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Is This the Bottom for Gold and Silver?

It has been a rough ride for those who have bought gold and silver the last few years as it heads to its biggest quarterly loss in history.  We have seen the metals fall from their 2011 highs to their current lows hit today of $1,223.40 for gold and $18.36 for silver. As of this morning, the metals have bounced off those lows with a weaker than expected GDP report and for reasons given below, I believe the bottom is in for gold and silver.

goldsilverprices6-26

Recap of Gold and Silver Price Activity

On Feb. 14th, 2013 I wrote that I expected the Market Makers to take gold and silver below their 200 day moving averages and they did by mid-April. The price of gold and silver subsequently bounced higher and on May 17th I wrote that this might be a "Dead Cat Bounce" and the gold and silver prices would again test and break their April lows and this was confirmed just last week. I have been very patient to write today's article and know there will be many who try and critique it. But I truthfully don't believe the claims that the Fed will begin to taper as those that do think we are in an economic recovery. And those who are depicting gold and silver as an irrelevant investment can't be seeing the same data I see. In fact, sentiment is so negative that pretty much every major investment bank has lowered their gold price forecasts, including Goldman Sachs. You may recall Goldman Sachs was bullish on gold in 2011, raising their forecast. Just because they all agree on something, doesn't make them right.

The economic data I wrote about on May 9th calling the stock market a bubble and recommending investors dollar cost average out of it, has been confirmed further with today's GDP expectations falling short and yesterday's consumer confidence, durable goods and housing data coming in less than expected. The DOW is presently sitting at 14,760, 322 points lower than the 15,082 May 9th close. The market sometimes has a mind of its own and the DOW is presently up 122 points despite the GDP miss.

The hardest thing to do is to buy when there has been carnage in the streets. But what do Market Makers really do? They like to create carnage and invest accordingly. The name of their game is simply profit, any way they can obtain it. One can look at Apple, AAPL, 5 year charts to see how this popular stock with investors can be moved up and down over time.

AppleChart

From a shorter term perspective, what has really been the difference in AAPL versus GLD and SLV the last year?

gldaapl1year

slvaapl

Apple's 52 week range is 385.10 - 705.0 (45.37% decline); GLD 119.66 - 174.07 (31.25% decline);  SLV 18.19 - 34.08 (46.62% decline).

What's On the Horizon for Gold and Silver?

Continue reading at http://bit.ly/14bkOpZ

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Consumer Optimism

If consumers become optimistic, they'll start consuming, and the prices of goods will jump.

One thing holding prices down right now is "going-out-of-business" sales.

A whiff of inflation in prices will cause a stampede to buy tangible goods and gold.

If the economy "improves" even on paper (not in reality), gold will go up. The inflation we've been talking about has already happened.

What do you think? http://consequeries.com/

I agree about inflation coming

but Bernanke has been failing in his fight against deflation (the credit contraction). It is deflation that he doesn't want to occur and is implementing QE (which by itself is inflationary) that is being swallowed up still by the credit contraction.

The Fed interference has caused a bubble in stocks again and over the next 5 years or so, we'll see the stock market fall and gold/silver rise.

When inflation finally does rear its ugly head (and it has in some areas, don't get me wrong), but prices alone are not the same definition as money supply (printing and credit). The credit market deflation distorts reality otherwise we'd have a much greater effect on prices than what we have seen. That will come.

Thanks for the info on "going out of business sales." What area of the country are you seeing this? Are there many business "For Lease" signs in your area? TIA

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

I would say yes

With Abe getting reelected and Bernanke admitting the economy is weak and would tank without QE, its full speed on the printing presses.

http://smaulgld.com/bernanke-warns-of-tanking-the-economy/

Please subscribe to smaulgld.com

Agree

My only question is, the Euro represents 57% of the dollar and the Yen another 13%, so that's 70% of the dollar. If 70% of the dollar is not doing well, by default, that 70% would push the dollar higher.

