How Much More Pain for Bullion’s Faithful?

Gold and Silver punished the faithful yet again on Thursday, demolishing the technical supports we’d thought would arrest the decline. The sturdiest of them barely evinced a bounce, a fact that telegraphed the onslaught that was to follow. How many more days of acute pain?  Not many, for sure, since Silver would be trading for under $10 by next mid-week if the collapse were to maintain its current pitch for just another few days. Now, our worst-case target for the July Comex contract is 31.520, although a bullish turn could conceivably come from a lesser support well above it, at 33.615. Both are Hidden Pivots, and the resiliency of the higher may help us to determine how likely the lower is to be reached.  With respect to Gold, we disseminated a 1451.80 target intraday for the June Comex contract. That number is an important Hidden Pivot support, and it looks sufficiently robust to contain the damage.  Although it lies $10.70 beneath Thursday’s bottom, it could prove to be just minutes away if sellers greet the day in the same despairing mood they were in yesterday.

Using our proprietary technical method, we attempt to judge the strength of both major and minor trends by observing their interaction with Hidden Pivot supports and resistances.  It was on that basis that we hung out a yellow flag last Sunday night with this headline: “Comex Gold Closing on a Crucial Target”.  As of that evening, the June contract had gotten within a few dollars of a longstanding rally target at 1581.20 that we’d been drum-rolling for weeks.  In the actual event, the high occurred just beneath the Hidden Pivot, at 1577.40, but we were ready for it nonetheless.  Here is what we wrote at the time: “Technically-derived targets have kept us quite bullish the whole way up. But the most immediate such target is not a minor one. Rather, it is a major ‘Hidden Pivot’ that has been nearly three months in coming, and it sits fully $200 above the ‘ideal’ price where long-term bulls might have gotten long or augmented an existing stake.”

Why Guess?

Although we didn’t publish the actual number, we provided a URL link that would have allowed readers to access it by way of a free trial subscription to Rick’s Picks.  In the same commentary that night, we came within two points of nailing the so-far high in the E-Mini S&P.  We were projecting a shortable top at 1371.00, but the high in fact occurred at 1373.25 on a gap-up opening Monday morning. Since then the futures have fallen nearly 50 points, or 3.5%, to a low yesterday of 1325.  Will 1373.25 prove to have been the Mother of All Bear Rally Tops?  We wouldn’t even hazard a guess, since we can deal quite capably with the unknown as it unfolds, one downside target at a time.  If you would like to delve more deeply into the Hidden Pivot Method, consider taking a free trial subscription to Rick’s Picks.  That will get you into our 24/7 chat room, where you ask “pivoteers” how they’ve fared using the proprietary techniques they learned at the Hidden Pivot webinar.  For detailed information about the next, scheduled for May 25-26, click here.

(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)

  • Buster May 9, 2011, 10:19 am

    Religious faith in regard to all of this is an interesting question. Any study of the structure of power and it’s history shows it has some strange religious foundations. Indeed the lines of contractual allegience of the organisations that control most of everything seem to lead back to the religious structures as it’s foundation. There seems to be so much ritualistic and occultic symbolism used by these organisations that it certainly makes me wonder what is really going on. I know a lot of the theories that supposedly explain all of this, but I like to stick to the facts as best I can.
    The use of printed or digital money in effect is a matter of faith in the authority that has the power to make it, ie the Banksters, which are part of this world structure of power apparently built upon this religious/occultic foundation. It is surely an example of ‘double speak’ and irony when they put the words ‘In God We Trust’ on their money, for it is in fact in the money printer that the trust is really being put in. If they really wanted to get all religious about it, a more apt Biblical quotation would be ” “Do not put your trust in nobles, nor in the son of earthling man, to whom no salvation belongs.”
    If I was to hazard a guess from what I see, I’d probably say that the groups that run the world can be traced back a long time, or at least regard themselves as the heirs of an historic lineage. This lineage seems to go back to ancient or fabled historic events that happened then. Maybe they are just following the script now, but whatever, they still appear to believe this stuff according to the way they run things.
    Needless to say, I wouldn’t trust them with anything, let alone the direction of humanity. And neither would I trust their money.
    The rest of the world don’t either. the Chinese, Indians, Japanese etc are just playing the game to suit themselves. However, when they turn tail things can get very dangerous for them, as the Elites are very dangerous people. We should never underestimate them. History shows that that is always a big mistake.
    If any of this makes any sense at all, which I often question, then we won’t be rid of them properly until after they ‘get revealed’, which is maybe where we are now at in history. Unfortunately, such a revelation is not a peaceful one.

    • Marc Authier May 10, 2011, 12:59 pm

      Buster, very interesting comments. There is really a mystery to explore here. I am astounded how people are like almost conditionned to accept a fiction ! There is effectively presence of the irrationnal or a magical aspect. Some bankers have stronger magic than others. Finally it’s maybe effectively just a question of more efficient mass delusion tools and mind control techniques and magic tricks. Hey I know Buster. I studied in accounting.

  • Marc Authier May 9, 2011, 6:12 am

    Why is it always a question of religion and faith when it comes to precious metals ? I would say that the black magic and the religious sect today, is more on the side of those stuck with all this dirty and worthless sovereign debt. Or how about this municipal debt ? Or how about all these junk bonds paying microscopic interests ? Or how about all these mortgage bonds ”guaranteed” by the banksters ? It’s even more a question of faith with paper today than with the shiny luminous stuff. I am sure that a lot of greek and irish savers had a lot of faith in their sovereign debt. Blind faith in paper is far worse that faith in precious metals. Specially today.

