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Why Gold and Silver Will Break to New Lows and Tax Moves to Capitalize Upon

We have seen the perfect storm come down on gold and silver this past week with the Fed taper, Congress agreement on the budget for two years and higher than expected GDP, but there is another reason why gold and silver prices are falling. This stems from the year-end tax moves that the big players in the precious metals market; Hedge Funds, Mutual Funds, Banks and Professional Traders, are doing by locking in dollar for dollar their losses against gains. The good news is, individuals who own the ETFs like GLD and SLV can lock in those loss deductions too and convert those paper assets to real wealth by acquiring the physical metal. First, let's look at what's going on in the precious metals market.

Gold is experiencing its worst year in 32 years. The media, especially CNBC, loves to harp on gold as much as they can. They ignored the last 12 years straight of gold moving higher, and jump on the bandwagon of gold haters with any downturn. What will they say about gold in the future when it begins to take off again and stocks decline? What would cause such a scenario to occur again? See http://usdebtclock.org

The "perfect storm" I speak of was the following;

1. The Fed is doing a $10 billion taper beginning in January ($5 billion cut on mortgage buybacks and $5 billion cut in longer term treasury purchases)

2. Senate voted 64-36 on Wednesday to send a government spending plan to President Barack Obama, who has signaled his support.

3. An increase of 4.1% in GDP growth as reported for the 3rd quarter

Fed Taper of $10 Billion

In my last article I said the Fed might do a token $10 billion taper if rates were low enough.

Is there a chance the Fed may do a token taper to make the market think they still have control of the situation? Sure. Especially if the stock market is out of control and interest rates are low enough. But it won’t be much at all. Probably like the $10 billion that the market thought the Fed would do last time they met.

Fed Chairman Bernanke is retiring and he wanted to go out on top or at least the perceived top before hitting the talk circuit like his predecessor Alan Greenspan did (the guy who didn't see the 2008 Financial Crisis coming). Maybe Bernanke will be knighted by England like Greenspan was before the next financial blow up in the years ahead caused by unprecedented Federal Reserve action and abuse of their once solid balance sheet.

If we had a good balance sheet in America, then Congress wouldn't have had to pass TARP or the Fed wouldn't have had to implement Quantitative Easing (QE). But that's not the case with a ballooning National Debt of over $17 trillion that represents the elephant in the room. All the Fed said in their latest statement regarding the future is this;

The Committee now anticipates, based on its assessment of these factors, that it unlikely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6-1/2 percent, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal.

Only one member of the Fed disagreed with Bernanke and the other Board members, Eric S. Rosengren, who "believes with the unemployment rate still elevated and the inflation rate well below the target changes in the purchase program are premature until incoming data more clearly indicate that economic growth is likely to be sustained above its potential rate." This is a more realistic view of the economy. The taper was premature.

In fact, in the aftermath of the decision, Bernanke was on television saying how they have to keep interest rates low. This is the problem the Fed has with any tapering because any perceived strength in the economy, higher interest rates on the National Debt are sure to follow. This higher debt payment has to come from somewhere, and with trillion dollar deficits already adding to the National Debt, and small reductions in the budget, isn't resolving the overall issue of what effect higher interest rates will have on the budget. Congress can't think that far ahead and neither does the Fed. That is why if there is any uptick in rates, it will surely be followed by more QE. It's all the Fed knows how to do; destroy their own balance sheet and "hope" the economy improves.

Senate Approves Bipartisan Budget Plan

The second whammy put on gold this last week was the Senate passing a bipartisan budget proposed for the next two years. This budget includes continuation of the current sequester that helped reduce the budget deficit. While reducing a budget deficit is good, it can be compared to the savings the individual had in the following video where a man goes to a banker and asks for an Increase his Debt Limit), telling the banker that he cut $380 out of his $17,000 a year deficit on a $21,000 a year income.


