Gold and Silver Near a Major Bottom

Don’t let this nasty shakedown in bullion scare you. For the record, we are quite confident that gold and silver will be back on track soon, bounding toward new record highs. But both may have a little farther to fall if forecasts disseminated earlier to Rick’s Picks subscribers prove correct. Specifically, we’ve been drum-rolling a possible 1709.20 bottom for Comex December Gold, and a 35.70 low for December Silver.  As of yesterday, the latter had overshot its target by 17 cents, hitting a 34.53 low that in a single day shaved 10 percent off the value of the world’s store of silver.  Gold, for its part, didn’t quite reach the 1709.20 target, instead turning higher from 1723.20. We think the December contract’s so-far $29 bounce from that number will prove short-lived and that the futures will make an important low at or very near 1709.20 today or Monday. If so, this is likely to put pressure on Silver, perhaps pushing quotes below $35 for a day or two. In any event, if the selloff in bullion is not over already, it will be soon.

Those who follow Rick’s Picks closely would not have been surprised by yesterday’s across-the-board avalanche in commodities and currencies.  The night before, a commentary bearing the headline “Strong Dollar Predicting Europe’s Breakdown” went out to subscribers and readers. Our actual target for the Dollar Index lay well above, at 79.86, but yesterday’s explosive move came within 1.06 of hitting it. We remain confident the target will be achieved, albeit earlier than we might have expected.  If so, and the dollar’s rally has further to go, yesterday’s dramatic unwinding of the so-called “risk trade” will continue apace. How much farther?  We’ve provided subscribers with a precise target for the December E-Mini S&P futures, and although the carnage could conceivably end with a relapse today down to 1088, about 20 points (or 160 Dow points) beneath yesterday’s low, any slippage beneath that number would, from a technical standpoint, have potentially grave consequences for the near and intermediate term.  We’ve also included in today’s “Touts” section of Rick’s Picks a precise and extremely bullish forecast for T-Bond futures that if correct implies that long-term interest rates are about to fall to levels that few have imagined, at least in print. If you want to be on top of our detailed forecasts and trading recommendations, and to have access to a chat room that draws top traders from around the world at all hours, click here for a free trial subscription to Rick’s Picks — or here to receive our commentary free each day.)

  • Seawolf September 26, 2011, 12:10 am

    Our beloved PM’s along with everything else except bonds took a serious hit when The Bernank did did not promise to supply any QEIII. Instead he opted to rebalance the fed balance sheet from short to long in order to lower long term interest rates. Lower long term inerest rates? They are already at rediculous levels. I suppose he could be trying to lower the CPI next month to prevent SS receipients from getting to big of a COLA adjustment, but I don’t think so.

    Suppose, and this is just a hypothesis, that he sees something really frightening. He sees a huge sea of unpaid interest about to collapse his lovely dam of debt. The fatal flaw of a fiat money system is the interest payments not the buildup of debt. The flaw is that interest is never really paid on that debt. No provision is made in the lending and payment process for the interest that is added to the principle at payment time. Early borrowers can only pay the interest portion of their debt by getting a little piece of later borrowers principle. All interest is rolled onto later borrowers. When the final borrowers (sovereigns) start defaulting there is no one left to take their place and the debt dam is in danger of breaking down.

    The system is like a Beaver dam. The beavers build a dam across a small stream, a lake begins to build up behind the dam. The beavers keep building, the lake keeps growing until the beavers run out of trees. Central bankers run out of new borrowers and the dam breaks. Lowering long term interest rates is an attempt to slow the flow into the lake because there are not enough borrowers.

    Just a hypothesis.

  • mava September 25, 2011, 8:10 pm

    I just love it when people proclaim gold in a bubble. This ought to to show you, how high the gold will go, as it shows you that so many around us are living completely without any étalon of value. Talking about zombified universe. There are billions of them all around us. Keep in mind that these are at least conscious for some reason, and at least recognize the conflicting data, but just still pushing on the habitual string. What about billions of zombies who are not even aware that everything they worked for is about to be wiped out? They will bid the gold up, like no one else would. They will be the reason that it will significantly overshooting it’s proper rate of exchange.

    When talking about oil price, I think it might help to remember what ANOTHER was saying about it (search for FOFOA). The dollar price of oil is determined by the amount of gold that is being delivered to oil kingdoms behind the scenes. Roughly speaking, if we send an ounce of gold along with $500 for each ten barrels we buy, then we can take the oil. If we send a half an ounce, then we need to send may-be $1000 for ten barrels to compensate. Meaning that the price of oil that is stated everywhere is only half of the truth, it is higher when we have troubles delivering the bullion, and is lower when we have no problems sending gold.

    While I believe that FOFOA is dead wrong on Euro, I believe he is right on oil. OIL and GOLD never flow in the same direction.

    This means that yes, of course we can pay even $10 for oil. Provided that we send a ton of gold along with the toilet paper!

    US cannot use it’s internal oil, according to this theory, until the world returns to gold, because doing so, would remove all meaning from The Dollar Scam. It would be as if you were making fake money but only used it to keep it in your own piggy-bank! What’s the point?

    I can’t help but to remember how FRN Game Points supporters (paper eaters) were bidding up assets sky-high. Not one of them ever stopped and said: – ” Wow! Really, this is too much, we are hurting the people who are into real money!”

    So, I am taking my sweet sweet revenge in that I just keep buying the real money, no matter what. I guess I just do not care how bad the fake money people are having it.

    Afraid that gold might stop appreciating? Just keep buying it. You see, unlike their fake scam game point, Bernanke just can’t print any gold. And this is what is going to finish his best laid plans, all we need to do is keep reducing the real supply. Ignore his hurt squeals.

  • Tom Paine September 24, 2011, 4:45 am

    Dang. Silver just dropped in one day as much per oz as I paid for my original position. The only consolation I can take, besides buying back some that I sold at a higher price, is that these kinds of quick drastic falls are typical of bull markets and none of the problems dogging the financial system and scaring people away from paper and toward hard assets have been fixed. If fact, they are worse than ever. Precious metal prices got a bit ahead of themselves that’s all, but they will return to fight another day. It may or may not take longer than gold bugs would like for prices to get back to new highs, but there is little doubt in my mind that they will.

    • Robert September 25, 2011, 6:46 pm

      The bull will shake as many off his back, and gore them, as possible, so that he may run ever faster and more powerfully….

      But of course, what do I know? Afer all, we entered a secular PM bear market this week, right?

      I’m with you, Tom. 6 hours to the Asia open, and counting….

  • gary leibowitz September 24, 2011, 3:01 am

    The fanatic rhetoric about gold must have something to do with the mesmerizing glitter of that yellow metal. I can’t for the life of me understand how people can become so adamant about their position despite the fact that it has not behaved as most expected. I am not talking about the rise. I am talking about the reasons for the rise. Most originally thought the rise would be due to hyper-inflation as a result of the Fed’s money policy, and the dollar trashed. When that didn’t happen people pointed to the stock market and world economic calamity where debt saturation has occurred. In affect a deflationary scenario.