  • Marc Authier May 8, 2011, 5:12 pm

    Thanks Buster. Real interesting citation directly coming from the horse’s mouth or is it another body part ? I didn’t know this citation. Fractional reserve banking system is just a ponzi scheme to feed the anglo saxon imperialist wars. USA with the FED took the scheme to a higher level. I wonder when will the rest of the world wake up to the ponzi scheme.

    The model needs perpetual wars to feed itself. Wonder what will be left to exterminate when nothing is left to kill and plunder. Wonder when countries like China will wake up ? Probably much too late. Banking is just a sophisticated form of human slavery, where you destroy labour, resources, human beings, countries, cultures and get to live handsomely with money for nothing and from nothing. It’s quite clear.

  • Marc Authier May 8, 2011, 9:12 am

    I suppose that you must have faith in US treasury bills yielding 0% or Japanese treasury bills yielding 0% ? That seems more of a religion. Money you cannot hold, that only exist as an intellectual concept, and is created ated out of nothing. Like God, the eternal abstent. In the old days he used to speak to us. Since we use paper as money, God seems to be pissed off. There is a lot of religion going on. Paper religion. Bah it’s far worse than that. Today you monetize the crap with digits on a computer screen. You have to hate these scum central banksters. They should be tried for black magic and monetary satanism. It’s all a question about faith. Nothing fundemental. Just mental.

    • Buster May 8, 2011, 11:55 am

      “Banking was conceived in iniquity and born in sin. Bankers own the earth; take it away from them but leave them with the power to create credit; and, with a flick of a pen, they will create enough money to buy it back again. Take this power away from them and all great fortunes like mine will disappear, and they ought to disappear, for then this world would be a happier and better world to live in. But if you want to be slaves of bankers and pay the cost of your own slavery, then let the bankers control money and control credit.”
      – 1940, Sir Josiah Stamp, Director of the Bank of England.

      Yep, we’re screwed!

  • mario cavolo May 8, 2011, 6:39 am

    Once again the orchestra of msm and idiotic talking heads love to speak of doomsday crash crash crash in this and that asset class because of a hint of a correction and selloff…why? Because people have the common sense to say “hey, this stuff has run up alot, let’s be wise investors and speculators and do what is reasonable and normal….take profits!

    Don’t get me wrong. Of course silver ran up parabolic and thousands of talking heads with a brain said “this goose is cooked, we’re really worried about $50”. Now in fact, the parabolic run could have continued to $70 or $80 or $100 but in fact it happened to finally hit the wall at $50. Meanwhile, the fundamental outlook of excess debt still supports permanently higher and rising gold and silver prices no matter the short term plunges and parabolic rises.

    Meanwhile, same story for commodities. Good grief a week and a half ago I shorted wheat and corn THREE times, every time to get stopped out by violent insane spikes up and back down up and back down. What a nightmare. Finally, the commodities started correcting…wheat, corn, cotton, copper.

    So what? It happens. They are still high and let’s consider the reasonable idea of GS who suggested that the run is done but that there should be a very low reasonable expectation that commodity and resource prices will remain in a high range, not plunge back to zero, for the simple fact that there are now on the planet a rising middle class group of one BILLION people across Asia Pacific, which will in terms of demand, more than makeup for the woes of 100 million screwed over American lower/middle class folks who are, for many reasons well known here, in the wrong country on the wrong continent at the wrong time in socioeconomic history. Woe to timing and all the other vagaries of life and fate far beyond our control.

    The situation with oil isn’t much different. Yes, speculators are causing rising prices getting themselves rich and screwing the world along the way. But at the same time, the demand for oil worldwide is in fact rising and so from a root long term perspective the trend for oil prices is up up up over the next 10-30-50 years, even with $20-$40 swings mostly because of the trader’s having a field day.

    The global economic balance is resetting, clear and obvious. In that reality, I’ll stick very much with the idea that the USD is ultimately heading down into a new 60 to 70 range and Asian currencies rising into new stronger ranges. And the EURO fits in that scenario wherever it may fall. Regardless of critical meanderings about the known evil doings, and indeed they are exactly so, look at it with a long term global socioeconomic perspective as ongoing natural cycles.

    All the country’s economies are now deeply interconnected economic web which becomes a self-supporting system protecting any individual asset from “crashing” and which will automatically create responses and reactions, shifts in asset allocation for the coming cycle. Crash, by that I mean, true doomsday crash such as of the USD, is a practical economic impossibility. Its mental masturbation, a spinning wheel, fun to ponder.

    You know what? While excess U.S. currency liquidity may seem like a very very bad idea for many reasons and blaming Bernanke is fabulously fashionable, the fact is that adding so much more U.S. currency to an expanding global economic system may over a few years simply get absorbed by that global economic rising system. And meanwhile, you can bet that if we have coming year’s weather conditions which make for nice harvests that the ag commodity prices will settle down. But as Rick reminded me recently, the fundamentals are very different now than they were years earlier, and that includes rising global demand due to the Asian and BRIC’s expansion.