Link if video doesn't post: http://bit.ly/1e7eFPu

This is truly an incredible video and the numbers used correlate to the actual budget and National Debt from a few years ago, when the debt was only $14 trillion. Today we are over $17 trillion and we should congratulate congress on saving a few billion on a trillion dollar debt? When you watch the video, keep in mind that the banker does give the man more money, despite the fact that he knows too well that it can never be paid back on the income he currently makes. Does anyone else see the lunacy in this type of thinking?

This is how Congress works, but you only see the lunacy when it is put on a scale of an individual trying to do the same thing as this excellent video portrays. This is what you should be talking about at Christmas to wake people up and prepare for what's to come (along with spreading cheer in celebration of the birth of Jesus Christ if you are Christian of course or celebrations of whatever religion one practices).

From this list you can choose the next Republican candidate for President (among those like Christ Christie and others who may be running), not from the Republican Senators who voted for this spending bill including Senator Ryan who helped draft the bill. Why? Because the one's who voted for it are supporting what the banker is doing in this video. They are not solving any of the problems that are plaguing our country, they are contributing to future problems. They are simply kicking the can down the road until their own retirement, hiring by the corporations that supported them or book tours as they like the kings and queens we tax payers have made them by supporting them. They don't have our best interest at heart. Their votes are good for gold and silver however as time will show. Unfortunately at the expense of the many. And this spending is not a Republican vs. Democrat issue. They both are guilty as charges. The Bush administration expanded the debt and with Bernanke's Fed, the Obama administration is like the Bush administration on steroids.

Increase in GDP Growth

When looking at the 4.1% growth number, we must note that a good percentage of that number comes from Consumer Spending (the last to know of any crisis) and Change in Inventories, which could be considered bullish OR bearish.

 GDP Growth Explained

There is growth in some parts of the country. I have clients tell me of the buying of homes on the East Coast in the area where John Kerry has a home and they are buying more than one home as investments. But this is eerily similar to the 2006 era where many were buying second and third homes, only to be ultimately disappointed with the eventual crash. Perhaps we are not quite there yet, but in due time. Just look at what's going on in Florida and Nevada again. When these cash buyers disappear as banks run out of repossessed inventory, coupled with any potential rise in interest rates, which we are seeing come to fruition now, look out below.

What Gold Investors Sitting on Heavy Losses Can Do Now

Continued at http://bit.ly/Jhqkku

NOTE: I am as bullish as anyone and sell gold and silver for a living, but I call it as I see it. I have included my 2014 predictions as well. For those that don't want to read further, I do see a strong January for gold and silver, then possibly one more dip to the lows before we are off to the races. These things will play out over time. Debt isn't going down. QE's not going to end. Obama hasn't saved the day.

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My latest article on gold

I decided to write one more article on gold before the year ended. Still waiting on Seeking Alpha to publish it (been 15 hours since I submitted and they love to take their time on any bullish articles on gold);

Gold and Dollar Down but Both Will Rise Next Year http://bit.ly/1ajXzLb

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

Silver To Hit New Highs...

http://srsroccoreport.com/silver-to-hit-new-highs-as-the-qua...

“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy.”
― Ron Paul

Thanks John

Great article, have you seen Chris Martenson's Crash Course?


http://youtu.be/JTEHUbfP7OA

Gerald Celente 2014 Long term metal bullish


http://youtu.be/DADfTSS-GGo

Immoral funding of Military Industrial Complex by Federal Reserve and US taxation system must stop!!!! End illegal/unconstitutional wars! Preserve US currency!
http://facebook.com/NoPropagandaZone
http://twitter.com/the_chiefe71

Celente's past predictions

I wrote an article the beginning of 2010 about how I thought Celente's prediction of a market crash that year were questionable. http://buygoldandsilversafely.com/tag/gerald-celente-wrong/

He continues with the same prediction every year, kind of like John Williams hyperinflation calls (Google Gerald Celente wrong).

