* * * Notice * * *
This commentary presents only the viewpoints of the Optimist, and it is intended only for perspective and entertainment. Please do not interpret any portion of this work as investment advice. If any of the concepts discussed here appeal to you, then you must do the work to decide if and when and how you should invest. The Optimist does not ask for any profits you make, and he cannot be liable for any losses incurred as a result of your investment decisions. The Optimist wishes you the best of luck in whatever you decide to do or not to do.
My channel lines on the updated chart of the MoreAu Index below project a gold price of $1,530, more (if the USDX drops) or less (if the USDX increases). That is my approximate target for taking partial profits from the current bull move. YMMV so DYODD!
Note that the MoreAu Index shows the value of gold, which is almost as high as it was in 2011. The price of gold was higher then because the USDX was substantially lower than today.
Gold had a stellar week, with a strong breakout above the 5 year price ceiling enforced by TPTB, but not all of us precious metals "bugs" are smiling. Mia culpa, I sold a small portion of my metals mining stock in March to raise cash intended for repurchase in mid to late July. Although most of my portfolio is strongly higher, the stock I sold would also be higher if I did not sell it. The reason I sold in March planning to buy more in July is illustrated in the 40 year seasonal charts copied below. Precious metals prices have a long history of drooping during the summer doldrums, from spring until August when the strongest price rise of the year begins. It is anybody's guess what prices will do this year, but I continue to hope that I will be able to buy more metals mining stock in July than I sold in March. YMMV so DYODD.
http://www.321gold.com/charts/seasonal_gold.html
http://www.321gold.com/charts/seasonal_silver.html
Excellent articles! It is worth recalling that gold and silver had substantial rallies in 2001, 2003, 2005, 2007, and 2009-2011. Each rally was stronger than the ones that preceded it. It now seems clear that the FED and its bankster attack dogs decided to break that escalating pattern in 2011 by not only pressing gold and silver down, but holding it down to quench bullish enthusiasm. "FED & friends" obviously have the ability to drive metals prices lower, but they have chosen to not do that. My guess is that they want to limit price advances (to minimize the risk of starting another "gold rush"), but also keep prices high enough to discourage physical accumulation. The mystery here is how long can they keep this juggling act going, in addition to fighting all the other financial fires in the world.
I hope that a future article will focus primarily on silver. There is enough gold bullion available to allow China and Russia to continue their rate of accumulation for some time, but there is barely enough silver bullion available for industrial consumption. My guess is that the FED is more concerned about the price of silver (than gold) rising high enough to start another stampede because a rapidly rising price of silver could trigger an explosion in demand for physical silver that would be impossible to contain. My view is that the FED needs to apply more force to quench potential silver rallies than it applies to gold, because a surge in demand for the low supply of silver could break the COMEX, and begin a process that puts the financial system of the West at risk. Cheers! Jim (aka Optimist)
The electors selected by each state are supposed to vote the way the voters in their state wanted them too. In the past month, however, there has been an unprecedented effort to convince, or force, electors to vote opposite the way the state voters wanted. Electors have been threatened, cajoled, besieged, and offered bribes to change the votes they are supposed to make. None of that should happen, because electors should vote in line with the voters in their state.
The supporters of the losers in the election are demanding that the electoral college provisions be removed from the Constitution, so that the voters would then decide the election in November. That is a bad idea because then the massive number of votes (including fraud) in the big cities would overwhelm the less densely populated states. The Founding Fathers brilliantly chose the electoral college as a way to preserve the integrity of all voters.
A change in the Constitution is a good idea, but not to eliminate the electoral college. Instead, the change should be to eliminate the electors, and have the electoral votes for each state decided automatically after the November election. There is no good reason for states to appoint electors, and then worry that the electors might vote in the opposite way that the state voters wanted. There is also no good reason to put electors in the unenviable position of being threatened or offered bribes to change their vote. The electoral college is a good way to elect the President, but removing people from the elector process and assigning the electoral college votes automatically in each state based on the way the voters in each state voted would make a substantial improvement in the USA Presidential election process.
at this link with the above title. He offers too much to quote here, but I will excerpt a point he makes early in the article:Your article focuses on gold and the probable supply by the FED and Treasury to the Banksters. You may also want to comment on silver, which no longer has any significant source of supply other than the unlimited dumping of paper contracts by the Banksters. My guess is that Russia and China are well aware that the Banksters naked paper shorts are very vulnerable to a short squeeze, but are not doing that because they can continue to add to their gold holdings at a low cost. When Russia and China decide they have enough gold and want to end the game, they need only to reallocate their physical purchases from gold to silver. The resulting Bankster implosion would bring down the entire financial network of the West.
Please accept my sincere condolences on the continuing suppression of metal prices. As a stock holder in your company, I share your concern that an unrelenting environment of depressed metal prices will inevitably cause damage to your mining company. I will not insult your intelligence by dwelling on the long term solution that you are so very well aware of (i.e., reduce mining output at low prices, both as a way to pressure prices higher, and as a way to conserve your precious in ground resource for times when prices are more favorable). Instead, I hope to suggest short term tactics that could help to restore higher prices.
A physical solution to a paper problem
You do not need me to tell you how intensely painful it is when a few traders dump a huge amount of paper metal short sales into the futures market, frequently at times when there is little volume, so the paper dump results in maximum price reduction. When the objective of those traders is to reduce the price, their dumping approach is certain to work. No doubt, those traders expect to make profits by being allowed to buy back their short positions at lower prices as longs panic and sell at a loss. That dumping plan by traders who have essentially unlimited resources to sell huge quantities of paper futures contracts would be an invincible way to make immense profits, except for a small detail. The futures contracts they sell in huge numbers require delivery of real physical metal if they are not closed out prior to the delivery time. Mining executives can exploit that weakness by refusing to sell discretionary physical metal during the month or so before delivery notices are issued. For example, miners could withhold from the markets all physical metal that they have timing discretion over until after the delivery notices are issued. By withholding discretionary sales during the month before delivery notices are issued, and by telling potential buyers for the following month to take delivery of futures contracts instead, mining companies could transform the earlier losses (caused by dumping huge amounts of paper futures) into gains as the traders who were betting they could sell short and then cover later are forced to buy at increasing prices because they do not have the metal required for delivery. Then the miners could sell into higher prices (after delivery notices have been acted on) the physical product they withheld from the market over the previous month. By focusing on withholding physical sales during the month before delivery, mining executives can press the short traders by constricting their supply of metal to deliver while encouraging buyers to take delivery from the futures exchange. Note that this approach only considers discretionary sales. Sales required by contract should be completed as previously agreed. When negotiating contracts or extensions for the future, however, mining company executives may want to consider time windows in which they retain flexibility about when they are required to deliver product.
Dividends payable in physical
Another approach that could be used by mining companies who pay dividends to shareholders is to offer the stock holder an option to receive dividends in the form of physical bars or coins made from the metal the mining company produces. That would increase the price of the stock in two ways. First, more shareholders would buy the stock specifically for the opportunity to receive real metal as dividends, especially if the cost of that metal was near the wholesale cost of the metal produced by the mining company. Second, bears who sell the stock short would need to obtain the appropriate physical metal needed to match the dividend those short sellers would be obligated to pay.
Dividends delayed
If metal prices drop below the actual cost of production, then the mining companies that pay a dividend could stop that payment, and divert the funds into buying futures for delivery. By taking delivery of very low cost metal from the futures exchange, mining companies would make it more risky for traders to bet short on the metals, and would increase the value of the company for shareholders.
Share information with shareholders
Mining company executives are encouraged to share information about their tactics with their shareholders, either by email or prominent notices on the company web page. There is no need for one company to try to influence the actions of another company. Other mining companies will learn about the tactics that executives tell to their shareholders, and then the other mining companies can decide for themselves if they want to do something comparable. Hopefully, it is not yet illegal for mining companies to decide when to sell their product, and to communicate information with their shareholders. However, if any portion of this open letter contains anything that borders on anything illegal, then all readers are encouraged to ignore that portion. Readers may want to forward the legal portions of this message to their favorite metal mining company. With enough focus on delivery of physical, we may be able to loosen the death grip a few very large traders have on the metals markets.