    Last night I watched “Che”, with Benicio Del Toro, the story of Fidel with Guevara leading the revolution in Cuba. Great flick, in Spanish with English subtitles. Early in the movie Guevara was sitting with his friends in 1950’s Mexico with the following dialogue “Unemployment in Cuba is close to 20%, and the 1.5% elites own 40% of the land wealth…we don’t need or want American imperialism. ”

    Wow, guess what? Those statistics the same exact statistics right now for the United States – 20% real unemployment and the top 1% representing 40% of the wealth!

    Some things never change.

    Cheers, Mario

    • Cam Fitzgerald May 9, 2011, 1:29 am

      Awesome post Mario. Now I don’t know who you are anymore. Welcome to the dark side of realism where the dollar actually survives and precious metals take a role in the new financial order. All kidding aside, I do agree that the metals bull has real legs and we have not seen the last of it. Just a pause. I am even more certain though that we are in line for a dollar bounce and can take advantage of that opportunity while it lasts.

  • Phil C May 8, 2011, 2:04 am

    Very hilarious to see all those WSJ articles about <> and all those who lost money. I guess it’s part of the game plan.
    🙂

  • warren May 7, 2011, 9:32 pm

    You have a choice between the natural stability of gold and the honesty and intelligence of the members of government.And with all due respect for those gentlemen, I advise you, as long as the capitalist system exists, vote for GOLD : George Bernard Shaw

  • F. Beard May 7, 2011, 5:13 pm

    How Much More Pain for Bullion’s Faithful? RA

    What an odd question. Faithfulness to shiny metals? That reeks of idolatry.

    Rather than bet on the end of the world where if you win you still lose, how about we invest in genuine reform instead?

    For instance, the capital gains tax and legal tender laws for private debt should be abolished. That would enable people to escape the stealth inflation tax except perhaps for bracket creep in the income tax.

    • Rick May 8, 2011, 6:01 pm

      I think my use of the word ‘faithful’ falls a tad shy of idolatry here.

    • Robert May 9, 2011, 8:09 pm

      Idolatry?

      Please, not the “Golden Calf” parable again.

      I really wish that calf had been carved out of granite so people would not confuse the nature of the Calf (Gold) with the moral of the story (don’t place your faith in anything above God and your own ability and resourcefullness)

      I’ll remind everyone that in the context of purchasing power, that calf idol (wherever it may be today) still secures as much in exchange for goods/services today as it did back then. 🙂 This point speaks to the separation of the NATURE of the golden calf, from the SYMBOLISM of the golden calf.

      It is the symolism of people blindly worshipping a pagan idol that is at the core of the parable from Exodus.

      Fiat currency is symbolic (and therefore subject to whimsical idolatry).

      Gold is an element that only has nature ( that nature being an element that can only willed into existence by the power of nuclear fusion within extremely huge, dense stars)

      So, F. Beard- you are absolutely 100% correct in your logic, but the vector of your premise unfortunately carries your argument exactly 180 degrees from your intended thesis.

  • Dierk May 7, 2011, 4:25 pm

    Silver = Real currency
    U.S. Dollar = Fiat currency

    Silver owes no one anything and has been currency for 6000 years. Modern Fiat currency is approximately 300 years old. Reference the Bank of England and the rise of modern fiat currency. 1971 marks the beginning of the death of the dollar as the government took us aff the gold and silver standard. The DOLLAR is in a BUBBLE, SILVER is NOT. Corrections will happen in any great bull market. Great time to add to any long position. Speculation is fun when your up but can hurt when your down. The SHEEPLE cannot control the nature of bank manipulation so beware!! Buy physical silver and hold through the great metals bull market to come!! SIMPLE

  • A. Ran Fand May 7, 2011, 4:55 am

    Greece Considers Exit from Euro Zone
    “Greece’s economic problems are massive, with protests against the government being held almost daily. Now Prime Minister George Papandreou apparently feels he has no other option” http://www.spiegel.de/international/europe/0,1518,761201,00.html

    Is there any alternative?

    • Buster May 7, 2011, 9:36 am

      Interesting interview on the Max Kaiser’s report this week. In the second half of the show he talks about a law suit being brought by the Greeks against the deliberate collusion between the Banksters to create the Greek debt collapse in order to reap financial gain.
      Of course, obviously it’s just conspiracy theories since human beings are such wonderfully moral and righteous creatures, especially the cream that rises to the top of the world society…….or is that scum, I can never quite remember.

      http://maxkeiser.com/

  • bill May 6, 2011, 7:33 pm

    Is there any evidence that JPM is not doing a pump and dump on SLV to get everyone out because they are not actually holding the silver??

    • Robert May 6, 2011, 9:14 pm

      Well, if you take the documented fact that yesterday’s one-day volume in SLV equated to over 80% of all outstanding SLV shares changing hands, then yes, I guess that is a reasonable premise.

      The real question is when/if the regulators are going to investigate the precipitous drop in NAV on the CEF and other truly physical backed ETF’s.

      I don’t think the structure of the CEF would allow the NAV to go negative unless someone big was naked shorting the shares (someone please correct me if they understand another way that this negative nav is possible)

      The silver leaving the SLV this week has also been remarkable- I think it is 20Million ounces and counting at this point, yet no reported dealer deposits on the COMEX to settle longs. Instead, we see “reclassifications” of existing COMEX stock from “registered” to “eligible”.