He is at least closer to it finally happening in my opinion, but I still think 2nd quarter is too soon for any financial crisis.

He is a compelling speaker.

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

You'll have to forgive Gerald

You'll have to forgive Gerald for not anticipating the COMPLETE breakdown in the rule of law over the past 5 years and the MASSIVE frauds committed by the central banks and government.

These actions have only SLIGHTLY delayed the inevitable. This chicken is coming home to roost.

“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy.”
― Ron Paul

I know

Gerald is a Trend Forecaster....in the end he will, the same as everyone other Austrian forecaster, be correct.

I use this line a lot... "There is a reason why our kids calculators don't go to a trillion."

I'm including that line in my next book, but preceded by a request the reader take out a calculator and tell me what $17 trillion x 6% is.

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

Fiat index bullish

Doug, you repeatedly keep saying "Dollar bullish", I'm assuming you do it based on the dubious Dollar index. Or are you really saying it based on predicted purchasing power of the dollar? For example, expected changes in price of identical quality bread in dollars?

With incompetence running rampant among governments of USA, Japan or Europe, who cares if dollar ends up stronger ahead of Yen or Euro? That's kind of like saying "In the land of the blind, one-eyed man will become king". Even if dollar held its strength on a fiat index, more critical are petroleum/energy prices, their impact on import/export & trade deficits.

The real measure which baby boomers, retirees would worry about is purchasing power of their worthless dollars. Not how strongly dollar held up on some Dollar index. This is where your statements differ sharply with people in the industry like Peter Schiff, Celente etc. In long term macro terms, your statements are identical w.r.t. precious metal price predictions with them, however.

Immoral funding of Military Industrial Complex by Federal Reserve and US taxation system must stop!!!! End illegal/unconstitutional wars! Preserve US currency!
http://facebook.com/NoPropagandaZone
http://twitter.com/the_chiefe71

chief

You are correct. Throughout many of my articles, and one of the premises of my next book, is that currencies priced in each other are an "illusion." Purchasing power is what matters.

I explain it here in an article I wrote in Jan. 2012 (right around the same time the ECB enacted measures to provide liquidity which it turns out has been Euro positive): http://bit.ly/JrpRNh

Ironically, I wrote this article yesterday; Gold and Dollar Down but Both Will Rise Next Year http://bit.ly/1ajXzLb

You are mistaken in how I differ from Schiff, Celente etc. They continually say the dollar is doomed. How can it be doomed if the other currencies are also doomed? This is the illusion. The fact they run from one side of the ship priced in each other with the dollar on one side and the Euro, Yen and Pound on the other, gives the illusion that all is well with currencies and of course monetary policy. Everyone is partying in the bar, drinking and having a good time. But the ship is the Titanic and the only lifeboats are made of gold and silver. I have said this in many articles.

The dollar will be viewed as (even though it has its own tremendous issues) the last bastion of safety. Germany alone can't support the Southern Countries. We are already seeing the desperation in Japan. People in Argentina who have experienced hyperinflation are taking 30% discounts to trade for U.S. dollars. 70% of the world still trades in dollars. As bad as we here at Daily Paul know the dollar is, the "perception" is, just like the perception we have a strong economy right now, the dollar is still king (you will never hear Schiff say that). That's why it stays above 80 on the Index and has been in a bull mode versus the other currencies since 2011 and why gold and silver have taken a hit.

I think this dollar/gold inverse patter will change next year and as the Euro and Yen (70% of the index) lose value vs. the dollar, by default the dollar rises, but I also believe the dollar and gold will rise together for awhile, with gold rising in price in all currencies as it has the last 5 and 10 years straight.

I could easily sell more gold like everyone else and just be the same dollar negative preacher, but I call it like I see it. I've been in the investment business for almost 30 years now. My next book will of course explain my position better. There is more than one illusion going on.