Should health care workers who treat Ebola in Africa be quarantined?On 26 August 1976, a second outbreak of EVD began in Yambuku, Zaire . . . Soon after Lokela's death, others who had been in contact with him also died, and people in the village of Yambuku began to panic. This led the country's Minister of Health along with Zaire President Mobutu Sese Seko to declare the entire region, including Yambuku and the country's capital, Kinshasa, a quarantine zone. No one was permitted to enter or leave the area, with roads, waterways, and airfields placed under martial law.http://en.wikipedia.org/wiki/Ebola_virus_disease
Sorry, but that dog does not hunt. During the decade from 2000 to 2010, third world nations (China, India, Mexico, and others) were massively building their production industries in an effort to ramp up their economies. That rapid buildup created an immense demand for base metals, and the base metal miners responded by substantially escalating their mining output, including the amount of byproduct silver they dumped onto the market. So how did all of that byproduct silver affect the price of silver during the decade? The price increased from approximately $4.30 in 2003 to $8 in 2004, from $6.60 in 2005 to $14.30 in 2006 to $21.40 in 2008, and from $8.40 in 2008 to almost $50 in 2011. Those price increases were all during the unprecedented industrial buildup in several nations. That buildup consumed huge amounts of base metals, so the miners also generated massive amounts of byproduct silver. Fast forward to now. With the world economies slowing under heavy debt loads, and with the industrial growth rate in China and other emerging nations slowing to much smaller increases, the now mature emerging market industries do not have the rapid growth pattern that marked the decade of 2000-2010. Reduced growth rates directly diminish the demand for base metals, and base metal prices are lower as a result. It is only a matter of time until base metal miners cut back further on their production, and that will also reduce the amount of byproduct silver produced. Meanwhile, silver consumption continues to rise as the newly affluent workers in the emerging nations improve their lifestyles by purchasing things that consume silver to produce. Reduced supply and increased demand will tip the scales to an obvious delivery problem. The resulting silver purchases by industries and investors will be unprecedented, with a price rise that will be legendary. YMMV so DYODD
Dr. Copper has a new prescription, and it does not look bullish for some markets, but I continue to think silver will be an exception. The recent price plunge in copper will translate to reduced output from copper mines, and probably also from mines of other base metals. Since approximately 70% of new silver production is byproduct from base metal mining, the supply of new silver will drop sharply along with the reduced base metal mining output. As other factors continue to push the demand for silver higher, at the same time that the supply of silver drops, the resulting higher prices will create a vise to squeeze the silver shorts. The timing is uncertain, but I think accumulating silver below $25 will prove to be very profitable.
Here is the copper chart through 3/11/2014 from Ed Steer's column:
I see things as unchanged (except for being worse) from June of last year:
Optimist: My view is that low velocity of money is much like a dam (operated by banksters) that is releasing only a small amount of water. Even though the FED is dumping massive amounts of water behind the dam (so that the water level is rapidly rising), the farmers downstream are complaining about a deflationary drought because they see so little water being released. That will change in a New York minute when the dam breaks or the banksters open the floodgates. All those who are complaining about deflation need to have their silver and gold life raft inflated and ready to use quickly when it is needed.
Another appropriate analogy is a mountain range covered in an unstable level of very deep snow (US$), and the FED keeps dumping more "snow" on top every day. An avalanche is inevitable. The question is when a trigger will begin that avalanche. That trigger could be imminent. Over the next three weeks, rampant rumors of a USA debt default (resulting from a failure to raise the debt ceiling) will reverberate around the world with increasing intensity. If there was a true debt default from a politically paralyzed USA government, the US$ exchange rate would plummet compared to more stable currencies. Nations and individuals who hold dollars will be pressured to dump them in advance of the potential debt default to salvage whatever value they can before everyone else tries to squeeze through the small $ exit door at the same time. The US$ exchange rate is already down significantly, and everyone knows that it could literally waterfall to much lower levels. It would take only one nation (or perhaps just a few wealthy individuals) to panic and be the first to dump dollars to trigger the avalanche.
FWIW, I do not think a debt default will happen. My guess is that if Congress remains uncooperative, the President will unilaterally declare the debt ceiling to be null and void (by virtue of the 14th amendment), so the FED can continue to print as much new funny money as needed to buy everything the government wants to spend money on. But it is of no consequence what I think. If big money panics to dump dollars before a possible debt default, then the potential exists for the rest of the world to pile on and for the US$ to quickly move to its tiny true value. When that feeding frenzy of $ selling at any price begins, it will be impossible to buy a lifeboat of physical precious metals. For the sake of those who are not fully invested in advance, let's hope that the dam will not break and the avalanche will not start this time.
In response to a comment that a correction could happen over the next few weeks, I said:
That is close to my Wild A$$ Guess. Metals could extend this rally for a few more days, but then I expect that the banksters will step on silver again, just in time to rain on the parade of anyone who is thinking about taking delivery of the September contract. My conspiracy theory is that the banksters are no longer as much focused on making profits, but now they are more concerned about managing metal deliveries.
A follow up question was why would the banksters have recently gone long metals if they plan to further suppress the price, and I replied:
My guess is that the banksters are acting in collusion as agents of the FED (which is why the banksters are never punished for the things they do), but that the FED keeps them on a short leash. My new and original (Google cannot find it as ever used before) term for the FED plus the banksters is FEDanksters. Although the past bankster actions to suppress metals prices have been profitable, that bankster profit was serendipitous to the FED’s agenda to support the dollar by depressing metals, which are the only real competitor to the dollar. In theory, metals depression could have continued much longer, and driven prices much lower, but the FED is alarmed by the dramatic rise in accumulation of real metals by nations and investors. My guess is that the FED now wants metals prices to rise (so that higher prices will discourage physical accumulation), but at a slow pace to control the level of bullish enthusiasm that rapidly rising prices would generate. If that view is correct, then the FEDanksters have been accumulating metals into the decline, not to profit from the subsequent rise in metals prices, but to have ammunition they can use to sell into those rallies to control the level of bullish sentiment. I would be surprised if the FEDanksters press the short side hard enough to cause much lower prices. My guess continues to be that the FEDanksters’ new game plan is to allow metals prices to rise slowly over time, but to prevent prices from spiraling higher in a way that could get out of control. As one small data point, the JPM house account accumulated a large amount of silver by stopping (taking delivery) 82% of the July contracts tendered by the shorts. If JPM was intent only on making profits, then the way to do that would be to continue to accumulate at current low prices. Instead, so far this August (off cycle for silver delivery), the JPM house account has issued (delivered) 69% of silver contracts. That is consistent with a FEDanksters agenda to slow the rise in metals prices to dampen the level of bullish enthusiasm. For anyone interested in politicians and FEDanksters, it is good advice to ignore what they say, but watch what they do.
Here is another tiny dot to connect. Throughout the July delivery month, JPM's in house account stopped a large proportion of the silver issues, and thereby accumulated a significant amount of silver. The tiny dot is that on 8/09, JPM's in house account issued all 10 of the silver contracts that were stopped in the off month for silver delivery. If that is part of a larger trend, then JPM could have been accumulating silver on price weakness so it would have "dry powder" to deliver into rising prices. That could imply that JPM expects prices to rise from recent lows, and it wants to be in a position to "manage" (i.e., slow down) the rise by delivering its previously stopped silver into the rise as needed. It is not too much of a stretch to guess that JPM is now accumulating gold deliveries to be able to issue them later into rising prices to contain the bullish sentiment at the current low prices. Assuming that JPM is in lock step with the FED, it is possible that the FED expects metals to rise, and is preparing to blunt the impact of that rising price situation. It is a stretch, but also possible, that the FED wants metal prices to rise (because low prices result in too much physical accumulation by strong hands), but slowly enough that it doesn't generate unwelcome bullish enthusiasm. YMMV so DYODD. :-)
China signals will cut off credit to rebalance economyChina said on Friday it would cut off credit to force consolidation in industries plagued by overcapacity as it seeks to end the economy's dependence on extravagant investment funded by cheap debt.In a statement from the State Council, or cabinet, Beijing laid out broad plans to ensure banks support the kind of economic rebalancing China's new leadership wants as it looks to focus more on high-end manufacturing.President Xi Jinping and Premier Li Keqiang have flagged for some time that the rapid growth of the past three decades needs to shift down a gear, and analysts said Friday's announcement was a signal that they intended to press on with reforms despite evidence of a sharper-than-expected slowdown."The guideline shows China's policymakers will focus more on economic restructuring to stabilize the economy rather than providing more liquidity to support economic growth," said Li Huiyong, an economist at Shenyin Wanguo Securities in Shanghai.
http://www.reuters.com/article/2013/07/05/us-china-economy-idUSBRE9640CG20130705
DYODD!
A friend asked about my views on the timing for silver purchases now. Here was my reply:
Thanks for asking me about timing, but I must confess that I can't give a useful answer. My previous guidepost was to expect high prices in early spring (around this time of year), followed by a correction into late summer, and then a sharp rally back into higher prices by the end of the year. With that in mind, I committed in the summer of 2011 to travel that December so I could purchase real estate with the profits I expected to take from the anticipated rising prices. That didn't work out well, so I repeated the same process in 2012, with the same bad results because there were no profits to take then either. I am as shell shocked as everyone else about the severity of this latest price plunge.
For what its worth, I had not been buying into the low prices earlier this year, even though I thought there were great bargains, because of caution about the rising levels of open interest (the number of buyers and sellers) in the futures market. The combination of falling prices and rising open interest told me that the short sellers were pushing the market lower, so I resisted a strong desire to buy more. Fortunately, by not buying earlier, I managed to save a significant amount of cash for purchases when the open interest returned to a more normal pattern. Well, the open interest picture now is worse than it has been before, and I continue to be cautious about new purchases. Even so, I could not resist the price plunge, and I deployed about 25% of my buying power into silver on Monday. If prices continue to drop, or just stay down, over the next few months, I will make more purchases until all my buying power is used. I refuse to even consider selling anything at these low prices because I am certain that prices will rise much higher once again, but I really have no clue about when that will be.
The one data point I can offer is that the price plunge in 2008 was the worst since 1980, and it seemed like the financial world was ready to implode. Then silver dropped from $21+ to less than $9, so a drop of more than 50%. Silver has now dropped to $23 from $50 two years ago, and that too is a drop of more than 50%. From the 2008 low to the high in 2011, silver prices went up more than a factor of 5. I would not be surprised (and I would be VERY happy!) if the price of silver goes up by a factor of more than 5 again over the next few years. The hard part is guessing where the bottom of this move will be to get the low point to measure the advance from. I will be able to tell you with confidence what that low price was, but only after a few months have passed after the low to improve my vision. From now until a few months after the next price low, your guess about the bottom is just as good as mine! Good luck!