      There is so much “action” in this market right now that the theories are too numerous to even catalog, let alone understand…

      This is quite a divergence from the quiet, sleepy little low volume silver market that served as the poker table for a small, interconnected “good ole boy” network of traders just 10 short years ago.

      When the daily silver ETF volume exceeds the daily volume of the S&P ETFs, then that has to be a game changer for this market.

      I said it yesterday- someone was buying all this volume the whole way down all week- I can personally only account for .0000000000000000000000000001% of said volume, so I must have had some help…

    • A. Ran Fand May 7, 2011, 4:52 am

      Robert, According to my calculations, you missed a zero.

  • Robert May 6, 2011, 7:28 pm

    Rick-

    Lots of venom spewed around the blogosphere this week.

    Lot’s of “I told you so” posts from all the bubble and top calling trolls, which I can easily ignore; but also lots of flaming arrows toward people like you that have the balls to call out what look to them like safe price levels on the charts.

    I won’t castigate anyone who has the hootzpah to do that. Just as a parabolic move up will not reveal the price point where it will runs out of energy, ditto the inverse when the parabolic move is down.

    Silver can do a dead cat bounce here, or it can shape a V and run to 3 digits. It could form a long cup and handle formation… Anyone who declares to know is a Charlatan.

    Kudos to you for not being afraid to post your observations. I think your trading track record (heavily biased to the right side of the trade) more than entitles you to miss the bottom in silver in this move by 10-20%… my opinion only.

    Also- regarding margin and commodities. Something else occured to me last night after posting about the colusion in the exchanges that is fostered by the fact that the voting members of the exchange are mainly the big banks.

    It dawned on me that this whole exercise was a giant money printing operation. Bear with me again- this might get long:

    1) Margin is a loan- it is a credit agreement. The Banks who own the huge shorts have unlimited ability to post the maintenance costs to keep their positions open (That’s assuming they even need to post margin at all since they represent the primary voting block on the Exchange itself).

    2) The longs post their margin from the credit agreements linked to their brokerage account. When the margin is posted, it is the same as when a bank “creates” the money to pay for a house at mortgage origination. The margined long does not post colateral on the margin loan- the brokerage simply “wills” the funds into existence, and the long fires the funds over to the exchange and says “keep my position open- I’m gonna run those shorts out of town”

    3) Then, when the amount of total margin credit in the system reaches some astounding level- The lever is pulled (as it was Sunday night in Asia), the bid side gets overrun, and the price plummets, creating the margin call stampede and forced liquidation that forms the sustained feedback loop that make weeks like this one stand out on the charts as the Maalox inventory depleting chaos that they are.

    Now- the crux of my premise- remember I said that margins are not collateralized loans- so the longs are often forced to sell real assets to raise the cash to meet the margin call. Well the “money” behind the margin loan did not exist as cash (the brokerage did not have to debit the cash side of their balance sheet when they created the margin funds), so when the long is forced to sell assets to meet the call…. POOF- money invented via margin loan suddenly becomes real cash spendable in the economy (and subject to further debasement/debauchery by the Fed and other loan-shark banks).

    I suddenly realize why Jim Sinclair is so brilliant when he says “buy the underlying asset, and stay away from leverage paper positions”… The paper game is, and always will be, owned by the giants that have the monopoly on the ability to loan money that does not exist.

    I may divest all my remaining AGQ (which I am fortunately still sitting on a 200%+ gain with) and go visit the local coin shop again.

    I’m still running with the bull. I realized ZERO short term capital loss this week, no matter what my brokerage account balance says- I still have existing liquidity, and I have my original capital plus several hundred percent in long term gains, and I got to buy into some great new positions at prices I was convinced a week ago I would never see again.

  • redwilldanaher May 6, 2011, 6:25 pm

    If the PM situation wasn’t already interesting and entertaining enough, along comes CNBC as reliably as May Flowers to act as the court jester. They’ve spent the better part of the last decade attempting to undermine the PMs at any and all times and now after warning that the Gold was in a “bubble” at $400 and Silver at $21, they’re crowing that they warned investors of this bubble pop as Silver approached $50. They can never manage to see RE and Equity bubbles in real-time but they sure did get the word out regarding the Gold Bubble! We had 8 years to prepare for its popping! Oh well, we can’t expect sociopaths to retain memories. I take comfort in believing that there is a special place in the Inferno reserved for such cowardly and duplicitous filth.

    • Cam Fitzgerald May 6, 2011, 6:42 pm

      Yeah, good point Red. I have noticed that too. My own comments regarding precious metals are for the medium term only.

      I have expressed that several times now. In the bigger picture I anticipate tremendous gains but do not see that as viable as long as the metals were moving on their current trajectory. They badly needed a pullback and a deep breathe before the next major leg forward.

      When it might start is anyones guess though. I don’t feel any insights right now in that regard with one major exception.

      If the dollar climbs another 100 points off todays numbers then Silver will fall to the middle or high twenties.

      This is not over if the dollar gains more ground.

    • redwilldanaher May 6, 2011, 7:37 pm

      Agreed Cam. IMO a lot of this is “smash mouth” stuff, one group of operators punishing another group of operators. We’ll see how things shape up after the bloodbath concludes.