The only one I know making a case for a stronger Euro right now is Axel Merk from Merk Funds. His main reasoning is that they have no budget deficit (unlike the dollar). This though might be a negative if the ECB cant' step in quick enough to help out the PIIGS et al and the IMF is strapped. If everyone outside of Germany is falling apart, the ECB has to do something. I find it hard to understand why he is so Euro bullish. But at the same time, he did say 50% of his holding are in gold.

And in case you didn't know, the G20 were the one's who gave Abe the green light. I dont' think they had a choice.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

let the short squeeze begin.

let the short squeeze begin. Could retest lows one more time but I don't think so.

Sierra

I think we do get one more test. We have had a nice bounce and I don't think gold and silver are ready to take off just yet.

I have said many times to clients that this is the tortoise (gold) vs. the hare (debt) and the Fed is still relevant.

My trip to Las Vegas for FreedomFest where I met Steve Forbes and Jim Rogers among others (especially liked Axel Merk), tweaked my thinking a bit. I am out in the desert finishing my next book over the next 30 days. Lots of pieces of the puzzle I have to put together.

Timing couldn't be better though!

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

fireant's picture

Yes, understanding that a bottom can never be predicted with

pinpoint accuracy, so I'd say we are within $100 or so of the bottom in gold. I actually think it will be global unrest and financial meltdown in Europe which sparks the next leg up.
Question. Do you think the treasury bull will continue, or has it already peaked?
Good article. I concur with $ strength...

Undo what Wilson did

fireant

Just saw this question. Yes, bullish on treasuries too because of "perception" and Bernanke's hands are tied.

10 year yield under 2.5% again and nothing but negative news coming out of Europe. Read today's Zerhedge article on Europe debt.

My timing was good in writing this article. I am out in the desert for the next 30 days finishing my next book. Timing couldn't be better for its message.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

I think not

Probably a $17 handle before it goes back up. Just a prediction though.

Ron brought the Liberty movement together, Rand is expanding the crap out of it! :)

Something to keep in mind

When the gold and silver sales people call you on the phone to get you to order more, it's usually because they expect it to go DOWN soon. I realize it's a long term investment, but I know the guy I buy from through Midas calls me to ask if I want to buy, then I notice it tends to take a dive after that.

This doesn't mean don't buy gold and silver, but they are "short selling" and you happen to be the one taking the initial loss. I still buy from them. Just realize this fact.

Nate

Nate,

I haven't called any of my clients or prospects for about a year and a half except for a couple of them. My phone rings enough as I write my 2nd and 3rd books. Having worked for a major gold dealer in learning their system, and then later writing a book about how they rip off their clients, and subsequently starting my own company, I can tell you that they don't sit around and short gold. They are all believers in gold.

They do tell their employees to call old clients constantly. Why? Because they are their best source of more sales; their bread and butter if you will.

But most of these outfits on TV that Glen Beck or someone else told you to call, sell high commissioned numismatic, rate, European, proof, collectible coins instead of the low commission bullion coins and bars. That's how they can afford the commercials!

I was involved in a lawsuit against one of these dealers where the city of Santa Monica won a $4.5 million settlement. It wasn't nearly enough to help those that invested. That company had $500 million in sales and they frowned upon anyone who would ask to buy bullion as well as any sales person who sold their clients bullion. You would then be fired for lack of production as in that business, you're easily replaced by someone else hungry to make money from selling crap to people; similar to a boiler room operation.

The price taking a dip right after you buy just means the market is falling. It's not the dealer doing this. Naturally, the last 12 years as the price of gold moved higher, most people who bought were rewarded. The carnage has mostly come of late, so if you bought in the last year to two years, you may have had that experience because of the current downturn in prices.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Most bullion dealers hedge

Most bullion dealers hedge their inventories in the futures market. It's the only way to be in that business and sleep soundly at night. If they have 1000 oz of gold in stock, they'll buy futures shorting 1000 oz of gold in the paper market. If gold goes down they make in the futures market what they lose in the physical gold. If gold goes up they lose in the futures market what they make in the physical gold. This allows them to make their bid/ask spread no matter where the price goes. So in reality bullion dealers don't care which way the price goes, but they do want there to be lots of buying and selling.