An alert reader, J.L., offered a larger scale view of the MoreAU Index to show that it is in a long term channel since 2001. J.L. explains:
Thanks J.L.! Happy Holidays to you, and to all our readers. Cheers! Jim
An analyst I respect commented today about the surprising relative strength of silver this week compared to gold, mining stocks, and the general stock market. Here is my contribution to that discussion:
I have been following Jim Sinclair's advice in times like these to those of us who are fully invested. Get into a hole, pull a large rock over the top, and then wait patiently until the storm passes. I too noted the relative strength of silver. Silver open interest is another anomaly that suggests the buyers are holding firm in the face of increased shorts by the banksters. The charts below show the weekly open interest reported by Futures Trading Charts for all weeks except the current week. You can click any earlier bar to see the open interest for that week. The open interest for this week will be reported next Friday. I assume that the data reported is the sum of open interest in all the futures months, so it would include futures spreads but probably not include options or other data. I am cautious about interpreting these charts because I have not yet been able to correlate them to most previous price swings, but the patterns are interesting. Note that the open interest in gold has been declining in recent months while the open interest in silver has been rising.
Larger charts are updated each week at http://sitekreator.com/Optimist/charts.html. Scroll down to see the links to updated charts on silver and gold open interest.
In the "Hope springs eternal" department, I think a time is likely to come when wealthy individuals, and/or organizations, and/or nations decide to execute a massive short squeeze by buying large quantities of undervalued physical silver. Could a firming open interest in the face of artificial price drops be a sign that big money is accumulating now? 
Increasing their long futures holdings and spreads (as Jim Sinclair noted would be a good way to hammer the bears) could be the first step in a massive buying plan. 
Everyone knows the way the exchanges changed the rules in 1980 to steal from Bunker Hunt, so the new players will not depend on the integrity or honesty of the exchanges. Instead, they are likely to make side deals with miners to deliver physical directly to them independent of the paper prices on the exchanges. If we see shortages of silver and increasing premium costs, the game could be on. 
In response to my guess about when to buy silver, one wag looked at the precipitous drop and said "Not yet... not yet..."
to which I replied:
When? . . . When? . . . 
Actually, I didn't say it well in my first post. I think it is ALWAYS a good time to buy PHYSICAL silver to hold in your CORE positions. That physical silver should not be for sale to increase your amount of paper cash, but should be kept as INSURANCE against the disastrous things that can happen in the economy. The 50% pullback this past weekend and Monday morning were good times to use available cash to increase your holdings in the paper positions (such as mining stocks, ETFs, etc.) you will use for trading (to sell at a profit later and thereby increase your cash available to buy more physical and more trading positions). As for when to sell those trading positions to capture your profits, I can only quote our noted timing guru "Not yet... not yet...". I continue to HOPE that silver can test the US$100 level within the next six months. There is more detail and a chart about that in my commentary The Silver Two Year Cycle Continues. Cheers!
On a more serious note, I will not be able to see a bottom in this market until the price has moved back up high enough to break the downtrend line shown in red on the chart below. My idea of a good "Buy Silver - NOW" point is after the downtrend has been broken, and then prices correct back lower to perhaps 50% of the rise from the bottom to the top of the move that breaks the downtrend line.(posted here in mid December)
I recently posted this chart (copied from Jim Sinclair) with my comment below:
An alert reader called me to task with the paraphrased exchange below. Enjoy!
Reader: Don't tell me you are buying gold stock! I hope it isn't one of the dreaded ETFs!!
Optimist: I used the word "stock" as a pun on the attached graphic title "stock of gold", but sometimes my puns are a little puny. :-)
Reader: Buy physical silver (and gold), and securely store them in a safe place where you can get to them without needing the permission or assistance of anyone else. Silver has appreciated more than gold since the start of this bull market in 2001, and I have no doubt that silver will continue to move up faster than gold over time.
Optimist: I can't argue with a man when he is right! :-)
Reader: The lower price of silver causes it to be more volatile than gold.
Optimist: This reader's digest version leaves out a few important details. :-) Higher volatility for silver is the result of massive moves higher and lower. The bullish moves higher for silver are driven by the recognized fact that the price of silver is seriously undervalued, so investors are correctly buying more whenever they can. The natural progression to much higher prices is short circuited by bankster barrages of dumping more paper shorts than there is physical to cover those shorts. That cycle of correct higher highs interrupted by criminal bankster price plunges creates the increased volatility, which will continue only as long as there is enough physical silver available to supply to industry for manufacturing consumption and to investors for accumulation. When the time comes that industry has difficulty acquiring physical metal for their just in time manufacturing processes, industry will rush to correct the long overdue substantial increase in their stock levels, and the banksters will be unable to dump paper to suppress the price because most investors will want the physical that is in short supply. The resulting explosion in the price of silver will be legendary!
Reader: A slowing world economy will reduce the demand for silver.
Optimist: Most of the investment world shares this view that silver is only a banged up, rusty, and little loved car in the used car lot, and that it only moves slowly forward when fueled by the consumption demands of a healthy industry. They reason that the silver car will stall when the fuel of industrial expansion is no longer available because industrial demand for silver will diminish. A few investors, however, will look under the hood, and they will see a powerful jet engine with afterburners. As the world economy continues its inevitable slide into depression, and as China reaches its overbuilt plateau, The demand for copper and other base metals will essentially drop to zero and the warehouses will quickly fill to the maximum. The base metal miners will be forced to essentially shut down their mines. Since more than 70% of silver supply is byproduct from base metal mining, that 70% of silver supply will vanish from the marketplace, and the loss of silver supply will be the jet engine that propels the silver car to much higher prices. The afterburners will be the huge short positions of the banksters who will be caught in an epic squeeze from industry and investors who buy physical more frantically as the supply of silver becomes much too low to supply the demands for physical. You can read more about this in When Will the Price of Silver Explode?. Get your physical silver now, and buckle your seat belt for the ride of a lifetime! :-)
I was recently chastised mildly for focusing so much on precious metals instead of on preparations which will be essential during the coming economic collapse. Here was my reply:
Forgive me, Father, for I have sinned. :D
I must confess that although I agree that the wheels could fall off the economic cart (which is constructed only of debt and Ponzi promises!) at any moment, so that anyone without preparations (food, water, secure shelter, and self defense) would be at the mercy of mobs intent on stealing what the thieves did not prepare, I am optimistically hopeful that the inevitable rupture of society as we know it will be delayed a few more years. During that time, I continue to allocate a portion of my assets to purchasing real physical precious metals, and to investing in the companies which mine or process those metals. The physical coins or bars of precious metals are not for sale as an investment, but are intended to be held indefinitely as insurance against disastrous things that can happen, or possibly to be traded for more secure property later. With a portion of my funds that I invest in precious metals companies, my intent is to sell them at a substantial profit into the next major leg up in the price of metals. I continue to hope that short term bet will provide profitable opportunity by the spring of 2013. {I outlined that approach here (with charts and details) in my commentary "The Silver Two Year Cycle Continues".} The profits I hope to make will go into buying more preps and later more metals and more investments to play the game for another cycle. At some point, that game will end, but I am not gifted enough to guess at when that endpoint will be, so I plan to keep playing (and prepping) until the game changes. When the wheels do fall off the cart, many people will not know the real value of the various precious metals, but those unprepared people will be at high risk for early termination. The survivors will quickly learn the real value of all coins and bars, including palladium and silver (which are more rare than gold).
WIllie Sutton didn't really say it, you can be sure that the U.S. Government continues to have admiring fantasies about the line "That's where the money is." There can be no doubt that the USG is well aware that there is a huge amount of money locked away in IRA accounts that the baby boomers can not yet get their hands on. If the wheels fall off the USA economic cart in the next few years, I have no doubts that the USA will "protect" those IRA accounts by converting them to T Bonds with a very long maturity (100 years?!) and a very limited payout schedule. Anyone who plans to use IRA funds for something more useful (like buying silver or gold, for example) should seriously consider these screenshots from Jim Sinclair yesterday.
I don't see the FED announcement today as a game changer. I am convinced that the FED was pumping as fast as they could during the previous months, and today's message simply brought them out of the closet so they could pump some in the sunshine (with more still in the dark). The FED message did ratchet up investor sentiment, and that should provide more near term upside gains, but my guess is that the banksters will be happy to punish the momentum gamblers several times over the next few months to slow the rate of increase. My big picture continues to be unchanged from The Silver Two Year Cycle Continues, and I still hope that silver will test $100 by April. In the shorter term, I plan to take a few profits near $37 to replenish a little of my buying power in case the banksters do a brief but sharp dump from near that level to one of the Fibonacci pullback levels (after adjustment to the recent high). Later I hope to have an opportunity to rinse and repeat that partial profit taking exercise near $49. Here is a near term chart updated through today.