    • Robert May 6, 2011, 10:47 pm

      Cam:

      Respectfully (of course), some charts to demonstrate graphically the true scale and scope of the required degree of dollar strength you would be proposing (late 2008 on the far left side):

      http://stockcharts.com/h-sc/ui?s=$USD:$SILVER&p=D&yr=3&mn=0&dy=0&id=p90045151198

      The DXY to Silver price ratio blasted above the 50DMA this week. RSI ran from being extremely oversold to the overbought threshold in 5 days.

      I’m sorry, I just don’t see there being enough market energy to create much further gain in this ratio.

      I will concede that another channel building period similar to the first half of 2010 is not only possible, but statistically probable, but that will probably come about not via further weakness in the commodities, but rather via further weakness in the other currencies comprising the dollar basket.

      All the news today about Greece, the EU, and the Euro may be the first shot across the bow , and let’s not forget my observation from yesterday about the Yen’s recent weakening/ BOJ intervention being completely erased this week.

      If you listen carefully you can hear the Japanese Printing Press Fairies flapping their wings and getting ready to wave their wands again.

    • Cam Fitzgerald May 7, 2011, 7:20 am

      I had a Blonde moment, Robert. I am hoping for a quick recovery though. Guess my point should have just been not to expect a big Silver bounce if the dollar keeps rising. Funny too how Silver has gotten so much attention when it was really the oil sell-off that was stunning to me. That one day decline came on like a freight train. Quite the message.

  • Earthwalker ~ May 6, 2011, 4:25 pm

    ! What is wrong with ‘self-preservation’? It does not equate as you say to a selfish disregard of the rest of the world… it simply is in the opinion of some… an attempt to preserve their ability to continue to be able to take care of their families needs in the face of a ‘seemingly likely’ melt down of the old ‘disfunchional fiat system’. Being prepared for such a reasonable scenario… as the third ‘little piggy’ who prudently built his house out of ‘bricks’ was… is not a sign of evil greed or inhumane disregard for those who are less focused on being prepared. Yes we all have to celebrate if the dollar (or other fiat) is going to survive (somewhat longer?). But at the same time preparing for a possible alternate outcome is still noble and appropriate.
    Earthwalker ~

    • Cam Fitzgerald May 6, 2011, 4:38 pm

      Fiat currencies are not going to end. Please stop with all the melodramatic theorizing. You just lost your shirt on Silver bullion because the cards are stacked against metals and that will not change anytime soon. Extremism is not a welcome element of the financial system. It is never elegant in its solutions, just grasping and selfish and desperate.

    • Steve May 6, 2011, 5:23 pm

      Wow Cam ! Fiat is radicalism in its pure form of theft. The gold standard is executive high treason in the United States, as gold has always been “valued” in silver Specie Money Dollars. That is until F.D.R. usurped exclusive legislative power (the People’s legislative body) via treasonous designs 1933/34 to create an enfranchising ‘gold dollar’ where Eagles, in 20 Dollar ‘value’, once flew,. I will agree that the people who view PM as their savior, should be investing in knowledge/training, as that is all that is required along with the guts to survive.

    • Cam Fitzgerald May 6, 2011, 5:44 pm

      I know most of the arguments. But I am a realist.

    • Robert May 6, 2011, 6:47 pm

      Shouldn’t a realist sometimes choose to stand for what he believes to be right, rather than apologetically declaring “it may be the right thing, but since other people don’t think so, I’m safe to assume it won’t happen”

      Freely floating fiat currencies ARE going to end. The anchor will probably not be Gold in isolation, and the assumption that the US dollar will remain the global reserve for as long as the US remains the most powerful economy on Earth means we only have about 5 years left- 2016 is when the Chinese nominal GDP is due to pass ours.

  • Cam Fitzgerald May 6, 2011, 3:34 pm

    How much more pain for metals bulls? Good question. I can see that today will be another down day for PM’s and oil already. The dollar may be inching up as we speak and bonds rebounding. I sincerely hope so.

    Yesterdays sell-off had the whiff of panic about it too and so there is a stronger likelihood that a downward trend in PM’s will continue. The crowd that lives for metal is now in disbelief though.

    This cannot be happening! The dollar is supposed to crash. The experts all agree on it too. Everyone knows the dollar will crash and then us Gold-bugs will be rich, Rich, RICH!!! Hooray for gold!

    How ridiculous. I have news for some fools. The dollar will not crash to zero anytime soon and reserve currency status will remain intact as long as the US is one of the worlds biggest economies. Is that not obvious?

    It has been a long wait for a solid correction and this one is well overdue in my opinion. It is just a cycle. I am sorry for those who just lost 25% on Silver but they should not be surprised despite all the rationalizations in the world that their metal of choice was going to see a hundred bucks within a months time. So the rules changed. Thanks God.

    Some of the negative inflationary aspects of stimulus and QE2 will now be vanishing along with excessive commodities valuations. Really, we should be very grateful and welcoming this correction as the market had run far ahead of itself and any sane person could see a blow-off was about to occur.

    I am amazed that so many seem surprised by the recent and sudden moves too. The market, as we know, has been fully pumped with dollars, care of liquidity measures that were badly misdirected on an acquisition spree around the globe. Everything physical rose in price as the antidote to a fractional frenzy gone wild. That trend is now ending for the time being.

    Silver was stellar. Oil over the moon. A bit too much though.