    So it looks like every single angle is covered to explain the rise in the metals. I guess the rise in oil and all other commodities is just coincidence. For if it wasn’t than surely a deep deflationary spiral will not bode well for the “other” commodities. Then we had the theory that a crashing stock market will provide strength to gold’s pricing, but that hasn’t happened either. In fact the rise in gold is as dramatic as the rise in the stock market. The theory that a falling dollar is proof that gold will do well has also not followed suit.

    Today we have very unstable world stock markets, a dramatic move up in the U.S. dollar due to other countries doing even worse, and a deflationary trend that is actually looking to expand. The political will to keep spending our way out of this mess is finished. No more quantitative easing where they drop money from the plane and everyone gets their share. Those days are gone.

    It looks pretty darn clear that the inflationist’s have lost this battle. Now to the deflation story. Traditionally paper currencies have held up against most other assets. Historically gold has done well in some of these deflation times BUT only when war is also waging.

    If you were to look at all investments over the last 5 years, on a purely analytical basis, would you really see gold as something special? Something that separates it from other investments? This presupposes you ignore your baked in assumptions of the future and base it on actual trends. Is this different than real estate, or the internet? Were their arguments at the time just as persuasive?

    Most of you are buying in anticipation of some sort of armageddon. Is this time really different? Will we not survive as a nation? Have we not gone thru other periods of economic calamity and come out without having to barter with gold?

    • Mario cavolo September 24, 2011, 3:46 am

      Hey Gary, rebalancing of asset classes across a newly formed global economy, not Armageddon. Volatile yes, doomsday no…

      Isn,t it GOOD that commodity prices fall including oil? That IS exactly what will help support economic growth and recovery. That is exactly what we need… more money freed up to spend in the rest of the economy.

    • Treasure Seekers September 24, 2011, 5:48 am

      I can say for myself and many others , I know personally, our motives for buying precious metals is one of honest money and aquring true wealth. Other reasons are to expose the lies being used to rob us of our freedoms and liberties.
      Most of us on here know the game with the ,Fed and the U.S government is rigged and the use of fiat currency is they’re catalyst for rigging it.

    • Robert September 25, 2011, 6:42 pm

      C’mon you guys!

      Get with it- I’ve given everyone here the key to the castle:

      8T in total existent USdollars can NOT clear 800T in USDollar denominated debt on term, unless those dollars are moving through the system in a very swift liquid manner….

      The world economy ain’t exactly moving swiftly these days, folks… ergo, more dollars are coming.

      These dollars may originate as euros, swapped for dollars, or as rubles swapped for dollars, but who cares? Credit is credit, and the extension of increasing credit increases the extension of debt, and all debts must be paid…

      MORE credit dollars are coming. Period. End of story.

    • fallingman September 25, 2011, 8:56 pm

      “No more quantitative easing where they drop money from the plane and everyone gets their share. Those days are gone. ”

      Oh yeah? No more QE? Wanna bet?

      Dude, I don’t know what you’re looking at, but gold and silver have increased my net worth fantastically in the last 10 years. Where have you been?

      Oh, and the problem is that not everyone got their share of the new money, because, contrary to your metaphor, it wasn’t dropped. It went directly to the bankers.

      That’s what the Federal Reserve exists to do, provide backup to the banks when they go hog wild on levered bets and lose. They’re the ones that got the money…and now, they sit on it, which renders your whole line of “thinking” moot.

  • L. Kyda September 24, 2011, 2:44 am

    Is there any vehicle available today that can simply preserve the value of one’s savings? Everything has failed so utterly and miserably as to be laughable: cash, stocks, bonds, real estate, gold. Dunno about anyone else, but an asset that falls 6% in one day seems to be neither a safe haven nor an effective inflation hedge. Even worse, silver is acting like a poorly pumped and dumped penny stock. For someone near retirement, what is there to do?

    • Robert September 25, 2011, 6:51 pm

      “For someone near retirement, what is there to do?”

      -Just an opinion- take a look at The Permanent Portfolio fund (symbol: PRPFX)

      This is not a tout- I do not own this fund, but I like the prospectus (which I recently did an analysis on for a retired relative of mine- don’t know if he bought or not)

  • ful_karboy September 24, 2011, 1:15 am

    Whoops! What I thought would be a headline “Selling puts” wasn’t so insert that and my rant may make more sense ;>)

  • ful_karboy September 24, 2011, 1:13 am

    Yesterday at $35 and today 1.5 times more at $30. With the premiums figured in, my SLV cost is just under $30. Been waiting and hoping for this and a bigger “fire sale” WILL be appreciated! I’d been out of SLV since trading it after it fell from $48+ last time. Sold calls on the way down then on the way back up too so lost all my shares. This time I’m getting them back cheaper ;>)

    The worldwide mess hasn’t improved, there is a LOT of cash looking for a home/good deal and we all know the crooks can run paper gold and silver down if they want to, or up and make $’s either way.

    IMHO these prices or perhaps even lower, will spur folks to buy physical, that were worried about “missing da boat”. Right in the busy season too! What a gift to our fellow “bugs” in Asia, where there is inflation too along with cooked books.

    I disagree with folks speculating the silver and gold would tank for long in a deflationary environment. IMHO it would not take much deflation before the banks are toast with so many folks here underwater on their home loans. They’re staggering already, here and abroad. Folks are withdrawing money from the PROPPED up stockmarket here and overseas they’re shifting money out of stressed banks and countries. The Swiss have axed one safe haven, tying their franc to the euro.

    China is backing off loaning to euro banks and pushing to get declared a market economy early. The implied threat is that they won’t buy very many euro bonds unless euros kowtow? Meanwhile europe does not want more competition and Brazil increases tariffs on some Chinese imports.

    This is not 1979-80 again! 1/2 the interest rates then and how would we pay the even interest on the debt? Another Fall 2008 is also less likely IMHO cause the PTBs need to prop up the stock market or things really get hairy. The next leg down in the recession along with falling nesteggs/retirement funds and consumer spending would drop along with Gov revenues, as their outlays increase. MANY more folks opting for SS early, States and cities are already retrenching…

    Possible they could waste $billions pushing down gold and silver, along with the PM stocks but that IS still a gift to those that wait and pounce!

    Best of luck to all longs!

  • Anil Vohra September 24, 2011, 12:12 am

    The gold bugs mantra:
    If gold is up, it’s on its way to $10k
    If gold is down, it’s a buying opportunity.

    Yes, the world has problems; no, gold is not the solution.