"Ludicrous" is a very strong word. Silver is still near its channel lows even after breaking out of the 16 month long correction. As shown in The Two Year Silver Cycle Continues, I continue to think it is possible that silver could test $100 by April 2013. In this very bullish environment, consider how the shorts must feel. It would not surprise me if silver continues to thrust higher in the short term, but a correction at any time would not surprise me either. I am still all in, so I don't need to worry about buying, but I view anything below $35 as a good buy point. Even if silver corrects back down to $30 after buying at $35, that is no disaster. Just try to accumulate more cash to buy more during a correction and hold until prices move higher again. If I had a significant amount of fiat available now, I would use a version of dollar cost averaging with a target to buy with approximately 10% of my cash each week, but adjusted so that I would only buy with 5% after a strong rally that week, or with 15% after a correction during the week.
None of us knows when the silver market will have a normal correction, or when the banksters will do a dump to punish the momentum gamblers, so buying a little each week will reduce the risk of getting caught by buying too much at too high a price so there is no cash left to use in a sharp price downdraft. FWIW, my WAG is that a normal modest price correction is likely soon (and a bankster dump is inevitable at some point), but I would not wait for that to begin a routine buying plan. It is important to remember that silver and gold are not just investments to buy low and sell high. Precious metals (that are core investments and are held in secure storage) are also insurance against some really terrible things that can happen, possibly quickly and with little warning. Keeping a solid base of good preparations (including precious metals) is essential, IMHO. YMMV so DYODD!
http://www.lemetropolecafe.com/ includes this insightful paragraph:A busted Silver market will spill over into everything. This one "little white lie" will expose many and far larger lies up to and including the fact that the entire system is a Ponzi scheme. It is really this simple, Silver CANNOT be allowed to be "outed" because it will expose everything else so don't hold your breath for a miraculous CFTC ruling, failure to deliver WILL be the catalyst.
A few days ago, someone commented that all of ones investment capital should be put into physical metal. This was my response:
I agree with holding your core position in real physical metal. However, there is still a very useful role that buying and selling precious metals miner stocks plays. There is a problem with being 100% in physical if you want or need to sell some. Selling and buying physical entails significant premium/shipping costs, and some degree of risk, and possibly a lot of exercise if moving a substantial amount of silver. Those problems are not a major factor for your core holdings when you buy once and hold for a very long time, but they can be a very big factor if you are trading a portion of your physical holdings. My view is that core holdings of physical are like an insurance policy that you simply hold without question as protection against some major economic risks. I do use a portion of my funds, however, to buy low and sell high to generate profits that I can use to buy more physical. My approach for doing that is summarized in the thread about the two year silver cycle (The Silver Two Year Cycle Continues). I am currently long 100% in hopes that silver and gold are near their summer lows for this cycle, and in hopes that prices will be much higher in the next nine months. Unless the wheels fall completely off the USA economic cart before the next cycle high for precious metals, holding miner stocks is likely to be as profitable (and perhaps much more profitable from the current very low miner stock prices) as holding physical metal. Since I plan to sell the trading portion of my position into the next high cycle anyway, it makes a lot of sense to hold that portion of my equity in mining stocks so that I can sell with much lower transaction costs.
A recent article speculates that a round of global intervention is just around the corner. Here is my thought about that possibility:If there is a coordinated action, precious metals investors will hear the drums beating first. You can bet that the first step in any intervention is to hit precious meals hard so their prices (which will rise anyway, but more slowly after the hit) will not be seen as a reliable and safe haven through the financial storm. Be prepared to buy a sharp price dip before the news, because prices should quickly reverse back to the upside after the intervention news is released.
Knowing the Game) goes over the bankster manipulation and the non response by useless agencies that many of us have heard about before, but it also includes the paragraph below. This paragraph sums up my viewpoint very well: What can we do about this as investors, market participants and citizens? I can only speak for myself, but I am not selling silver here or lower. I don’t know how low we may go from here and there is nothing I can do to prevent a decline, so I’m not going to obsess over it. As new funds become available, I’ll buy more silver. I’m in it for the long run or until I see signs that silver is free of manipulation and exhibiting signs of overvaluation. That’s very far from the case presently. The COT structure was bullish before this last sell-off and is even more bullish now. Try to remember that the collusive COMEX commercials are buying, illegally in my opinion, but buying nevertheless. No one, not even a crook, buys anything that he doesn’t expect to rise in price. Certainly at past extremes of commercial buying, it invariably turned out to be a good time to buy. The key test will be if JPMorgan sells short additional contracts on the next meaningful silver rally. Although that rally may not feel close at hand, I can assure you that we will get it eventually and the answer to what JPMorgan will do. When the rally does come it should prove to be explosive if JPMorgan decides to quit manipulating the price.
news came out last evening that CME was requiring all member firms to comply with regulations arising from Dodd-Frank which basically is forcing margin requirements for all "Non-Hedges" to effectively double as of this coming Monday.
Talk about short notice!
The ramifications of this are obviously huge and no doubt are adding to an already volatile mix of madness. Those traders with losing positions are going to be impacted even more since the new requirements may well push them over the line as far as margin calls and force them to either liquidate or come up with more cash, immediately.
I think some of what we saw in the markets today is traders already anticipating this with the result that we had a significant amount of position squaring.
Silver Price Could Double by Year End. This article prompted me to look at my own possible projections for a year from now. In the charts below, the top of channel line for silver is now at $67.50. That top of channel line will extend to $93 a year from now, and the price could overshoot to $96. The top of channel line for gold is now at $2,285. That top of channel line will extend to $2,750 a year from now, and the price could overshoot to $2,800. The thrust higher to those levels would yield a gain over the next year of 186% for silver and 61% for gold.
This is NOT a prediction of what will happen, but only a projection of what is possible. DYODD, of course, but I plan to be very happy if silver and gold approach gains like those over this coming year!
Seeking Alpha article today summarizes my viewpoint very well.While I do believe we will potentially see silver and SLV over the $40 level by the end of February, I believe we will see some form of consolidation/pullback in the metal starting within the next few days. Generally, when silver is in a strong uptrend, as it seems to currently be, the pullbacks tend to be rather shallow, and should not be more than a couple of dollars. However, as long as we do not see any large spikes down in silver over the next week, which could potentially invalidate this analysis, then you will want to buy the upcoming consolidation/pullback for an even more powerful move up in silver over the rest of February.
Another painful day of depressing drops in the prices of silver and gold. My view is that year end tax loss selling is a significant contributor to the current weakness in PM prices. On 12/26, I posted this:
2011 has been an unusual year for PM trends. The sharp rise for silver in April (but without participation by gold), the subsequent rise for gold in September (but without participation by silver), and the failure of either gold or silver to rise into year end, all point to a questionable view of the usual annual trends. I expect more weakness from tax selling into the end of December, but I am cautious about predicting the usual summer swoon. My advice is to dollar cost average with purchases possibly each week beginning in early January and continuing until the stack of available FRNs is much smaller. I don't know of any way to predict when the next big rally will happen, so I want to think like a Boy Scout and Be Prepared.
On 12/15, after silver completed a reversal day to the upside and the charts looked like the new bottom was in place, I was asked about the technical perspective for that bottom. Here was my reply:
I will not be able to see a bottom in this market until the price has moved back up high enough to break the downtrend line shown in red on the chart below. My idea of a good "Buy Silver - NOW" point is after the downtrend has been broken, and then prices correct back lower to perhaps 50% of the rise from the bottom to the top of the move that breaks the downtrend line. Until that downtrend line is broken, I am holding what I have, but not adding more with new cash. After the downtrend line is history, things will seem a lot happier here.
I remain convinced that 2012 will be much more friendly to silver and gold bulls than the second half of 2011. Keep the faith! Happy New Year to all!!!
With silver and gold prices down sharply, i have been asked about trading the gold silver ratio. Here is my reply:
Far more often than not, silver outperforms when prices are moving higher, but silver under-performs when metal prices correct to lower levels. I agree that the opposite happened this summer, but I see that as an unusual exception. I suggest an alternative approach in which you use the ratio to decide when to make a trade. If the ratio looks good for buying silver, or if the markets look positive for both metals, then buy silver with a known vehicle like AGQ to maximize your gains to the upside. Conversely, if the ratio looks better for gold, or if the markets look like a correction might lie ahead, then just sell the silver. Do not buy the gold part of the ratio trade (just hold FRNs as dry powder for a subsequent correction) because gold is likely to drop (although not as far or as fast as silver) whenever silver also drops. The best answer for trading that I can see is to always buy silver when the prospects for metals are bullish, and then sell the metals for FRNs (and possibly consider a smaller position in ZSL) when the metal prospects look short term bearish. Don't forget to use some of the FRN profits to increase the holdings of your physical metals for the longer term!
There seems to be a never ending debate about whether silver or gold is better. Here is a reply I offered today:
The current bull move began in 2001 when the FED put the 21 year long bear into hibernation by dropping nominal interest rates so far that the real interest rates went negative. All the price action before the bull began in 2001 is noise that does not impact the current market environment. The chart below looks at the percentage increase from 12/31 to 12/31 for each year using the indicated gold and silver closing prices on 12/31. I highlighted the "winner" each year in bright green. People who prefer gold will be happy to see that gold did better than silver in several of the years, and gold is indeed beating silver substantially so far this year. If gold continues to shine as much brighter than silver through 2012 and possibly into 2013, then gold could actually begin to catch up to the 612% gain of silver from 12/31/2001 to now. My bet, however, is that silver will soon resume its decade long winning performance. Cheers!
Someone asked what factors would drive the price of silver higher. I summarized the six points below:
(1) There are more (probably much more) than five Billion ounces of gold bullion collecting dust in vaults around the world, and more is added to the vaults everyday because more is mined than is used as jewelry or industry or investment products.