    But now change is again at hand and there is a correction taking place in advance of the conclusion of QE2 (and in the absence of any announcements of QE3).

    There is no doubt that measures introduced by the Fed have exported inflation all around the world and led to some of the political upheaval we are currently witnessing across the globe. It is also clear too that those same measures were leading to many other negative conclusion for all of us. We are all in this together, remember? The First world and the Third world have both suffered.

    My central theme has been that the medicine of Easing was also capable of killing the patient. Quantitative measures taken too far could only lead to extreme pricing and speculation in the broad commodities sector, in energy, and specifically oil. The outcome has been very detrimental to broad, consistent economic growth. The positive effects and the desired outcomes of Keynsianism have proven that they can self-extinguish if not controlled.

    The result of this is that the medicine being applied to generate global growth was in fact creating the risk of sending us straight back into recession. The process was defeating itself. The medicine was killing the patient.

    This has now been widely recognized and there are dissenting voices at the Fed who see that what is being unleashed is beginning to turn negative to their own interests.

    QE3 cannot be justified as long as QE2 is seen to be a failure. There must be other ways to stimulate the global economy without bringing on the dislocations we have recently witnessed or the distortions in the balance sheets of our major trade partners.

    For the moment, lets be grateful that the price of oil has fallen and taken some of the sting out of the financial squeeze so many are experiencing or about to experience. Fuel prices will gradually fall back and the process can be reviewed again from another perspective.

    For the metals bulls…..I suggest you take a breather for the summer. The world will not end. Your worst nightmare that the dollar would actually rise and cut short the spectacular gains you have already made is now imminent from my perspective.

    It is welcomed too for if the dollar were in fact to plummet as many of you swore was inevitable then the unimaginable would then be upon us.

    Who really wants that? Who wants extreme financial instability? Only the gold bugs I imagine. Those who cannot see far enough past their own selfish personal investment decisions to understand that a return to a gold standard would actually devastate the economy right now.

    Are you people anarchists, or what? A small handful of very vocal people are now openly rooting for the dollars collapse. They see it is their own salvation, proof of their own superior investing prowess and they justify a return to gold as an act of responsibility on the part of governments to bring sanity back to the financial system.

    I don’t entirely disagree that responsibility is lacking where the accumulation of debt has become overwhelming and destructive. I do not agree though that a dollar collapse is in anybodies interests. This perhaps is why I have such revulsion to the hyperinflation camp as it is populated by an extreme vision of financial accountability and punishment for sins of the past.

    That camp is dog-eat-dog. Every man for himself and by virtue of that sentiment, to hell with society and the greater good of the nation. That camp, numbering only in the small single digits of real popularity (1% buy precious metals) seems to have taken over the media with their thrilling ideals of ending the financial system as we now know it and taking the world back into the stone age where credit might become extinct.

    Good grief. Have they even thought the idea through to its conclusion?

    There is only hope for gold-bugs in that small world and it seems they will only be satisfied when the entire system has been upset and turned over, when they are the last ones standing, ready to barter and trade bullion for food and supplies. Rarely have I heard anything so idiotic in the past. It amounts to extremism, nothing more, for it surely is not rational.

    What a grand new world that will be for the other 99% of the population though. It is at times like these when precious metals have gone from being a mere investment class to being a black religion that I actually begin to favor the idea of confiscation. If only to resist the hazards of selfish self-preservation ahead of the common good.

    Anarchy is never a good substitute for the excess of government and high levels of personal indebtedness.

    There must be better solutions.

    • Buster May 6, 2011, 4:20 pm

      Yes, the better solution to an anarchist goldbug uprising is well underway, curtesy of the powers that be…. read – home reposessions, non-bailout business bankrupsy, family breakdown, mass medication & toxic vaccination of the population, GM food, deliberate radiating of the world atmosphere helping the rise in mass disease, toxic chemical contamination by big business, increasing financial burden on everyone in favour of the parasitic elites leading to yet further economic breakdown, the use of HAARP as a silent weapon of weather & seismic activity, plus increased surveilance and control of society to help keep control of anyone who can’t bear the burden.
      Sounds great!!

    • Cam Fitzgerald May 6, 2011, 4:34 pm

      Oh Great. Here come the conspiracies and all the loony followers. Yes my friend, the government is out to get you. You are the target. It is all personal of course. Nothing is left to chance. Is it those damn Rothchilds banging on the door now? So run. Run, hide, buy gold and guns and ammo buddy. We will all be safer then.

      Good Grief!

    • mario cavolo May 6, 2011, 4:35 pm

      Amen Cam. Its like I don’t even recognize its the same guy writing tonight. If you would think of China with the same clarity and reason, I’d ask you to be the godfather of my newborn 🙂

      Cheers, Mario

    • Cam Fitzgerald May 6, 2011, 4:45 pm

      Glad you appreciate my views. I think the lights are coming back on here too and my frustration with the lunacy of those who seek metals and hyperinflationary ends over sanity and stability is showing through in my remarks. I am on my way over there, by the way, Mario. Maybe next year. We will have to meet up at some point. More than happy to be Godfather (did I tell you I am half Italian by the way and also come from a long line with very deep political roots in the US. You might be surprised.) I am only Canadian in terms of a passport. One generation only.