    What happens when gold goes to $500. There will be endless diatribe about the gold bubble that was obvious to all. It happened in dot.coms; it happened in real estate. But, it can’t happen in gold because it’s different this time.
    Really. Don’t be stupid; buy Gold!

    • Treasure Seekers September 24, 2011, 1:53 am

      A bit hard to follow you.
      Your writing seems to be in the third party or an internal conflict.

  • Seawolf September 23, 2011, 11:05 pm

    Did the head of a large bullion bank throw a tantrum because he did not get his QEIII?

    • Robert September 23, 2011, 11:53 pm

      The heads of the Bullion banks are not leaders, they are followers.

      Their banks are insolvent (in terms of dollars), so they are beholden to the dollar masters at the Fed.

      The correct question is: are the bullion banks responding to a tantrum at the Fed? and the answer is a resounding “yes”.

    • Seawolf September 24, 2011, 1:13 am

      Actually Robert I think they all dance to a tune played by the ESF and that is a tune us common folk are not allowed to hear.

  • Dirt Diver September 23, 2011, 9:22 pm

    Who cares about gold and silver instead we should be picking some long term equities. Gold and silver are doomed.

    • Treasure Seekers September 23, 2011, 9:41 pm

      BAHAAAAA !!! Sound like part of the herd that was scattered by ,Ben B. “Wolf”.

  • Dirk Diggler September 23, 2011, 8:58 pm

    if we’re going to get price deflation, I sure as hell wish it would hit my supermarket and health insurance company!

  • Remi September 23, 2011, 8:54 pm

    Never outmatched…..Gold and sliver “near a major bottom”…Give me abreak!

  • Radek September 23, 2011, 8:14 pm

    I have nothing constructive to contribute, except that I just can’t get ANY productive work done at my day job for the past 2 days! The markets are corrupting me. I am holding onto my chair trying to control my fear and greed, and staying disciplined.

    Like Mario C and some others, I too ‘loaded up’ on silver today. Also shorting financials via FAZ.

    I don’t think I’ll ever be an “investor” again. It’s all gonna be day- and swing-trading for me from now on.

  • DG September 23, 2011, 8:01 pm

    The deflation here we come argument is certainly not reflected in equity prices. You would think the invisible hand of mister market would have clobbered equities along with commodities given that prices for every product was going down.

    Given that known data, I’ll suggest that we are simply seeing a normal (however abrupt and severe) correction in a PM market that needed consolidation – coupled with the results of a paper system which allows massive distortions (no limit on naked short selling).

    $25 or 28 silve means nothing. Ditto for 1500-1600 gold.

    Have we cancelled the $100 trillion plus entitlement programs?

    Have we finally balanced our budgets?

    Are the PIIGS solvent now?

    Are France and Germany’s massive debt obligations to Greece “all good”.

    Are the derivative markets finally transparent and well regulated?

    Has the financial industry been reduced an appropriate amount in the US (about 70%)

    Will ZIRP -flattened produce massive profits for the banks, which were providing what 40% of S and P profits?

    I was giddy with SLW 3 days ago, as it pressed higher, but that afternoon reversal was ugly and a big tell….I sold it pre market the next morning….just bought it back on the “$7 off sale”. Too soon? Maybe. This is crazy volatility.

    Would not be surprised at all if silver climbed from here and closed over $32 today…trade higher for a couple weeks, then back into the 28 or 29’s…maybe a tad lower.

    These shake outs scare the bejeezus out of everyone – the true believers and those that want to believe, that don’t..and can’t….and those are the folks that bought YHOO in 1999, and also are the ones who will be buying PMs, about 4 or 5 times higher than these prices. It is the only way obscenely high prices happen…

    but what the heck do I know??? I sure didn’t see the last two days coming!

  • Robert September 23, 2011, 6:55 pm

    If I was going to sell Gold today, I would be selling it in Pesos, and I’d be buying Mexican real estate in anticipation of the day that Hugo Salinas Price wins and Mexico re-monetizes Silver…

    I see brand new concrete block construction, 900SqFt detached single family homes 5 miles from the beach in Mexico listing for US 30,000… All I need is a little more US$ strength and a Mexican SCorp (FM3) to hold title and I’ll be ready to pull that trigger.

    • Treasure Seekers September 23, 2011, 7:41 pm

      My question about selling was concerning how much more down side we had left. Since I asked the question gold has fallen to – $109.00 from around -$60.00.
      My intent if , I sold some gold ( maybe 5%) was not to piss it away going to ,Europe or ,Disney World, but wait it out a little longer and buy silver with the cash.
      The ratio has already risen from around 48 from early this week to 54.10. A full 6 points and climbing.

      The question still stands. Would anyone care to answer?

    • Mario cavolo September 24, 2011, 3:31 am

      indeed Robert that type of real estate escape option, and the comfortable simpler lifestyle that goes with it, exists in many less developed countries across latin America and Asia…cheers, Mario

  • mario cavolo September 23, 2011, 6:18 pm

    I need to get this off my chest. I just finished looking at the weekly charts for the USD and the Euro. What’s the problem? What’s the big deal? The Euro was at 1.20 in 2005, 1.60 in 08, 1.28 in 09, 1.50 to 1.20 in 2010, back up to 1.47 and now its at 1.35. If the currency is on the verge of horrifying sovereign disaster, why isn’t it already well below previous lows of 1.20? I have the same sentiment when I look at the USD chart going back a few years. What I’m getting at once again is that asset values and prices are relative across all asset classes to each other. I’m not saying this to suggest that $100 trillion in derivatives will not end up causing the entire global economic system end up a smoldering ash, such a kind of total meltdown “could” occur. But until then, we have to deal with the practical reality while the financial system is in fact still functioning and processing, regardless of who’s screwing the pooch…

  • Robert September 23, 2011, 5:59 pm

    Ben Bernanke has proven one thing this week:

    He is an amazing cowboy.

    Imagine being able to herd millions of people into long dated US Treasuries like this, so that you can destroy the value of their savings with one simple stroke of the keyboard? Money supply charts tell the story of where this thing is going.

    The Fed and Treasury have to be nervous about the prospect of dollar repatriation- they had no other reason to go after the yield curve like they have. Self fulfilling prophecy- They are going to foment the Asian dollar dump that they most fear.

    PM’s and equities were the only performing asset class out there over the past 18 months- What these idiots did this week was demolish the gains that people MIGHT have converted into realized profits in order to make down payments and secure new loans.

    Congratulations, Ben. In the interest of encouraging the banks to lend, you instead destroyed every capitalist’s incentive to borrow. What’s going to happen when the banks are BEGGING people to borrow by offering 0% forever, and everyone is still saying “no, thanks” ?

    But hey, the MxP just painted 13:1 against the FRN on the FOREX chart- looks like I’ll be eating for virtually pennies on my vacation in 2 weeks.