BobW

You may be right about some dealers, but I look at it from a different angle based on my conversations with my suppliers. They buy from the various mints every week and sell future delivery when demand is so high. If the price falls, they typically raise their premiums (like they did in April) to adjust for either the lack of supply or to cover losses from past purchases.

No one is selling. There are only buyers based on my conversations with my suppliers and based on my own experience with my clients.

My business has been doing quite well with this down turn in price because I have had my clients dollar cost average into a position to fulfill their allocation to metals with that segment of their overall portfolio. For some, it's now a waiting game. For others, they have Limit Orders in, hoping for lower prices. No one will catch the exact bottom, but dollar cost averaging in the last year and a half has given my clients a better overall price.

Some bullion dealers may hedge, but I don't see the need to when your supply is bought up so quickly and delivery dates are pushed out because of demand. One of my suppliers has a July 29th delivery date for Silver Eagles and July 22 for Silver Maples. The other supplier has delivery in just a couple days. Depends on the supplier.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

I want to add that for the

I want to add that for the situation that you describe, where coins go flying off the shelves as soon as they arrive from the mint, there is no reason to hedge with short futures for the simple reason that there is no real inventory. Now if you sell coins for future delivery at a fixed price but have to buy from the mints at the spot price you have a reverse situation, effectively a negative inventory, because you've sold coins that will have to be bought in the future. In that case you could lock in the bid/ask spread by going long on futures rather than short. I think you'll find that the major bullion dealers, who have been in business for decades and have seen prolonged bear markets as well as bull markets, do use futures to hedge.

No one is selling in the

No one is selling in the retail coin market, that is true. But there's been a massive liquidation from Gold ETFs, and contrary to the beliefs of the conspiracy theorists, that put a lot of real physical gold bars on the market. The good delivery bars stay in the vaults (only their ownership changes) so you don't see them, but they're there. No matter how many gold bars are in the vaults, it takes time for mints to refine them to the required .9999 level and mint them into coins. (A good delivery bar and an American Buffalo coin are two separate products.) So you can have shortages of coins from the mints even while there are plenty of bars in the vaults.

Remember, the big guys don't buy one ounce coins. They buy the good delivery bars in the vaults. There is legitimate concern that some bars have been lent out, sold short, and so bought by somebody else, with the result that a single bar may have two "owners", balanced by a shorter in the middle who owes one bar and may or may not be able to afford to buy it. So some countries and some individuals are starting to take physical delivery of their good delivery bars. It will be interesting to see how this plays out.

is this the bottom?

No..... The bottom will be reached around mid August when the bond market blows up.

I see the bottom hitting about 11 to 12 possibly 13, but not much lower than that.

We will have several more reports that the administration has been playing games with securities, or the bond market, the US starting a war in Syria that gets Russia AND China finally pissed off enough at our government, that they not only help Assad, but will be actively killing US troops.

Israel will precipitate something incredibly stupid and that will aid the dollars demise.

Two more scandals and that will do it. The dollar will drop, QE3 will end and silver, gold and copper will head for the moon.

Texas Little El

Texas Little El said; "Two more scandals and that will do it. The dollar will drop, QE3 will end and silver, gold and copper will head for the moon."

The dollar will drop means by default the Euro, Yen and Pound (80% of the dollar) will rise. Explain to me how these economies and their Central Bank activities are better than that of the Fed and U.S. policies. Keep in mind, I well understand the ramifications of Fed policy. I just want to see why you are bullish in those 3 currencies versus the U.S. dollar based on economic data, perception and Central Bank activity.

No right or wrong answer, just explain your point of view further if you could. Thx.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Making the assumption that other currencies will go up

I am of the opinion that the purchasing power of all currencies will drop. We aren't looking at just a dip in the US Dollar, but a global depression spurred by a lack of confidence in the Euro, Dollar and ultimately the Yuan.

The Yuan can't stand on its own. China needs the US since we are their major trading partner. When our financials go belly up, watch the yuan stay high compared to the dollar, but no one will be able to afford the products that China is producing. This will lead to a devaluation of the Yuan over a short time span.

I will write more later, off to get some work done for the day.