(2) There is less (probably much less) than one Billion ounces of silver bullion available for consumption by industry, and that number is further depleted every day because less is mined than is either consumed by industry or is converted into more valuable investment products.
(3) Perhaps 70% of the silver currently being mined is a byproduct from base metals mining. As the world continues to fall into a deeper inflationary depression, the amount of base metals that will be mined will reduce as worldwide construction demand decreases with the slowing economy. That inevitable reduction in base metals mining will further exacerbate the supply deficit in silver relative to the demand.
(4) The industrial applications that consume silver cannot reasonably substitute other alternatives, so those industries must have silver to continue their business. The amount of silver used in each product is small, so the use of silver is price inelastic because industry will continue to consume silver even after the price increases substantially from current levels. The real wild card is that all industries have migrated to just in time purchases of the silver that those industries must have. When news gets out that one industry is having trouble getting delivery on cheap bullion silver, there will be a stampede by all industries to lock in the physical they must have to continue production.
(5) The Banksters have been artificially depressing the price of silver for decades, and those criminals continue to squelch price rises in silver by selling huge quantities of paper that is not backed by anything. The investment world is beginning to realize that paper promises have little meaning, and that smart investors need to hold physical. As that migration to physical accelerates, the paper market will become much less relevant and the Banksters will be overrun with demands for physical. The explosion in the price of silver will be so strong that it will even be able to carry its little brother gold to higher prices.
(6) One silver problem is that buyers get too much metal for their money. As silver rises, it will not take as much space in secure storage, and big money people will consider putting some of their wealth into silver. That buying by big money will drive the price of silver exponentially higher, as each increase in price makes silver that much easier to store. People who prefer to buy gold because silver is too heavy and bulky will be happy to hear that someday they will be able to get much less silver for their gold, because the price of silver will increase so much more rapidly.
So far, the Banksters have been conspicuously absent from their usual price plunges, and silver feels very strong. I have repurchased the silver equities I previously sold, and I am all in again. I still would not be surprised to see a sideways action or even a push down later to get silver closer to the 32 level, but for now 32 seems to be the new floor. YMMV so DYODD!
This is not a prediction but only a what if guess, because I do not know what will happen with silver soon. However, if the price of silver begins to drop overnight tonight or into trading tomorrow morning, I would not be surprised if the Banksters force a spike down to the $28 level. That would allow them to pick off all the stops that are set just below the medium term down channel line (now at $28.50) and below the Oct. 05 low at $28.44 before they allow the price to rise back to $30. My guess is that spike down would be a great price to buy because the Banksters did not force silver to close significantly below the $30 level seven weeks ago and I do not think they want value buyers to have an opportunity to load up on physical below $30 now. Just getting the price to the $30 level by the options expiration on Tuesday would net the Banksters significant rewards on both the calls below and the puts above that strike price. The table below summarizes the current options open interest at nearby strike prices. It looks like the Banksters would reap significant options rewards for forcing the price of silver down to $30 by expiration, but I doubt they would get much bang for the buck on the costs to drive silver much lower than $30. After options expire Tuesday, my guess is that silver could begin a strong rally for the remainder of this year. YMMV so DYODD!
I was asked if it is better to buy silver soon, or to wait for prices to drop more. Here is my reply:
My advice is to buy some tonight, buy some tomorrow, and buy more this weekend. I think it is always a good time to buy physical, and the recent price drop makes this a much better time to buy than the previous three weeks. My guess is that prices could drop a little more over the next few days, but I doubt that there will be a major drop from the current price. When silver is selling for more than $60 next spring, nobody will care whether they paid $30 or $31 or $32 when they bought. The people who will care a lot are those who did not buy because they waited too long in hopes of buying at cheaper prices, and ended with buying nothing.
As always, DYODD before you decide when and how to invest. Cheers!
December silver and gold options will expire on Nov. 22, just 7 days from now. This would be a timely setup for the Banksters to step on silver again over the next week. There are approximately 5,000 calls and almost that many puts between 32 and 35. Those would be a tasty morsel for the Banksters to gobble up. My guess is that a price drop to around 32 over the next week would not be surprising. Although I am still very long in silver assets, I just today took profits on my AGQ to be sure that I will have some buying power if the Banksters depress silver soon. YMMV so DYODD.
ZeroHedge and Trader Dan report that after the close today, the CME quietly raised the maintenance margins on EVERYTHING to be as high as initial margins. This could be big news if it is the start of a "war" against leverage. A strange thing about this, however, is that none of the markets had a typical hard sell off before margins were raised. Surely the Banksters knew this was coming, just as they did for all the previous margin hikes. So why didn't the Banksters do a massive sell today before the news? The only guess I can make is that the Banksters may want to get long ASAP, and they are no longer willing to risk selling more paper shorts to try to trick the gamblers into selling their positions to the Banksters. If that is the case, then after a brief knee jerk spike down Monday, the Banksters could launch a blistering rally.
JMHO, of course, and DYODD because YMMV, but my guess is that the price today (approximately $30.50) is very close to the bottom. This is the low to buy so you can sell high later. I used no confusing technical analysis in forming my opinion (which is the same as my previous posts below about not closing below $30). Instead of TA, my call of the bottom is based on Manipulation Projection (MP). The Banksters have had numerous opportunities over the last month to push silver down below $30, and there is no doubt that they have the ability to drive silver prices much lower in the short term, but they have not chosen to do so. My guess is that the Banksters do not want silver to close below $30 because lower prices will encourage investors to accumulate too much physical. Instead, the Banksters are content to just step on rallies to slow the upward momentum and to steal from the gamblers by picking off stops in the process. If my guess about the Banksters' motivation is correct, they will not push the price much lower than it is today. Since it is already late in the year for the Christmas rally to levitate precious metals prices, I anticipate that the next major move in silver will be much higher prices.
Peak Silver Revisited is an excellent article. His focus on the future in which energy will be both less available and more expensive is well worth reading. For many years, I have expected that the coming depression will directly result in much less base metal mining, and that will indirectly slash the byproduct silver that is produced. He covers that point briefly:
The author then goes further to show that ore grades are also dwindling over time:
The combination of higher energy costs, declining base metal production, and dwindling ore grades will severely slash the production of silver in years to come. Although the amount of silver consumed by industry may slow somewhat during the coming depression, that will be much more than offset by a substantial rise in investment demand for silver as investors try to protect their assets from the ravages of inflation. Sharp reductions in supply combined with significant increases in demand can only be satisfied at much higher prices for silver.
IMHO, it is NEVER a good bet to sell silver to buy gold. While it is true that gold rose more than silver from 2001 to 2003 and in July - August of this year, for the majority of time since 2003 silver appreciated substantially more than gold whenever the metals were rising. The only times that gold appeared to be better was when the prices of both metals were falling. I previously looked at the data below on that relationship. My conclusion is that if you think the US$ prices of gold and silver will rise, then it is a much better bet that silver will rise faster than gold. If you prefer to bet that the ratio of gold to silver will rise, then the best way to do that has been to simply sell both gold and silver until the sharp price correction (that drives the price of silver much lower than gold) has past, and then to buy more of it back again at the lows. My summary is if you think metal prices will rise, then buy more silver even if you need to sell gold to do so. Conversely, if you want to bet that silver will do worse than gold, then the historical odds are that you should sell both metals until the price correction is over.
One other thought to keep in mind. The price of silver has been depressed by the Banksters for so long that it seems to be a natural thing, and we expect the price of silver to plunge just whenever the Banksters want to step on it. There are, however, many reasons (see the next paragraph) to think that the Bankster manipulation of silver will end, or at least moderate significantly, in the reasonably near future. When the price of silver is no longer controlled by the Banksters, that price can rise to heights that few can dream of today. Silver continues to look like a much better horse to bet on than gold. DYODD because YMMV.
Here are some of the reasons I think the Banksters could soon lose control of the silver market:
The CFTC is now under some sort of Congressional review. The CFTC was supposed to participate in a session with Congress a few days ago, but that has been cancelled and the CFTC promises a vote on position limits by October 18. I don't expect the watered down position limits to stop the manipulation, but it can help to constrain the amount of damage that the Banksters can do. There are many reports of lawsuits and DA action against the big Banksters, and that too can distract them long enough for the silver market to escape their death grip. Considering how many short positions the Banksters covered in the last two weeks, they could even be on the verge of going long and helping to fuel the rockets for the bull market. Even after the Banksters drove the price of silver down sharply, the demand for physical silver continues to increase. The "silver bullet" that will finally put the Bankster vampires into their caskets will be when they get so overwhelmed by physical demand that they can no longer sell paper instead. I can't give you a timeline for when that will happen, but (like Supreme Court Justice Potter Stewart) I will know it when I see it!
Silver obliged with closing above $30 as projected, but what's next for this week? My guess is that the next few days will be a replay of the 2nd week rebound following the decline into early May. The pattern shown in the oval below reflects relatively strong buying in the Monday and Tuesday after the decline, but renewed selling in the following days. My interpretation is based on MP analysis, where MP is short for Manipulation Projection. After the Banksters ramp up their paper short positions to drive the markets lower, they try to cover as many shorts as possible on Monday and Tuesday so their tracks will be less obvious in the Commitment of Traders report based on a snapshot of the closing positions on Tuesday. I will not be surprised if prices rebound on Tuesday (as the Banksters continue to cover shorts), and then drop again over the following days of Wednesday through Friday (when the Banksters could ramp up their shorts to do it all again). My MP based viewpoint is that the carnage could end on Friday 9/30, or on the following Monday. After that final bout of the Banksters harvesting long positions abandoned by discouraged gamblers who bet that silver will rebound quickly from current levels, the Banksters would be ready to cover as many shorts as possible in early October. There is speculation that in October, the CFTC may take long overdue action on position limits. If the CFTC does plan to actually do something useful in limiting the abuse of the silver market through manipulation, then preparation for that event could well explain the timing and the severity of the recent purge of the silver and gold markets by the Banksters.