    • Farmer Tom September 24, 2011, 2:05 am

      Indeed Robert, Ben is an amazing cowboy. I am pretty sure too that today’s rout in precious metals is part of the process. Lets look at some of the basics for a few moments.

      If you were a “broke” government in need of capitalization (you sell treasury’s and assorted sovereign bonds to drum up the much needed bucks) then the prescription would threefold:

      First, you artificially juice the dollar with fears of a Greek default and suggestions that the Euro will go down in flames, possibly imminently.

      Second, you need to scare the sh*t out of everyone participating in equities to get them unhinged and in a real selling mood. This applies especially to Mom an Pop and their assorted 401k’s and other pension plans. They will flood into the safety of government bonds despite negative yields, natch.

      Third, you need the cooperation of Central Banks to send the value of precious metals (Gold in particular) into the gutter if you really want to create a stampede for the exits. Some strategic selling which looks like a sharp short-covering correction sends prices down in a hurry and Holy Crap Batman, there is no safe place to put money anymore!

      Please. Give us more US bonds.

      Now the wind is out of the sails of gold and silver as investors flee this obviously hazardous and volatile metal. Central banks then coyly step in and draw off the excess as it is sold back into the open markets. They want it for themselves. All of it. So should you.

      And the real brilliance is that if PM’s are no longer seen as a proxy for an “alternate” form of money then all the Gold bugs suddenly shut up and begin rethinking their value system. Nobody wants to listen to them at this stage of the game anyway. Just look at how much technical damage was done in a single trading session!

      How the hell can you sell the idea of Gold when we have days like this? If Silvers sudden drop did not bring you back to your senses then what would? So the PM crowd got walloped and it was accomplished strategically while leaving no safe haven other than government debt issues.

      You need to appreciate of course that there is tremendous competition for capital at a time like this. Sovereigns will absorb the bulk of it any way they can even if that includes sending mixed messages on the economy and stirring up a hornets nest of fear.

      And the competition for money is not just a balancing act between various markets such as currencies, equities, real estate etcetera. Not at all. It is truly much bigger than that. The really hot race is between nations and governments, between Europe and America.

      This may be at the heart of the regular rating agency downgrades of Euro nations where we have seen yields rise on the one hand (attractive, right?) but instability ensue thus assuring Dollar strength and a surging bond market here.

      Naturally, this leaves the US in a much stronger position globally and ensures it is sufficiently capitalized to carry on business despite offering nothing on the yield side but rather only a guarantee of safety and security.

      That is how you win when the chips are down and there is not enough money to go around for everyone anymore. It is a no-brainer where capital flight actually ends up in US coffers and preeminence reigns.

      But Rick is right. We are close to a bottom in Gold. Only now, there will be fewer pension funds participating. Fewer hedge funds, institutional’s and private buyers too.That leaves the field open to those who really want gold and kills off some of the hot confidence of those who were banking on a payday of 10,000 dollar ounces.

      This is how fiat is taking the day back and hurting the PR campaign that gold enthusiasts have been waging for years now. It is only one battle but it has left some lasting scars.

      And one important element has succeeded wildly. Governments everywhere have scooped the lions share of free capital as it bailed out everywhere all at once.

      Expect stocks to keep falling for some time as sovereign balance sheets are shored up with money from the four corners of the globe.

    • Robert September 25, 2011, 6:28 pm

      Tom-

      I agree it’s part of a process- a process that Summers and Barsky laid the groundwork for perfectly.

      The “fly in the ointment” is the follwoing point you made:

      “You need to appreciate of course that there is tremendous competition for capital at a time like this. Sovereigns will absorb the bulk of it any way they can even if that includes sending mixed messages on the economy and stirring up a hornets nest of fear.”

      This is exactly true, but governments are not in the capital business- they are in the credit/debt business.

      This is the smokscreen, the rub, the big green head that yells at Dorothy and her friends.

      This week, the big green head yelled louder than it has in years.

      But the point about credit versus capital exposes the alternate paradox that blows’s Summers and Barsky’s thesis right out of the water:

      People can not work harder forever. At some point the incentive to work for an ever smaller share of available currency credit will reach a tipping point, and the entire credit based economic system will collapse, regardless of how much new credit gets pumped into the system.

      In my opinion, this point has already been reached, and breached. It has not been universally ACCEPTED by 100% of the people, especially the “most credit worthy” among us (think Buffet), but the people who provide REAL work (coverting capital resources into real income and profits) are beginning to increasingly hold out for something more than government credit in exchange for their efforts.

      Ben Bernanke was wrong in 2002. The disgusting thing is that he will let the world economy collapse in a massive “inflationary deflation” before he acknowledges this publicly. In fact, he’ll probably never acknowledge it.

      I have a neighbor’s son who is a welder (fully employed, BTW- he can put in as many hours per week as he is willing to take), who fully understands that every dollar he earns today will not help one iota when it comes time to pay for his kid’s college in 20 years. A 20-something year old blue collar worker who understands Jefferson’s “true nature of credit and coin”

      The amazing thing to me is that the only ones among us who still think government credit is a superior form of money are the “financial geniuses” on Wall Street and in Ivy league Academia…

      Isn’t it indeed a fascinating world we live in when one day, the high school graduate welders will be proven to be better economists than the silk tie wearing PhD’s …?

      The only “bet” a person has to make regarding the PM’s is “will this tectonic shift in sentiment occur in my lifetime?”

      I think it will, so my chips are placed where they need to be.

      My wife freaked out this week that the NPV of our mining shares took such a hit, but she was immediately soothed when I explained that we still own every share, and those same shares will serve as very effective multipliers when the dividends on these companies begin ratcheting up (which they must in a zero interest world- these companies will have NOTHING else to do with their cash incomes but buy each other, and distribute it to shareholders)

      a $100k portfolio paying 10% per year dividends looks just about as nice to a retiree as a $1M portfolio paying 1% per year, dontcha think?

      And doesn’t either option look better than accepting 3% over thirty years?

      A co-worker of mine moved his entire 401k into the company’s USTreasury bond fund this week. When I tried telling him that the company has a very attractive “inflation plus 2% guaranteed” fund (where 100% of my balance sits), he wanted to hear nothing of it. The CNBC pundits and their “big green yelling head” masters own his mind…. sad.

    • Farmer Tom September 25, 2011, 11:10 pm

      “This is exactly true, but governments are not in the capital business- they are in the credit/debt business”.
      ———-
      Sure, I would generally agree with that Robert insofar as governments can control the flow of financial resources through the use of policy tools. They are therefore in the position of power and influence where banking regulation, and by extension, the creation of credit is concerned. Note I am not referring to the specific powers of the Fed here but rather to federal regulatory issues.

      What I was trying to convey though was that governments everywhere still need to borrow in order to spend. What else is the point of selling bonds and other instruments?

