used on land, for having proven (with confidence) that the metal is there.  The guidelines that I speak of are NI 43-101 guidelines which are a de facto industry standard in the mining industry.

Now that the deposit is there with some confidence, they have to prove to a bank that they can mine it at a profit as the project gets moved into feasibility.  This is where I have concerns.  The reason that DFI is the first to have a NI 43-101 resource is because nobody has been bold or crazy enough to try to mine the sea.  And moreover, nobody has proven that it can be done at a profit.

The technical challenges for mining the sea are numerous and obvious.  The logistical challenges and high costs for mining the sea are what has prevented anybody else from mining it.  

The fact remains that most mining companies are mining at a loss on land, nevermind in the sea.  I'm not saying it can't be done but I want to see it to believe it.  

The NI 43-101 resource is calculated down to a depth of 8.5 meters but the deposit is known to go to at least 30 meters.

In the 1970s, $28 million was spent on coring the site.  The Saudi-Sudanese Red Sea Commission (RSC) was established with the directive of assessing the economic potential of the resource. Preussag A.G. was commissioned by the RSC to conduct a five-year geological exploration program and technical feasibility study.  The NI 43-101 resource calculation is based upon the coring done during that time.

If it was easy and profitable to mine the sea, the majors would already be doing it.  Since they aren't, we would have to classify this as a high-risk endeavour.  Congratulations to DFI for being the first to pull off a resource cal on the project, but I will only be impressed if they can convince a bank to lend them money for the cap ex for the project.

World investment demand for silver climbed to 279.3 million ounces in 2010, up around 40% from 2009, according to data from metals research consultancy GFMS. That compares with a rise in industrial demand of about 20%, to 487.4 million ounces in 2010 from the year before.

 

And the Hong Kong Mercantile Exchange announced that it will launch U.S. dollar-denominated silver futures contracts on Friday. It cited “surging global demand for silver” as the reason for the launch, pointing out that silver demand rose 67% in China between 2008 and 2010, with the nation accounting for nearly 23% of the world’s silver consumption last year.

 

 

http://www.marketwatch.com/story/silvers-a-worthy-gold-rival-2011-07-22?reflink=MW_news_stmp

Inflation in China is driving its citizens into silver and gold.  The chinese people understand that gold and silver are store houses of value and perform exceedingly well in times of inflation.  

5 years ago, China was a net exporter of silver to the tune of 3500 tons.  Today, they are a net importer of 3000 tons per year. That's a 6500 ton swing in 5 years.  China's demand for silver is growing exponentially.  With silver demand from Asia set to explode with the launch of the Silver futures contract quoted in the Renminbi, it begs the question:  Where's all the silver going to come from?

The entire world produces about 680 million ounces and chinese silver demand is up 40% in the last two years, Worldwide investment demand in silver is officially pegged at 279 million ounces. Where the heck is all the silver going to come from to satifsy just the Asian demand?

There's a massive transfer of wealth going on worldwide as the balance of power shifts from the West to the East, and this dynamic is no more apparent than in the precious metals markets.  You can walk into a bank in China and buy gold and silver right there in the bank! Yet, here in the US, we're told by the propaganda put out by the media and Wall Street that gold and silver are barberous relics from the past and not worth investing in.  

Even Comrade Bernanke believes that "gold is not money."  Well, Mr. Bernanke, don't tell the Chinese that gold is not money, or they might laugh you out of the building.  Gold and silver are money! It's the free market that determines what money is, not some unelected bureaucrat in Washington.  

Fiat paper is only money by decree.  When I look at spot gold and silver prices and notice that they are soaring year after year, the market is telling us that gold and silver are being used as money and therefore, fiat papaer is losing credibility.  And that's all that fiat paper has going for it- confidence. 

When confidence is lost in paper currencies, hyperinflation results.  And it can happen at any time.  If the world decides they don't want to hold their savings in fiat currencies but would rather hold precious metals instead, paper currencies will self-destruct in a hyperinflation and that's exactly where we're headed.

I, for one, and glad the Asians are buying gold and silver as ferociously as they are, because they are the deathknell of the Wall Street-led domination of the worldwide financial system.  What I find sad and repulsive, is that the Chinese government cares more about its citizens than the US government does about us.

I thought it was the Chinese that were big bad Communists while we're the great saviors of the world.  How can we rectify the fact that the Chinese government is saving the wealth of its population by encouraging them to buy precious metals, while our government is not? Wall Street has swindled the US population out of its gold (via FDR's unconstitutional confiscation) and also our position as moral and financial leaders of the world.  This swindling continues to this day in the form of gold-bashing propaganda and currency controls.

Speaking of Wallstreet, UBS has come out with a new long-term target for gold- $938 per ounce.  You know what that means? UBS and the boys on Wall Street are so desperate to keep the house of cards together, that they can only resort to propaganda pieces.  There's no doubt that UBS is probably buying gold and silver as I write this and the same can be said for the other financial houses on Wall Street.  

"Those that own the gold, make the rules."  It's important that when this financial system fully collapses, we don't let he Wall Street banks back on top of the system because there's no doubt that much of the gold of the world is owned by them and they would love a gold standard for that very reason.  

This is one of the reasons why Ron Paul's Competing Currencies bill is so important because it's not a gold standard where the banks can still inflate to whatever end they deem necessary (just like they do now), but rather, gold and silver can be used as money.  That's the only way to liberate the world.  It must come via sound money and the spark of liberty is being lit by the Chinese! (Take that Donald Trump!).