      Cheers

    • Buster May 6, 2011, 6:02 pm

      Interesting that those (part jesting) statements should be labelled as conspiracy theories. They were mostly just taken from actual news events and data that we all have access to.
      No, I don’t believe that goldbugs or gunslingers have the answers to the problems we now face.
      How can anyone solve the age old problem of corruption and unbridled self interest, or the emotions of fear & greed that rule our lives.
      For what it’s worth, I don’t hold out any faith in our present system as it has been totally compromised of any integrity. As Steve basically says, self reliance is worth more in reality.
      As for the ‘conspiracy theorist’ label, I won’t worry about that. I’ve always thought outside the box and generally figured out the real deal from the junk.
      But I would say with some conviction that things are a lot, lot worse than you seem to think they are.
      Unfortunately that will likely become more apparent sooner or later.

    • mario cavolo May 7, 2011, 8:15 pm

      Cam, would love to welcome you on a visit here. Its easy if you would go to my website and click on the contact us link to send me an email so we can stay in touch…interested to hear your political history stories while hanging out sitting along a typical local street here 🙂 Cheers, Mario

  • Marc Authier May 6, 2011, 3:23 pm
  • gary leibowitz May 6, 2011, 3:02 pm

    An easy decision to make. If gold/silver move up against a steep drop in equities than these commodities will seperate from the rest.

    The “pack” commoditiy move for the past 2 years questions wether the metals are any different than say cotton.

    If I am correct we should see a rally in everything for the next 2 weeks. This includes the dollar. In fact I expect the dollar to “take off” soon. My expectation is for the SPX to hit around 1385 for the high.

    Disclaimer: I rarely get the moves right on timing or price. Just a guess on my part.

  • Jess May 6, 2011, 2:18 pm

    I think there is only one way to look at this and that is their helping JPM because they bailed them out, plain manipulation! Margin requirments and Osama was and excuse to get the ball rolling so most will over look. Everyday there is another headline of Osama this or Osama that. They will keep it in the headlines for a long time. It’s better to talk about Osama than whats going on here. Anyone that can justify what is going on in silver has to be totaly absent from viewing the facts and that is why they will continue abscound the issues. Will JPM dump the shorts and at what price? If they can get it back to a profit, I’m sure they will. Then what? Again no fundamentals have changed from last week, dollar still weak, many states still broke, a step away from default. So lets pounce on silver move these guys out of there and make them put it somewhere else that will help out JPM, hey, who knows it might even jump start the economy! I have always believed that we have enough smart people here in the U.S. to fix the problem, (Many on this sight)but this crew is not going to get the job done in the way they’re going.

  • Nitram May 6, 2011, 1:39 pm

    this bubble should be keeping metals up. http://finance.yahoo.com/q/bc?s=%5EIRX&t=my&l=off&z=l&q=b&c=

  • Marc Authier May 6, 2011, 9:46 am

    Fantastic diversion. And what about other markets ? What about US treasuries or the US dollars ? It’s always fascinating hearing that precious metals are bubbles while US treasuries are yielding negative interest rates. In reality it’s disgusting. 080% of all assets are presently invested in precious metals. In the 80’s it was 9%. What about the other bubbles ? The real ones like the US treasuries for example.

    • Jackson May 6, 2011, 10:34 am

      U.S. debt is the mother of all bubbles. My mom lived to a ripe old age btw. One day the U.S. will default on it’s debt… but notice how I didn’t say ‘soon’. It’s anyones guess as this wheel has been spinning for decades.

      Are we really going back to a gold standard? I think the odds are we’ll have a world reserve currency linked to gold but even that isn’t written in stone.

      Think of it this way, if we as a society are really on the short path to a gold standard shouldn’t gold be going up much more than it is? Are you (or we) really so naive to believe we know something that the market doesn’t? The market is never wrong and unfortunately for right now it’s saying no collapse is knocking at the door except a slowing economy and more deflation.

      And to answer your question about ‘other bubbles’… What about them? They all collapsed.

    • John Jay May 6, 2011, 2:36 pm

      Marc Authier,
      There are no markets, only interventions.
      The same goes for government economic statistics.
      With every passing year the lies the Federal government tells get bigger, sloppier, and more amusing.
      They meddle in everything, look at the distortion they caused in the housing market, it has destroyed a good part of the economy and ruined millions of Americans.
      Look at the distortion they cause in the labor market with open borders and H1B visas.
      The silver market is just a side show unless you got caught in the futures market by their latest meddling.

  • Nobody May 6, 2011, 9:16 am

    I don’t see anybody talking about ETF NAVs, for example CEF. CEF if closed and backed by real bullion.

    The historic NAVs I’ve seen for CEF, from memory, place it typically between +5% and as high as +15%.

    Right now it’s at -8.5% and going lower.

    It seems to me the markets are failing. That trust is out the window. CEF can go to zero, physical really can’t. And yet we see decoupling of bullions CEF proxy with the reality of it’s physical holding.

    Strikes me that this is confirming the rumors that COMEX has in fact failed it’s just not public yet. When it is public I can’t see distrust limited to COMEX it seems to me it rapidly extends to all markets. I think we’re seeing that right now with CEF. Note SLV has been running a higher negative than normal effective “NAV” as well.