      We all know the outcome of creating money out of thin air and the consequences that brings. In fact, this is not yet what is being done. Real debts are still being incurred and that debt will all have to be repaid eventually whether in current or devalued dollars or by default but a debt is still a debt. Why else would we even bother to worry about all the mis-allocations of our wealth?

      We need to get past this idea that fiat is so-called “toilet paper” as the gold bugs always insist.

      That comment always drives me crazy. If you need to do real work and it involves sweat, blood and tears to earn a dollar then what you receive is certainly real in the world we still live in.

      What you get is what pays the bills, buys the gas and puts groceries on the table. Sure it has devalued over time. No arguments there. Inflation is a tax that the world has lived with since,…. well pretty much forever. That is why we invest to avoid those kinds of ongoing losses.

      And so it is that governments borrow from the productive sources of our economy to spend on needs they have defined (and that our society has also helped define through the vote).

      That they spend wastefully is not the issue here. What I am saying is simply that there is competition for money now. A lot of competition.

      Countries are broke, States are broke, pension plans are broke and the social safety net itself is now coming under threat. There is not enough money to go around and only those with the ability to offer the highest degree of safety will have all they need.

      That means that our governments are approaching us today with hats outstretched and asking for a handout. They need to borrow more and they need your money now. Tax increases are a big taboo….deficit spending is bringing on the wrath of God himself and the past debt now seems unrepayable. More borrowing is surely in order though since revenues don’t cover expenses. How else do you stay operational?

      But where do you get more money when much of the world is hating the dollar and it is seen to be declining while gold rises and humiliates the system?

      See what mean?

      That is why Gold had to go down along with the rest of the market this time. Does it even matter what sent it down? I will say this though; there is not a chance in hell that “true” short-covering could account for those recent declines. The magnitude and technical damage was just too great.

      I am telling you that this sell-off was orchestrated specifically to defeat the flight to safety argument of the gold-bugs and I am suggesting that only Central Banks themselves were in a position to “manage” such a rapid decline, thus magnifying the decline.

      See, that is why you need a little crisis now and then to drive money into the “safe” hands of government and out of all the other markets. Fear is good for government bond sales. Just that simple (on the farm, anyway).

  • mario cavolo September 23, 2011, 5:46 pm

    ….massive widespread global unwinding of the risk trade?

    Oh really how’s that gang? Nah, I disagree… I propose three key points for theoretical clarity:

    1. The main reason the market’s tank so fast and furious such as now is the problem I wrote about a few weeks back….the widespread use of HFT’s doing 70% of the market volume across ALL markets PLUS the ability to SHORT the markets via more vehicles than ever. The system may destroy itself by allowing itself to eat, I mean “short” itself to ground zero….how stupid is that? The proliferation of HFT trading exaggerates and exacerbates the depth and breadth of the spikes up and down and we are just archaic humans with keyboards and mouse’ FOLLOWING the HFT’s, not trading with them in any kind of a fair or balanced way. When ever before in history have we seen 500 pt up and down days for several days?…think about it, its nuts, but it is happening for underlying technical, structural reasons in the trading systems which did NOT exist just a few short years ago. The market will most likely bottom around 10,000 ish (Rick’s 980 on the S&P?) and that’s a good place to be accumulating. Ditto for gold 1670/silver 32, right about now. I just picked up a load of silver at $32-33 and I don’t think my child will be regretting that come 5-10 years. I’m tempted to back up the truck…

    2. Unwinding risk trade because of spiking USD$ No, no….spiking bonds and USD mean lower and lower interest rates. Lower and lower interest rates mean more people WILL continue to choose the risk trades at reasonable prices relative to PE/book value/dividends.

    3. China – yes I always DO need to bring this up. I hosted a lunch event today here in Shanghai, a small group of typical mult-national Managing Directors, GM’s, regional Sales Managers. Of course we discussed the markets/the China problems, the new revelations of high debt levels at the municipal level. All of us who live and breath and do business inside HERE, we ALL have the same response: “Yes of course there will be some negative effect impact…” , and here comes the key part of the quote “….there is SO much money here.”

    4. Isn’t the fact that the USD is spiking now as a flight to relative safety as the equity markets are falling proof positive that the doomsday “collapse of the USD” is more an unreasonable and theoretical rather than realistic notion? All asset classes are relative to their risk profile.

    You will argue that the system is fundamentally destroyed and bankrupt at the sovereign level. Yes, once again, the end result will be the same continuation inflation and reduced currency purchasing power that has been happening through about two centuries of history…its all relative.

    With the falling Euro and rising USD I’m greatly looking forward to taking my wife to Europe for holiday instead of the U.S. 🙂

    Cheers, Mario

  • warren September 23, 2011, 5:35 pm

    Okay, I’m looking at 1680…..explain please.

    • mario cavolo September 23, 2011, 6:04 pm

      Besides the fact that most everyone here realizes that there are all sorts of nefarious manipulations taking place, but besides that, what’s the big deal about a 20% correction from the top price of gold? 20% of 2000 = 1600…not something to lose sleep over is it?

    • Robert September 23, 2011, 6:49 pm

      Hurray Mario…

      a voice of reason cries out from the wilderness, yet only the reasoned hear it- to everyone else it is simply the wind howling through the trees.

      I’m preparing myself a Gold sandwich for lunch- proving that yes, you can eat it afterall.

  • fallingman September 23, 2011, 5:34 pm

    I respect the negative comments on gold and silver here…and I’m glad to see them.

    One of my triggers to sell or buy has always been to listen carefully to price projections. In two days, it’s now all about how certain prices are to fall and how far prices will fall.

    You may be right. It’s a crazy business, but I wouldn’t bet the ranch on seeing gold and silver lose all that much for all that long.

    • Rick Ackerman September 23, 2011, 8:44 pm

      I respect the bearish comments on bullion too, fallingman, especially since today’s selloff has crushed not only all of the Hidden Pivot supports I was able to identify, but Fibonacci -based supports as well.

      I have always believed that even if Gold wasn’t going to $5000 or more per ounce, that it would at least hold its purchasing power relative to all other classes of investables. With a deflationary bust evidently starting to unfold globally, perhaps it’s time to take my own theory seriously? Even in a collapse to $500 an ounce, Gold could still wind up having been the best asset to hold.

    • fallingman September 23, 2011, 10:59 pm

      Yeah, that’s the premise I’m working under.

      I’m also heavily short…double short…the S&P, so I’m pretty well hedged against a 2008 style freefall. And I have beaucoup cash. Nothin’ like a stash of clownies at a time like this.

      I sure wouldn’t go in heavily without some kind of hedge in place, whether we’re talking puts or at least sold calls…or an offset of short stocks…to take some or most of the catastrophic risk out.

      Rick, please let us know if you think this is the big one. (Picturing Fred Sanford)

      I know you will.

      Your insights are very much appreciated.