Although it is several months old, I have only today watched the video at the link below. It is an excellent introduction to the merits of physical silver as an investment.
http://www.youtube.com/watch?v=Qtp1i-z4AEY&feature=player_embedded
That video is very well done, and I highly recommend watching it too. There are two points that would have been good to include in the video. First, as the world economy continues to stumble downhill toward a global economic depression (while printing enough fiat to insure it will be an inflationary depression), the amount of new construction will be reduced. That reduced level of worldwide industrial output will require less base metals, so the amount of mining for base metals will also be substantially reduced. Since approximately 70% of silver production is byproduct from base metal mining, that portion of silver supply will be reduced along with the cutbacks in base metal mining. Silver consumption from industry will probably reduce a little too, but not as much as the supply reduction from smaller byproduct of base metal mining. Meanwhile, the continued "printing" of additional fiat to feed the global machine will insure that silver demand for investments continues to grow at a rapid rate. The net result will be less supply of silver available to meet increasing demand, and that can only drive silver higher.
The second point is that the banksters have an unchecked power to drive prices lower to force gamblers who bet on rising momentum in the markets out of their positions. The bankster backed plunge in metal prices this past week clearly demonstrated that power is not being limited by the toothless clown called CFTC. However, the banksters continue to have an insurmountable problem with investors, and nations, that want to accumulate physical metals as protection from the high inflation that will result from unlimited printing of fiat. Since the banksters are the only shorts, and since they cannot push investors out of the markets because lower prices only make it possible for investors to buy more, the banksters are stuck with a problem they cannot control. As investors continually increase their ownership of physical, the banksters will be forced eventually to cover their shorts at much higher prices to avoid having to deliver metal they do not have. For now, the banksters still have the ability to pick the pockets of the gamblers and to increase price volatility through coordinated market manipulation to the downside. However, that increased volatility is much like the banksters punching the proverbial tar baby because the banksters keep getting stuck in deeper to the investors each time they steal from the gamblers. Sooner or later, the banksters will be unable to avoid default from inability to deliver the physical demanded by investors, and then the price of real metal will far surpass any limitations that banksters can put on paper. The future price of silver will be much, much higher than it is now.
Trader Dan has an interesting chart showing two sets of Fibonacci levels of interest. You can visit his page to see his chart, or read the same information copied below:
I am using two sets of Fibonacci retracement levels to do this. The first originates from the bottom in the silver market made back in late 2008 when QE1 was first announced. That is in blue. The second originates from the breakout point late last year when silver embarked on its stunning run from down near $20 all the way to $50 before it sold off. That is in red.
Note that if we use the latter set (in red), silver has violated all of the major Fibonacci retracement levels except for the last one, the 75% retracement level. That comes in near the $28.50 level.
It just so happens that this level is fairly close to the more significant 50% retracement level of the entire rally from 2008. That comes in near $29.22 (in blue).
Also note that there was a bit of a pause in the silver move higher over a two month interval in NOvember and December 2010 that hovered in that same general area. This is a potential support level for the metal. If silver can recapture $30 and then $32.50, today's low might be as low as we get. If it cannot and fails at today's low, then the band between $29.22 - $28.50 will come into play.
If the market were to fail there, it will then have potential to retrace the entire movement higher from last year with only the $24.30 region to prevent that.
If silver opens lower next week and then closes higher, the bullish candle that day could mark at least a short term bottom. My hope is that silver will not close much lower than $30. The daily silver chart this week (smaller copy below) reinforces that target. I have drawn a correction channel, and also an Andrew’s Pitchfork using the high April close, the low May close, and the high September close. All my chart data is basis the most active futures contract. The bottom of channel coincides with the pitchfork mid line near $30. If silver closes significantly lower than $30, then the junction (now at $22) of the decade long bullish channel and the pitchfork lower rail becomes a possible target. As always, DYODD before you decide how to invest. Cheers!
PAAS announced Friday that they would buy back up to 5% of their stock over the next year. That is obviously bullish for PAAS, but it may have much wider implications. Silver mining stocks in particular, and all miners in general, are severely undervalued at current prices. There is the potential for a price explosion if large companies go on a Mergers and Acquisition (M&A) program to grab the true value at the current very low prices. PAAS may have lit the fuse for that explosion by essentially doing a M&A on its own stock! If other miners follow suit, the abnormal depression in the mining stocks will soon end.
On a different topic, someone commented yesterday that they were getting lots of information and opinions before making a purchase. I'll share with you my reply:
You should be aware that there is a trap in trying to get too much information and too many viewpoints. You can end up with more noise than clarity, and the resulting analysis paralysis can prevent you from doing much of anything. I deployed all my cash into silver yesterday and today by using the Nike approach: Just Do It!!!
Our torture over the last few weeks ended at 3 PM sharp today. The FED released its long awaited statement at 2:15, but Wall Street said WTF? and resumed the sell off with gusto. At 3 PM, the PPT (which stands for either its name Plunge Protection Team or its mission Paint the Phucking Tape) charged in and took no prisoners. With the PPT buying any stock that anyone would sell, the stock market rocketed higher. The PPT also made a pass at shorting gold and silver, but that was much less effective. The FED/PPT have made it clear that they will spare no expense to move stocks higher, and that will directly remove the dark cloud that has rained on silver and the silver miners. There may be one more passing storm when they grasp at the final straw to raise the margins for gold, but I see nothing else than blue skies ahead for us. Happiness is being all in on silver and silver miners!
Jim Sinclair - Gold Milestone at $1,764 Paves Way to $12,000For what its worth, I deployed my remaining cash into silver equities at the close yesterday. I waited until yesterday because I thought that the banksters might push the price of silver lower into the first notice day(s) of July silver. There are still 1,860 open contracts in July silver. If even half of them stood for delivery, then almost 5 million ounces would be ripped out of the NYMEX inventory. My guess was that prices would be pushed down in an effort to discourage longs from taking delivery. Depressing prices is a time honored way to push momentum player longs out of the market. The problem with that approach is that lower prices make accumulating real silver more attractive to value buyers (optimists like us, the Chinese, etc), so the banksters dare not keep prices down for long. I would not be surprised to see the price of silver rally soon, perhaps after another brief thrust down near the open on Tuesday to pick off any loose stops at prices a little lower. My guess is that the incessant drumbeat about the possibility of a USA debt default before the debt ceiling is raised will soon push metals prices higher as big money avoids paper and heads for physical, which is the only real risk free investment vehicle.
Richard Russell's comments after the 30% plunge in the price of silver last week are well worth reading. My WAG (Wild A$$ Guess) is the plummet last week and the drop again today will be seen as an A wave down, to be followed by a B wave back up, just as RR and many others have projected. My contribution is to WAG that the B wave could surprise to the upside and thrust to the $52 level, possibly by early June. Having a B above the A wave peak would suck the easy money speculators back into the long side of the market at just the wrong time, and it would capture all the bear stops that hang heavy just above $50. After the B wave top completes, the C wave down into the summer lows could fall to the $29 level to capture the bull stops below the A wave low ($33 so far) and below the $30 round number trap. YMMV so DYODD! Cheers!
The charts of silver and gold paint beautiful pictures this weekend! My guess is that the weakness in the US$, and the corresponding strength in silver and gold, is a reflection of the uncertainty about the U.S. budget and whether or not the U.S. government will continue to function normally without the disruption of a shutdown. As of 6 PM EST, there is not yet a decision about the shutdown possibility at midnight tonight. If the budget mess is not resolved and the government stays shutdown into next week, my guess is that the US$ will drop more sharply toward my target of 72.5, and the prices of silver and gold will continue to surge. The top of channel lines on my ten year charts are now approximately at $51.50 for silver and at $1,930 for gold. The bands from a little below to a little above each of those prices would be tempting targets for taking partial profits on some of my positions. Cheers!
My guess is that the price suppression of the last three weeks was intended to make Obama look more "Presidential" (despite the damage to the US$) and to avoid embarrassing the U.S. government by having gold and silver rise during the visit by our Chinese guest this week, or after the State of the Union message next week. I also guess that now that the Chinese visit is over, or perhaps after the State of the Union message Tuesday, the banksters will work on reducing their huge short position. Bankster short covering could solidly firm up prices next week. DYODD before you follow my guesses! Cheers!
On 1/10/2011, I wrote:
FYI, I think it could also be bullish if there is a sharp spike down to new lows, providing of course that there is a "V" bounce back up again. That spike down would trip out the trader's stops at several price points between 28.70 down to 28.25, and could then shake off enough fair weather traders so that the bull can march ahead without looking back.