    I just don’t think the margin changes explain the increasingly negative NAVs, I think abandonment of the market due to lack of trust does. And lack of trust is not going to correct quickly. But face to face silver prices can correct quickly, and even seem to me to result from lack of market trust.

    • roger erickson May 6, 2011, 10:22 am

      Thanks. Most useful insight yet. May answer the following questions.

      ?? The reported trigger was CME increasing margin rates on silver trades through their exchange.
      That’s a fascinating topic, raising multiple questions.

      1) how did a large chunk of the silver trade come to be centered in London, at the CME? ?? (how much, when, & how?)

      2) what is the process by which they set their margin requirements? ??
      (seems to involve arbitrary responses, no automatically scaling stabilizer rule; http://static2.seekingalpha.com/article/265473-silver-a-short-why-cme-should-have-raised-margin-rates-by-30 )

      3) our own FED supposedly used to routinely micro-manage margin calls on various money flows, from 1940-1951
      margin calls are a powerful tool, useful for a distributed Public Purpose [if proper use can be defined and dynamically managed!]; OBVIOUSLY dangerous in the hands of narrow interests

      4) what is the effect of margin requirements across multiple markets & exchanges?

      5) what is the pattern, speed & acceleration of the net profile of changing margin requirements in all market exchanges (does anyone plot this?)

      6) is there any profile of all the people & processes involved in setting all known margin requirements?
      (that’s the sort of thing process control engineers & ecologists would map out in any other system – why isn’t that done in what’s become “political” economics?)

    • roger erickson May 6, 2011, 10:39 am

      underlying point is that anyone privy to the decision-making process for impending margin call changes could game the markets big time;
      no way that strategy isn’t pursued by the usual distribution of people who can’t resist doing so – they used to be called Royalty, now they’re just called various rich people

      why the hell aren’t all margin call changes fully automated & the rules published? for all markets where margins are used?
      usual answer will be that it’s an art, not a science;
      so is fraud

      solution is transparency in public markets; whatever the considerations, just publish & automate them in real time & keep the playing field level;
      if rules need to be changed, publicize the entire process, to lower the burden of financial parasites

    • Jackson May 6, 2011, 10:42 am

      I honestly don’t understand the margin argument. If the price of silver goes to $150 shouldn’t the percentage of down payment rise too? Seriously, do you think you can trade it for free?

    • Robert May 6, 2011, 6:32 pm

      I touched on this yesterday.

      The voting members of the CME (the comittee that decides its time to raise margins) is comprised of representatives from the exchange’s largest clients- which just happen to be the same big banks that own 95% of the short side of all outstanding open interest in silver on the exchange.

      Rigged game? you bet, but can they rig into existence the real physical metal that the longs are standing for? That will be the ultimate parlor trick.

      The COMEX needs to die. This week’s action is the death rattle… now it needs to just roll over and breathe its last.

      Regarding the declining NAV’s of the ETF’s – this divergence is fascinating- that’s all I’ll say about that.

    • ful_karboy May 6, 2011, 8:43 pm

      If you check CEF’s NAV page you’ll find that their basis for calculating the NAV uses a bit outdated prices {too high} for both gold and silver so the discount is somewhat less than 8.5%

      I made the same mistake ;>(

    • RLP May 7, 2011, 10:12 am

      I made a google spreadsheet about a month ago that tracks the NAV of several PM cefs, including CEF. It does this live utilizing google finance and kitco. Updates every 1 minute. Google quotes can be delayed 20 minutes but are usually much close than that if they arent correct. Here is the link. Free to all.

      Link

  • John Jay May 6, 2011, 5:09 am

    Silver is in a special situation right now.
    Margin almost doubled to $21,600 per contract, so I think we have to wait until the weak hands get shaken out before supply and demand comes out on top.
    I think $32.84 should give support if silver does a quick dip tomorrow to find the bottom. At some point, bargain hunters with deep pockets will turn fear back into greed. I am sure everyone is watching their charts waiting to hit the buy button.

    • Jackson May 6, 2011, 6:03 am

      In this special silver situation the bottom is anyones guess. The price of silver nearly doubled in four months. I think there’s a lot of people out there in denial about the silver bubble. Heck, it could have gone to $150 and they’d still argue it’s not a bubble. But that’s beside the point… IMO $20-$25 silver by summers end is more likely than not. $20 should be the absolute floor and worst case scenario.

    • mario cavolo May 6, 2011, 6:27 am

      Indeed, I was hoping this opportunity would come. I’m starting to scale into silver in this 30’s range and perhaps Oct OTM calls are a reasonable way to leverage too. Related, a sharp drop in commodities, which may have begun, will be regarded as confirmation of continued lower interest rates, bad for PM’s. and also support Bernanke’s position that the commodities’ rise has more to do with this past year’s supply/demand/weather/harvest issues than the liquidity/speculating that we mostly want to attribute it to.

    • Jackson May 6, 2011, 8:56 am

      I’ll get back into the game at some point. Maybe tomorrow, maybe in three months. All depends on my emotions… unfortunately! However, don’t delude yourself into thinking we COULDN’T have another crash like in 08′. Unlikely maybe, but not impossible. I’m kicking myself really hard right now for selling my short positions way too early but that’s water over the damn. Time to sit back and wait for some direction in the market. Darn it, I missed this move down and I had it right in my hands… I was waiting for it eagerly. Did anyone else see the gap up and the doji candle?