  • Seawolf September 23, 2011, 4:09 pm

    Carol, you are correct that the Saudies can pull oil out of the ground at about 10.oo per barrel, but they cannot afford to sell it at 40.oo per barrel. Budget constraints in the Kingdom require about 90.oo per barrel. (Have to keep the local sheeple from getting restless you know). Also 40.oo a barrel oil implies a very large supply surplus. At that price the Canadian oil sands would have to shut down, deep water production would be uneconomical and I think even the shale formations would be uneconomical. Given the number of excess dollars in the system 40.oo oil would imply a very deep recession, so deep that I do not want to contemplate it.

    • Carol September 23, 2011, 4:30 pm

      So you are of the opinion that the Saudies would rather get nothing for their oil than to get $40 a barrel? If the market price of oil is ONLY $40 the Saudies will sell for that price as they would have no other alternative. Also please remember if was merely 10 years ago that oil was in the low $20 range and the Saudies did just fine and the world was not in some horrendous recession.

      Haven’t you ever wondered why the middle east desert is “blessed” with so much oil and Russia and obscure South American countries but there is no oil under the US soil? I call BS; there is at least a 100 years worth of oil under the soil in the US. This whole “peak oil” nonsense/scam has been used by GS et al to run up the price of oil far beyond its fundamentals.

    • Seawolf September 23, 2011, 5:36 pm

      I’m not saying that the Saudies and the rest of the producers would not sell at $40 because they would but they would not be able to sell enough to make up their budget shortfalls. In an oversupply situation to whom do you sell the extra? $40 dollar oil today implies a supply excess just as what was the case at the time of $20 oil you referred to. At that time OPEC was holding emergency meetings on how to get the price back up because $40 was the floor price for the Saudies. Then the recession was mild and a new business upturn saved the day. Today an economic downturn steep enough to drop oil to $40 would not be mild. The cheap oil of the 20th century is almost all gone.

      As for oil in the U.S., in the early 20th century we drilled and pumped the easy to get oil and sold it for $2 and $3 dollars a barrel. We were the supplier to the world then. What we have left is the hard to get at stuff. Example: there should be alot of oil under the eastern side of the Rockies, unfortunately there is a few thousand feet of granite above it and drill bits do not last long in granite. If you could look down on the U.S. and see all the drill holes it would look like a pin cushion.

  • Doniel September 23, 2011, 4:00 pm

    I am a little surprised at your comments re: the prices of gold and silver. Don’t you realize by now that the cartel can take the price of PM’s any where at anytime? Your price points on gold and silver are meaningless. You are living in “newsletter fantasy land”. The price of gold and silver will go wherever they want it to until the whole fiat system collapases. Until then, your comments hold no water…

  • Carol September 23, 2011, 3:55 pm

    I have no crystal ball for sure but from all my studies I have come to the conclusion that governments always buy or sell at the worst possible time e.g. they buy at a top and sell at a bottom. Remember the UK selling their gold at $250 an oz (of course I was a buyer at that price point :)? Now I have to include academia in with that statement since academic wonks run the government because if they had any real skills they would be out there starting real businesses (IMHO).

    So when University of Texas backed up the truck in April I think it was and bought a billion $ worth of gold. Top that off with all the talk of China buying with both hands and I could hear the bells ringing. Time will tell of course but this latest blow-off could well have been a major top.

  • ben September 23, 2011, 3:23 pm

    Rick…you say in your bond commentary that we will see 4% mortgage?!?!? I know of people getting 3.5% 30 year mortgages with low level city jobs…and that was a few weeks ago before Treasuries broke out to these ridiculous highs! We might soon see 3% interest on 30 year mortgages.

  • Seawolf September 23, 2011, 2:56 pm

    Divergent Opinion – And who pray tell is going to sell oil at $40.oo per barrel? The same goes for all commodities. If the producer can’t make a profit he doesn’t sell.

    • Carol September 23, 2011, 3:12 pm

      I beleive Saudi Arabia can pull their oil out of the ground for something like $10 a barrel. Others may cost more but still much less than $40. Oil is in a speculative bubble and has been for years. It has no reason to be anywhere near what it has been selling for. $40 should be the high in my humble opinion,

    • DG September 23, 2011, 7:45 pm

      Carol:

      Saudis can’t pull the oil out for $10 because they need that revenue to pay for their massively pissed off poor people. It is a floor much higher than $10. More like $40 or 50. It is their only source of revenue.

  • Jess September 23, 2011, 2:44 pm

    there is nothing to be sure of in silver or gold for that matter as long as they continue to give the banksters free reign we will continue to see a free fall. Comex is keeping most away from silver as ahedge since the big slam awhile back and they fear it with gold, talk was going around just a few weeks back of them raising margin on gold. This was a set up to keep all away from silver and gold and send them to other investments and it has worked. As long as they can move people around where they want them to go with the manipulation, it will continue. Who can stop them? Nothing that I see. CFCT says they are on them but, they are seen as a Goliath laughing at David with his slingshot. I wouldn’t put a price on where this price could go. $8 down in two days! Where are the buyers, used to hear about dip buyers all the time especially in silver, but old news now. Free market, yea right!

    • Robert September 23, 2011, 11:46 pm

      margin does not prevent people from buying the commodity.

      People will simply start ignoring the exchanges that insist on leverage, and will start using the exchanges that require 100% physical backing of every contract (ie: Pan Asia).

      Heed my words, if something doesn’t snap soon, then one of the 3 scenarios below will come to pass:

      1) The PAGE will come online, and the Gold price will begin moving by hundreds of dollars every day between East and West- and a massive Gold carry trade will emerge that moves the physical east, and the profits west.

      2) The PAGE will come online and volume on the LBMA and COMEX will collapse, leaving them both with too little liquidity to fight the real price discovery mechanism

      3)The heads of the PAGE will start turning up dead in back alleys in Singapore, and the whole PAGE idea will collapse before they ever trade their first contract.

    • Robert September 26, 2011, 5:04 pm

      Please read scenario #1 above, again….

      in the past 16 hours Gold has moved in a $135 range.

      I repeat: Gold has swung ONE HUNDRED AND THIRTY FIVE DOLLARS in the past 16 hours.

      Price discovery in non-manipulated markets. Gotta love it.

      I’m buying AGQ today. I expect the same result that I got when I bought AGQ for 50 back in Aug 2010.

  • gary leibowitz September 23, 2011, 2:28 pm

    The dollar has consolidated nicely and broken out in an explosive way. The world debt contagion is already upon us. No amount of concerted efforts will change that. If deflation is now seen as the next boogeyman than I can’t for the life of me figure out how gold breaks out from here, let along doesn’t fall hard.

    • Robert September 23, 2011, 6:44 pm

      Gary-

      Seriously?

      You really think Ben Bernanke (of all people) is going to take the podium and declare that his own 2002 thesis was erroneous?