That seems to be a perfect description of the price action today. It looks like the trader's tree was indeed hanging heavy with stops that were ripe for taking. Here's my WAG (Wild A$$ Guess) about what might happen next. I suspect that the banksters who sold a huge number of shorts to cause the price plunge may not have been able to cover all of those shorts yet because there may have not been enough low hanging fruit in stops to pick off. With all eyes focused on the COT reports, it is not politically correct for the banksters to admit to a large buildup of short positions (that were necessary to trigger the sell off) when data is reported at the close on Tuesday. My guess is that the banksters will be in full buy mode on Tuesday (since USA markets are closed for the holiday Monday) to cover enough of their shorts to at least brush over their tracks in this market plunge. Meanwhile, Asians and Europeans will be salivating over the bargain prices that are being offered to them Monday and Tuesday before the USA markets open. It looks to me like the potential exists for an explosive "V" (as in Vengeance!) shaped recovery in Asia and Europe Monday, with a much stronger follow through on Tuesday and the rest of next week. Banksters still holding shorts in the USA markets may be smiling now, but their expression could turn to panic by the time the USA markets open for trading on Tuesday. This is all unsubstantiated guesswork (with a strong emotional bias to the bullish side), so DYODD!
Seasons Greetings to all, and best wishes for a very merry Christmas and a happy, healthy, and prosperous new year. I continue to hope that the price of silver will increase by another 50% to around $45 within the next few months, but I am happy with the advance silver has already made, and more will be exceptional. Happy Holidays! Cheers!! Jim
The video at the link below is an excellent interview with John Williams of Shadowstats.com. My interpretation is that he sees the USA as a canoe without a paddle going down a rapid river with a waterfall dead ahead. At some unknown point, the canoe goes over the waterfall and drops suddenly into hyperinflation as people around the world panic to get out of dollars at any price. When that happens, it will be very helpful to have most, or at least some, wealth outside the USA in vehicles that are not fixed to the US dollar canoe. My addition to this video is that once the canoe begins to tip over the top of the waterfall, you can bet that currency controls will be imposed to prevent anyone from taking real wealth out of the USA. If your vision of the Apocalypse includes the waterfall panic into hyperinflation, then it would be very sensible to get some wealth out of the USA before the canoe arrives at the waterfall.
http://www.youtube.com/watch?v=aMp22y9OUHA&feature=player_embedded
I jumped back in with both feet to resume a 100% long posture last week quickly after the FED announced that it would deliver another generous helping of QE2 to press the dollar lower around the world. That announcement was not the music a person holding cash would want sing along with. The subsequent explosion in the prices of silver and gold since the FED anouncement are no surprise considering the damage to the dollar that QE2 will contribute.
Seems like there was a little excitement today. Silver was strongly higher in the morning, but dropped abruptly in the afternoon. That price plunge was almost 10% from the high to the low! Since the price plunge happened just before news was released that the margins for silver would be raised tomorrow, it looks like the banksters were front running the news in hopes that an avalanche of stops would push silver sharply lower and deliver huge profits to the banksters again. I was asked if this might mark a medium term top, and this was my reply:
My guess, for what its worth, is that the reversal today will be only a brief glitch in the march on to significantly higher prices over the next 4 to 6 months. In years past, all the market bulls were leverage addicts and they played only in the casinos of futures and options contracts. TPTB could count on driving those longs away from the market by simply raising the margin cost to bet in the markets. I think, however, that the new breed of players is not concerned with margin costs. Instead, the new bulls are just like us in that they want to own precious metals as insurance against the falling value of the dollar. The BIG difference, of course, is that the new breed of bulls are billionaires who more closely resemble the 1970s Hunt brothers than us. The interests that are intent on buying silver and gold to insure their fortunes against dollar devaluation will not be worried about greater margin costs that in effect only reduce the leverage to do that. Instead, they will be buying as much as they need for insurance, and they will allocate the costs that are necessary to make those purchases. The new lower prices will spur wealthy investors to accumulate more and faster than they would have at higher prices. I look for the bull to resume its rampage within days.
Question: How could the prices of gold and silver increase faster than inflation so that their real purchasing power would also increase? Here is my answer.
I see three reasons to expect the real purchasing power of gold and silver to increase from current levels: price suppression, demand, and supply
1) The prices of gold and more so of silver are being continuously suppressed by the banksters in collusion with the government. That suppression holds the prices down below the prices they should trade at now. True market forces will eventually become strong enough to overcome the price suppression, and then the prices will escalate up to their proper levels and will have more real purchasing power than the suppressed prices have now.
2) Most investors are now conditioned to think only of paper assets to invest in, and they would not consider owning physical gold or silver any more than they would buy tons of grain or a warehouse full of copper as an investment. Those investors will learn the old wisdom that owning a real commodity is far better than betting on paper promises, and silver and gold will be the commodities of choice. As investors become sadder but wiser about the problems that paper creates, demand for real silver and gold will substantially increase and that increased demand will drive the real purchasing power higher.
3) For centuries, miners have taken the easy to get ore as they mine for silver and gold. The silver and gold remaining in the earth will be increasingly difficult and costly to extract. The depletion of easy to mine resources will significantly decrease the new supply of silver and gold over time. Reduced supply will translate into higher real purchasing power for silver and gold.
My guess is that the real purchasing power of silver and gold will increase substantially over the years ahead, even as the items that you want to purchase increase in prices due to rapidly rising inflation.
A question was asked about whether it is better to buy all silver, or to also buy other precious metals. I said:
So long as it can be safely stored and there are no mobility concerns with the weight, I vote for buying all silver. I see silver as being seriously undervalued now, probably because of severe manipulation. At some point, I expect silver to forge ahead in price to make up for its current under-performance. Even if I am wrong about there being more severe manipulation directed against silver than the other PMs, I cannot imagine that gold will double by gaining another $1,200 to $2,400 before silver gains another $18 to $36. Although silver trudged through more manipulation mud than gold so it has been slower to now, it seems to me that silver will be the fastest horse on the next section of track. Cheers! Jim
Someone said that charts have less value because the markets are manipulated. I replied:
I think that the manipulation creates a new opportunity for us. The manipulators have a weakness in that they cannot simply depress and hold down the prices of silver or gold. If they keep the prices too low for too long, then there will be more consumption and investment demand at the same time that there is less supply from production, and that would result in a massive fail for the manipulators who do not have the physical metal needed to meet increased demand. Instead, the limit on their game plan must be to let the average price rise enough to reduce demand and to increase supply. Along the way for those increases in the average prices, they will sell at selected opportunities to step down hard on the prices in an effort to shake out the weak hands who were trying to catch an easy ride on the gravy train of prices which must rise over time. The old school charts and technical analysis tools cannot predict when the manipulators will stage their raids. Instead of showing the way to profit by trading the markets with the technical tools that once worked OK, a trading plan based on the old technical tools may actually increase the probability that we will lose money by getting stopped out at loses after the manipulators strike.
The new opportunity that the manipulation offers is to simply look at the big picture instead of at the small details within that picture. Instead of betting that a once useful pattern will point the way to higher prices, we can now simply wait for the manipulator's expected sharp price sell offs, and buy into those price dips even as conventional traders are forced to use stops to sell at a loss. Then we can hold over time for the manipulators to release their pressure on the markets, so that prices will again recover and gain more than before (so the overall price averages can continue to rise over time).
Buying into those manipulated dips is the easy part. The more difficult phase is to take profits into price rises at just the same time that all our senses and technical skills tell us that the bigger gains are just ahead. Listen to the internal voices of fear and greed. When fear pushes us to sell out to cut our losses, that is likely the same time that the manipulators have depressed prices to a great buying point. When greed tells us to buy more because prices are exploding to the upside and we feel confident that they will jump higher still, the manipulators are likely ready to launch another price raid to prevent most traders from making profits. Use the manipulations to your advantage. Buy the dips and hold until prices rise again to attractive levels, then sell some of your positions to lock in some profits that can be used to repeat the buy and sell process through the next manipulation cycle. Note that this process of betting against the manipulators will work only in a continuing bull market, and that is where seeing the big picture is vital. Also, DYODD to know what you are doing before you choose to invest your money. As a final thought, having a little good luck with your timing would be advantageous too! Cheers! Jim
Someone suggested selling positions for a profit soon, and then buying them back in an expected summer correction. Here was my reply:
I will be cautious about planning an exit point for taking profits with an intention to buy back in at lower prices during an expected correction. The previous guidelines for market action seem to be confused at best, and they may not be working at all now. As one example, the prices of silver and gold exploded much higher in a blow off into the spring of each of the previous even numbered years, but that pattern did not work this year. Another example is the disappointed silver detractors who expected the prices of silver and gold to have already fallen sharply into a seasonal correction by now, but there is no sign yet of typical seasonal price weakness. Until I see otherwise, I will treat any analysis of cycles, waves, and seasonals with much more caution than in previous years. I'm not yet ready to make any medium term price predictions , but I would not be surprised if we do not get a sharp correction to lower prices this summer. This could be a year in which the "correction" will be only a sideways movement for a month or two before launching into higher prices again. DYODD, but my guess is that taking profits too early, and waiting for a price correction that may not happen to buy positions back, could be frustrating this year.
My guess is that the take down today is because of the Silver options expiration next Monday, which will be closely followed by first notice day for Silver July futures the middle of next week. The Boys don't want any bullish sentiment nonsense while they finish shearing the sheep. Has anyone else noticed that Silver lagged significantly behind Gold over the last few months, and that was attributed to Gold being precious but Silver was only an industrial metal like copper? So today, the Boys dumped precious metals to take Silver down harder than Gold while industrial metals like copper were up on the day. The Boys have painted Silver as only an industrial commodity on the upside, but as precious as Gold during their monthly take downs.