Texas

Understand one thing though...all currencies are priced in each other. I think what you are saying, and I agree with, is all currencies purchasing power will drop compared to gold. Correct me if I'm wrong.

China has some huge issues at present, but because they won't relinquish fully their relationship to the U.S. dollar, it's rather moot. Why should they when they can continue to sell us their cheap goods?

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

exactly on all purchasing power drops

I keep seeing Silver hover at $18.50 or there abouts.
Mid August should see yet another reduction in the price of Silver/Gold and Copper. I don't pay much attentions to Platinum, Palladium or Rhodium as a precious metal.

Silver should hit about $11.83, Gold down to $972 and Copper at $2.63

I figure at that point, enough scandals will have occurred, or the US Gubermint will doing something incredibly stupid, ie Killing Ed Snowden or invading a sovereign nation to get him back, a frontal assault on Syria, blowing up an Iraqi site, playing fast and loose with a drone that kills an important political figure that ISN'T a terrorist, or we have yet another Psy-Ops fiasco that goes horribly wrong, and that will push the markets right over the edge.

That is my prediction.... for whatever it is worth

???

In what form, and where, do you recommend to purchase copper?

Update: Bolivian Presidential Plane detained

I didn't think that one of my predictions would happen so soon.

http://www.guardian.co.uk/world/2013/jul/03/edward-snowden-a...

The Bolivian presidents plane is a sovereign nation. Seems that the fun has already started.

Let us see how many Obama does prior to mid August.

No! The price of paper promises for future gold is make believe!

Is a paper promise for future delivery of gold or silver worth more than Zero? If never delivered? If you believe it is, it is. Federal Reserve notes are backed by the full faith & credit of the US government.

Comex ® is backed by the full faith & credit of themselves. Should the Comex continue it's price slide all the way to zero, will they advertise a gold & silver inventory clearance sale to clear their good name? To make their creditors whole?

Disclaimer: Mark Twain (1835-1910-To be continued) is unlicensed. His river pilot's license went delinquent in 1862. Caution advised. Daily Paul

Who cares?

Gold is cheaper than it has been for years.

Buy Buy Buy

My clients care

My clients care. That's why I write. Some who have been perma bulls for gold have hurt their clients if they bought at higher prices by not looking at sentiment and by not giving the Fed enough credit. Many people I advise on a daily basis as to when to buy. And I agree, buy, buy, buy!

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Yepper

but I have trouble feeling sorry for short-term thinkers.

Luckily, they are your clients and not mine.

Not sure what you mean by that

Not sure what you mean by that VR, but my clients are long term thinkers. Same goes with ALL of my suppliers who I ask questions about their small and large corporate clients....no one is selling their precious metals, especially on the dips...only adding to their positions.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

if this is the bottom then that doesn't mean it's the last time

for example if there is ever another market scare - industry will freeze and precious metals will dive again like in the 08/09 crash

Market scare

Troy, there will be another market scare. The banks don't mark to market and real estate has formed another mini-bubble in some areas that speculators came in (they are selling now). The stock market is built up on fluff, not fundamentals.

As we contract, the illusions of wealth will chase perceived wealth in treasuries (this has been why treasuries are so strong) and the dollar (why the dollar is so strong) and lastly, gold and silver, which have been beaten down to where they are ready for the next leg up (which I give an 80% probability occurring the next 3 months).

I am dollar bullish and still think we are contracting with the Fed fighting it and will be forced to continue to fight it. So far, I have called this market pretty good. Doesn't mean I am right, but I haven't been wrong for awhile.

Remember, only a small percentage of people own gold and silver. Just doubling to 2% would cause huge price increases. Lastly, it is the world that is chasing real wealth. Just talk to people in Argentina and Brazil for example. Just talk to those in India of late. The list is growing. Europe is screwed. Japan's monetary policy is trying to save a sinking ship. This is big. Central Banks won't be able to stop it, although they will try.

Author of Buy Gold and Silver Safely
Next book: Illusions of Wealth - due out soon
Also writing book We the Serfs!

Thanks

I like your posts, Doug. They make sense to me :)