      Will he seriously jeopardize his legacy as an Economist in order to legitimize his tenure as a Central Banker?

      I think not.

      This week is nothing but paint taping, and chest thumping- simply intended to get the politicians to fall in line and understand that the printing press is the only thing that can save us now…

    • Benjamin September 23, 2011, 8:11 pm

      I’ve been around this forum for a long while. And every single time something like this happens, there’s gotta be at least one person that comes along to pronounce the death of Gold. But every single time… Gold moves on to new and spectacular heights.

      Don’t ya naysayers think it’s time for a new view on things? If so, here’s one version (and maybe the only version), in all it’s no-nonsense glory…

      The central banks and bankers buy gold. They do that because it would be insane to hold their wealth in the form of the very paper that they are given the task of devaluing. How do I know? Well, it’s either that or they’ve taken a vow of poverty, and therefore do everything they’ve done (create money) out of the kindness of their hearts. But where I come from, no one _ever_ does anything for free. Especially the creation and manahement of money supply. So they “gamble” with YOUR paper money, not their gold bullion. Heck no!

      So there ya go. Gold is not in a bubble. It’s in demand. It’s going to be in demand for as long as there is such a thing as central bank currencies. And it’ll be in demand long after they’re dust in the wind.

  • Divergent Opinion (gold/silver bull is OVER)) September 23, 2011, 1:28 pm

    Was surprised to read today RA is still strongly bullish on gold/silver.

    Here’s my opinion:

    The elliptical rise by gold and silver over last 2 years is solely a product of the excess cash created by the Fed subsidized 2 year bear rally, no more, and no less.

    And when all that excess liquidity suddenly dries up, due to a worldwide stockmarket panicked contraction (soon forthcoming), so will the gold/silver over-extended bull run.

    I opine that the world is an “all one market” scenario, and when the full brunt of the unavoidable, shocking deflationary face-punch hits the world, only 1 thing is king, and that is cash–“legal tender”. And since neither gold or silver are (yet), “legal tender”, under a crushing deflationary hit, they will also suffer the price fluctiations of all commodities–even “precious” one.

    I clearly see gold at 1500 usa dollars (first level of true major support, in my opinion), before I see it at 2000, as RA predicts above.

    And, once 1500 breaks, there is the psychological 1000 support, and the stronger one around 800 usa dollars.

    And that 800 is my minimum target for gold, at the bottom of the deflationary wave. Yet, that is not my true target, for i expect gold to hit somewhere between 400 and 500, at the bottom of the depression, a few years from now. And that’s where i consider it again a true buy, around 450 usa dollars an ounce. To use your preferred jargon on this website, that’s where I would consider ‘backing up the truck.’

    As to silver, which moves even faster (especially downward, silver historically gives up hard earned profits in the blink of an eye), I see it very soon at circa $25 usa dollars an ounce, before we ever see it at $50 dollars again.

    So there it is: a divergent opinion. For we are in an “all one market liquidity world”, and when worldwide equities get wiped out (shortly), so will gold and silver, plus all other commodites, including oil, that will again quickly retest it’s $40 usa dollars a barrel bottom.

    • Robert September 23, 2011, 6:39 pm

      Your divergent opinion ignores the fact that all debts must be paid, and that right now the cumulative supply of US dollars that exist (about 8 Trillion)

      is offset by about 800 Trillion in debt (aka government unfunded liabilities and private leverages deriviatives)

      That’s a 100:1 debt to POSSIBLE equity ratio- the real debt to equity ratio is worse because approx 50% of the 8 Trillion in existent dollars is hoarded, or otherwise unaccounted for.

      So, uhhhhhh…. how exactly does all that debt get paid, if it is denominated in a currency that does not exist in sufficient quantities to extinguish it?

      Does this help you understand the TRUE nature of the game being played?

      Your divergent opinion was a fun read, but it is built upon the false premise that every person on Earth will one day submit to the dollar as the most legitimate legal tender there is. This just ain’t gonna happen (economics will always yield to mass psychology) .

      The US Dollar is being abandoned from within.

    • Rick Ackerman September 23, 2011, 9:11 pm

      You’ve offered some strong arguments, D.O., and I hope you’ll be airing more of them in this forum on a regular basis. For my part, despite the hubris of today’s commentary, I would never be so foolish as to lock myself into a damn-the-torpedoes strategy for bullion. As I have implied below in my response to D.G., the markets may finally be giving way. If so, the paradox that is manifest in arguments between inflationists and deflationists will have to be reconciled.

      However, I am not optimistic about a “unified field theory” coming to fruition before the actual, catastrophic event. I say this because, as far as I am aware, no one predicted that all of the world’s capital would shift into Treasurys and U.S. dollars ahead of the financial system’s still-inevitable collapse. There were dollar bulls all along, to be sure. But even now, with the long awaited Day of Reckoning evidently upon us, do they truly understand what is occurring? Metaphorically speaking, with a tsunami on the horizon, a hundred shipwrecked sailors on a tiny island are all eyeing the same, skinny palm tree as a last refuge.

      And then, what? If the dollar bulls are going to be right, at least for a while, then they should be at the tellers’ windows today, withdrawing the paltry sums of cash that the branches keep on hand. My gut feeling is that deflation is about to level all assets, possibly in mere days or weeks, but that there will be a hyperinflationary spike at some point to reconcile the dollar’s fundamental worthlessness. When the dust has settled, even if Gold and Silver have not achieved the heights that some always imagined for them, I seriously doubt that hoarders of bullion will regret the choices they made.

  • Remi September 23, 2011, 1:20 pm

    Rick is forecasting dollar going up. At the same time he predicts gold has reached the bottom and will go up (while dollar is strngthening). Does not make sence!

    • fallingman September 23, 2011, 5:25 pm

      Don’t assume the clownie and gold can’t and won’t move in the same direction at times, especially when Euroland is in crisis.

      Liquidity concerns are causing long liquidations, then you get stops being triggered. I mean, look at the chart. This is simple stuff. The gold move was spiky. Spiky up, spikier down.

      Look at the size of gold and silver’s move already. They’ve nearly instantly discounted the clownbuck’s move and so could easily be washed out already or approaching a bottom…or not. We’ll just have to see. It’s the way the almost always act. It’s eye popping, but I’m starting to buy.

      Fools rush in…

  • C.C. September 23, 2011, 8:03 am

    Dow headed southwards towards or passing 9500, S&P blowing southward past 1000.

    Aside from addressing employment issues, the Fed’s mandate (unwritten) now of course, is to keep M.O.P.E. in the positive direction by way of a stable Dow/S&P.

    We have been through this drill before, and I doubt that the Fed will allow a slide to pick up too much momentum before they act.

    If pain rolls in at or before November, you can rest assured that the Fed is ready to implement the next in a line of liquidity tools in order to achieve the desired effect.