I responded to a question about why gold could be higher Friday while silver was lower. Here is my reply:
I think the current price of silver is suffering in exactly the same way that copper and crude oil prices dropped sharply this last week. The markets are focusing on the depression that is impacting the Western world, and industrial materials like copper and crude oil are thought to be in less demand due to the slowing economy. The markets are also treating silver as if it is nothing more than an expensive form of copper to be used only for its needs in industrial production. That is why the price of silver dropped on Friday (exactly like copper and crude oil), instead of rising like gold (which the markets are valuing as both precious and monetary). The time will come, however, when the markets shift focus back to the the age old truth that silver is also a precious metal, and that silver also has a long history as a monetary medium. When the market begins to properly value silver for more than just an industrial commodity like copper, and credits silver with its long standing role as a precious metal with monetary qualities, then the price of silver will recover the ground recently lost in comparison to gold. The key question, as always, is when will that time become evident in the marketplace. My hope is that the time for silver will be soon, but it's your money that you invest, so you get to place your own bets about when that will happen. Cheers! Jim
The value of silver and the value of gold reached new highs this week. The Gold & Silver tab at the top of the page discusses the concepts of value (which is independent of currency) instead of price (which depends on the currency unit the price is measured in). A typical price chart shows a combination of changes in the value of the silver or gold and the changes in price that are caused by the currency that the chart is priced in. The change in value is what would result if one buys (long) silver or gold futures in US$ and simultaneously buys (long) an appropriate amount of the USDX US$ exchange rate futures. Then the USDX long futures will cancel out the silver or gold price changes that result from currency variations, and the combination will leave only the changes in real value which is independent of any specific currency. (Note that I have not actually done that futures spread trade, and I do not recommend it to anyone else.) The current charts of the value of silver and gold are copied below. I update those charts each week at the links below each chart:
MoreAG charts the value of Silver MoreAU charts the value of Gold
The ten year monthly charts for silver and gold show the expanding channels described in Silver and Gold Cornucopia. To fully show the channel highs, I have added artificial high prices on 5/01/2010 to my monthly charts, and copied those updated charts below. To reach the projected channel highs this week, silver would need to be at $40 and gold would need to be at $1,600. The top of channel prices continue to rise over time. Will silver and gold get up to the lofty top of channel price levels again? My bet is that they will rise even higher than that! Will it happen within the next year? Your guess is as good as mine, but I will be very happy if they do get there soon! Cheers! Jim
I was asked if the Silver Sidestep got sidestepped this year, and what price I would sell silver to take some profits. Here is my reply:
The Silver Sidestep is obviously not on schedule for this year. I really have no basis for guessing when it will reappear, so I cannot offer any timing advice to anyone else. To paraphrase Justice Potter Stewart, I don't know when precious metals will rally strongly again, but I will know it when I see it. I continue to hope that a surge in the prices of silver and gold will happen soon, but since I have no leverage or margin debt to worry about, I can simply hold my positions patiently and wait until the next price spike arrives. The top of channel lines on my charts are now approximately $39 for silver and $1,540 for gold. Those prices may seem outlandishly unlikely now, but no more so than a prediction of $14.50 would have seemed when silver was at $6.50 in the summer of 2005.
As for what price I will sell some of my positions at, I plan to use a phased approach in which I will sell a little of my silver holdings beginning around $25, and gradually increase the amount that I sell into still higher prices. If Silver gets up to the top of my channel line above $39, my guess for now is that I will have sold no more than a total of half of my position into that rise. If silver does not get high enough for me to take some partial profits soon, then I will wait for the next opportunity later. Let me reemphasize, however, that this is only a plan for me to take some profits in my positions, and it is not advice for other people to do anything similar. Best of luck to all of us. Cheers! Jim
Someone recently commented that Silver is manipulated just so it will help with controlling the price of gold. My reply is copied below. Cheers! Jim
My view is just the opposite. I think the primary objective is to suppress the price of silver, and TPTB uses gold sales as a tool to do that. With an estimated 5 Billion ounces of gold bullion sitting in vaults around the world (compared to less than 1 Billion ounces of silver bullion), there is plenty of gold to go around. If the price of gold could rise above $3,000 per ounce without silver prices also rising sharply, the world economy would continue to chug along pretty much as usual. My guess is that TPTB are much more worried about what will happen when the price of silver rises to above $50 again. A predictable scramble for physical silver by industry and the big money players and small investors around the world could destroy the manipulators who have huge naked short bets against the price of silver. The financial pressure against those TPTB aligned companies could cause them to fail, and they could take down the whole western financial house of cards. An explosion in the price of silver can illuminate the smoke and mirrors TPTB use to keep the economy limping along, and can trigger a crash in financial power that TPTB will be powerless to control. My guess is that TPTB will not be happy with a rise in the price of gold, but higher gold prices are not likely to reduce their power or control or their personal living standards. In contrast, I think TPTB may be petrified that rising silver prices can result in Game Over for TPTB as the world wide rush to physical exposes the financial frauds that TPTB use to control the world economy. DYODD but my bet is that after the big precious metals price breakout that awaits us, silver will continue to race much higher in percentage of price gain than any of the other horses on the track.
With silver now at $17.23 and gold at $1,140, I think the next major bull move may have already begun. If so, then this could complete the Silver Sidestep pattern that has been delayed a little this year. FYI, I sent the email below to a friend this morning. Cheers! Jim
I realize that I have sounded bullish before, only to be a bit disappointed by the temporary delays in the start of the next major move higher, but I continue to be hopeful that this time the next big move has already begun. My chart projects a move up to as high as $39 for silver, but I hope to begin taking partial profits around $30. Timing is not my strongest point, but I would not be surprised to see exceptional highs in precious metals as soon as mid to late April. The thrust up could then be followed by a refreshing seasonal pullback into early August before the cycle repeats. As you can see, I really am an optimist!
This weekend, I sent the paragraph below in an email to a friend, and I want to share it with you. Cheers! Jim
The increasing prices for real physical silver are just the tip of the iceberg. There are massive amounts of paper silver contracts traded every day, but very little real silver available to back those bets up with the real thing. A time will come, and it may be in the near future, when the artificial paper market will be recognized as a useless and rigged casino. The prices of real physical silver (and gold) will leap exponentially higher than the irrelevant paper "spot" price as the mass of investors and industrial users wake up and realize that the paper fraud is just another version of the multiplicity of scams in place throughout the western financial world. Everyone will want the tangible, productive, and protective qualities that only real, physical precious metals can offer. Silver will lead the price explosion because there is precious little real silver remaining in the world.
Gold closed this weekend at a new all time high value! That is exciting!!! You can see the weekly update of the MoreAu Index (which charts the value of gold independent of currency fluctuations) at
this linkGold & Silver link this link
As I post this, silver is $15.15 and gold is $1,056 (priced in US$). I just sent this morning the text below to a friend by email, and I'll post a copy of it here for anyone interested. Cheers! Jim
The markets take a perverse joy in reminding me often that my short term timing leaves a little to be desired. I bought more stuff a week ago because the bargains were just too good to resist. With prices much lower now, I plan to use all the rest of my accumulated cash to buy as much as I can today. That does not, unfortunately, mean that prices can not drop more in the short term. My WAG is that this should be near the low for this correction, and that prices should quickly recover much of the recent drop, so there will not be much time in which one could buy at the bottom (however much lower it may be from here). For funds that you will not need to use within the next few months, buying in this price range must be a great opportunity. If prices then drop a little lower in the next week or two, I might borrow some on margin to buy even more. I feel like a kid in a candy store here. Unfortunately, I can't tell anyone else what they should do, so this decision will be up to you. Hope you have the best of luck with this one!
FYI, this sharp drop was not expected in my call for sharply higher prices by March, so I no longer can have that expectation. Prices will rise again, and to explosive new highs, but I just do not know when that will be. One of the joys of physical, however, is that their owner can wait without risk until the time is right for prices to move strongly higher again. Hope that helps. Jim
I hope that everyone had Happy Holidays, and I trust that we are ready to get back to serious investing. I plan to use this new page to briefly offer my current viewpoints about the precious metals markets. I hope to keep this short and sweet, as a simple and quick way to post (and document with a timestamp!) my guesses about what the markets will do in the weeks ahead. Readers are welcome to cheer (or jeer!) in the comments section at the bottom of this page.
As I post this, silver is $16.82 and gold is $1,095 (priced in US$). I see the recent 9% decline in silver and the 6.3% decline in gold (weekly closes) as a healthy pause that can power both bull markets much higher over the next few months. My guess is that this correction is near an end, and that prices will soon begin to thrust upward again. If there is additional price weakness, I do not intend to sell, but to look for opportunities to buy more at lower prices. I am almost 100% invested in the precious metals sector in hopes that the
Silver Sidestep
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This commentary presents only the viewpoints of the Optimist, and it is intended only for perspective and entertainment. Please do not interpret any portion of this work as investment advice. If any of the concepts discussed here appeal to you, then you must do the work to decide if and when and how you should invest. The Optimist does not ask for any profits you make, and he cannot be liable for any losses incurred as a result of your investment decisions. The Optimist wishes you the best of luck in whatever you decide to do or not to do.
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