    To think that with the history we have for inflating during the past 30 years, that we are somehow going to get religion now, is fantasy. As is too, the notion that we are going to grind this down in a long, drawn out market-clearing affair spread out over years.

    The 3-second sound-bite, emotions-driven, want-it-now society we live in doesn’t roll that way…

    • fallingman September 23, 2011, 5:16 pm

      Yeah, I think you’re precisely right.

      My little addition is that the Fed really NEEDS for the markets to swoon a bit and let the clownie rally a bit in order to have the leeway to get back to debasing in earnest. Knock another 120 points of the S&P and the lemmings will be begging for more QE instead of lampooning the Fed for being ineffectual.

      I just started layering in to silver stocks and selling way OTM calls. The premia are huge. Looks like a gift to me. I could be wrong, especially short term. Doesn’t bother me. Sell it off more and I’ll just buy more…for better or worse.

      On another note, if Morgan doesn’t take this opp to get out of their shorts, they’re crazy. Of course, if they’re just fronting for a certain uncle and his bearded co-conspirator, they’d just hang on to those shorts wouldn’t they? What the scumbags do here will tell us a lot.

      I’m so delighted with this smackdown. I thought we might not get a chance like this again. See ya at $200.

    • fallingman September 23, 2011, 5:18 pm

      Or rather they’ll cover here and just put ’em back on the next time we rally hard.

    • mario cavolo September 23, 2011, 6:37 pm

      I snapped some up at $32 ish… can’t think that will be a disastrous choice a few years later….

  • Bill September 23, 2011, 7:23 am

    Rick – give me your scenario where gold runs contrary to the dollar. If the market does continue its slide (with occasional squeezes to the upside) and investors continue to pile into the dollar for ‘safety’ then gold & other commodities will continue to slide as well, right?
    I continue to imagine a sell off / crash that forces the Fed to inflate – this taking place near a bottom for stocks which will then start to go on an inflation run along with gold & other commodities. Timing? Depends on the severity of the sell off?
    I want to load up on some gold but feel the market selling pressure is to great which fuels a dollar run & gold decline. The market seems to have a long ways to go on the downside which would imply gold might too?
    Thoughts Rick or anyone?

    • pbeau September 23, 2011, 11:29 am

      This was a question I had that remains to be completely answered. However, there was an article submitted in the forum a few days ago called “Massive Physical Floor in the Gold Market” http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/20_London_Trader_-_Massive_Physical_Floor_in_the_Gold_Market.html that reinforced a belief that there is a paradigm shift causing the “floor to come up to meet the ceiling.” Lower prices can fuel higher demand, causing prices to rise in a tight market, especially now when there is traditionally higher purchases in asia. Distrust of banks, government, Fed, etc.. and general fear are on the rise, globally, that to me is a greater price support than anything.

    • Mario cavolo September 23, 2011, 4:29 pm

      China….gold….

    • Treasure Seekers September 23, 2011, 4:55 pm

      Great question (s) ,Bill. I’m in the same dilemma not knowing what my best strategy should be with my gold and silver. My overall strategy is go long and stay long, but still make trades along the way ,take a little profit and buy the dip. What I’,m seeing is way beyond a dip!!! I set a target early this week to buy below $1800.00, pulled the trigger and locked in @ $1784.00 . Bad move!! Some people call it taking a bath. I call it an enema using a fire hose.

      My physical holdings are much more than , I bought this week and my question to , Rick is should ,I sell off a few ozts if there’s more downside to this market?

    • Robert September 23, 2011, 6:24 pm

      Selling any PM holdings into this move is as assinine as trying to catch the falling knife. Buy the weakness, and forget the near term- just stay away from leverage.

      PM exchange selling this week has all been on falling open interest.

      You have to understand that open interest can ONLY be increased by new longs coming to the exchange to initiate the buy side of a contract. This is how the COMEX and LBMA both work. You can’t generate open interest with the intent to sell. Sellers can only stop new requests (issues) to buy.

      Since you can not initiate a contract with a sell (short), what happens during period like this week is that buying (long) interest dries up, and when what few new longs there are actually DO come in to initiate a contract, the sell side offers them any ridiculously low price that they want, and down goes the spot price. This triggers stop orders, and the existing longs freak out, and dump their existing contracts right into the hands of (drumroll) the shorts that are taking the other side of the few new orders coming in.

      Therefore, when open interest is falling, it can only mean that the buy side is holding out, and the sell side (shorts) control the price, because they can meet any ridiculous ask that comes along.

      What this week indicates to seasoned PM traders is that the market is simply illiquid.

      The open interest data suggests that this is a market that must be BOUGHT. Don’t worry about the falling knife- all shorts must be covered, or else the market moves into backwardation. Go read Antal Fekete’s great work on what it means if/when the physical Gold market goes backward.

      The floor meeting the ceiling analogy is a perfect way to look at this. The action this week is driving down the ceiling, but is it driving up the floor even faster and harder.

      In fact, what the big PM shorts are actually doing right now is filling the room with concrete.

  • John Jay September 23, 2011, 3:09 am

    With the size of the national debt it makes good sense for the government to take advantage of low, low rates on 20-30 Treasury paper. I don’t know how much supply the market can tolerate, even with the Fed’s three card monte scheme. I guess we will find out.
    A little scary when they do something that actually makes some sense for a change.

  • Roger Erickson September 23, 2011, 2:57 am

    Or, near a major high. Depends on whether you’re tracking herd behavior, or monitoring inter-dependencies.

    Da Boyz may have been playing on another level.

    http://www.nakedcapitalism.com/2011/09/randy-wray-the-biggest-bubble-of-all-time-%E2%80%93%C2%A0commodities-market-speculation.html

  • Rich September 23, 2011, 2:52 am

    Having surgery myself next week for a hernia…

    • Rick Ackerman September 23, 2011, 8:24 pm

      Everything is fine, Rich, thanks. No big deal, feeling better than ever, etc.

  • Rich September 23, 2011, 2:51 am

    Rick, did not realize you had (heart) surgery.
    Pray and trust all is well…

  • Daniel Alvarez September 23, 2011, 2:18 am

    The trick is, where is that leg. That´s what its all about!

  • Daniel Alvarez September 23, 2011, 2:11 am

    you read my mind! Ok, finally going to relax with some ligth reading by Frost and Prechter. (Very Interesting) I noticed that you are into the wave theory too. And like sombody said, your system is a 1000% more practical approach to trading. No need for prior knoledge of wave counts and rules but the ones specific to the H P method, which are simple to understand but to master like all things that are worth while, i takes a lot of practice. And while doing that we broaden our vision, training our minds to recognize setups that just “look great” just poping out from the screen. I even have a drawing tool now set up that gives me the p,x and d just by measuring the ab leg with it. Its quite handy.