Lastly, I created my own currency, the Barackazillion. It's the world's strongest currency. Why? Because you can't tear it in half. Google it for a laugh.

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

The dollar is only being

The dollar is only being supported by lies and fraud. Fake employment, fake GDP, fake inflation numbers, fake paper silver/gold, fake demand for stocks, fake threats of 'the taper', and all other sorts of propaganda. The curtain is being pulled back as we speak and the world is waking up. All fiat currencies fail...they are all doomed.

“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy.”
― Ron Paul

John C

John C, there is iron in your words of wisdom.

While it is true that throughout the history of mankind, all currencies fail, there is one currency that has the backing of the strongest military in the world. I don't discount this aspect of "perceived" strength, but this is just another illusion of dollar strength as the underlying data that backs the dollar (debt) is the largest in the world. Who else could pull this off? Japan has with the Yen simply because they have been a net exporter (producer) and are a creditor (own about a trillion of our debt). The U.S. is a next exporter and largest debtor. On "paper," this would dictate the dollar should implode. But it hasn't just yet. Your average Joe does not read Daily Paul, Zero Hedge, Lew Rockwell. Your average Joe knows more about Kim Kardashian than gold and currencies and how much debt the U.S. has.

Things won't implode overnight. It's the tortoise (gold) vs. the hare (debt) and we know who wins that race.

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

Didn't the Romans once have

Didn't the Romans once have the strongest military in the world? ;)

A shame to have the 'strongest military'...yet can never defeat an enemy (only drone bomb wedding parties). The best the US can do is occupy a territory while financially paying the price.

I agree that the status quo could go on a bit longer...but not indefinitely. How much longer before there is a failure to deliver the gold? As Bill Holter recently said...

"Once we are known not to have the ability to deliver gold, all bets are off and the fledgling new alliances will be made fully public. We will be isolated and dollars will not be accepted for trade settlement. Our ability to print “power” will be stripped. As strange as it may sound, in my opinion this whole episode will come to a head when we fail to deliver gold. To this point we have had the ability to make delivery. It will not matter where or to whom we “fail to deliver” to, a single delivery failure will spread faster than a wildfire and our “lifestyle” will change forever. As much as we “over lived” our means in the past will be paid back by “under living” our means in the future …until the debt is paid in full. Paying back our overconsumption will be that much harder as we have already sold the family jewels".

http://blog.milesfranklin.com/selling-the-family-jewels

“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy.”
― Ron Paul

Re: Romans

John, the Roman Empire fell because they could no longer conquer a country that they could pillage their gold and pay the soldiers and live like Kings and Queens. So they then debased the currency little by little till the actual coins had no gold in them. This was the end of the Roman Empire. The last FreedomFest was centered called, "Are We Rome" and it was a good debate on both sides. Remember, we still do produce more than any other country. The dollar still is above 80 on the Index. The perception is still strength when you spend this much on the military.

As far as any future failures on delivery, I know a guy I follow has said that their are 91 owners for each ounce of gold at the Comex. Sprott has been trying to expose this for years. I do agree something will occur at some point, but in the meantime, I look at everything else and write what I write.

Gold is simply insurance. You own it and forget about it. But there are some people who have not bought yet and my advice is the same until I write my all-in article; dollar cost average into a position.

There are a ton of reasons to own gold. Long term we know what's going to occur. I just try and shed some light on the short term when I can (I only write 2-3 articles a month right now as I am working on 2 books and updating my 1st book).

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

Too many parallels between

Too many parallels between the US and ancient Rome to list. The Romans had to generate revenues to pay for the massive military and bloated bureaucracy. Taxes were raised and the currency debased. Sounds familiar.

As far as what the US produces...we are behind the EU and China in exports and run staggering, shameful trade deficits.

While most sheep in the US may be ignorant to the possibility of a dollar collapse and couldn't begin to tell you what a gold eagle is worth...I'm certain the Chinese, Indians, and most others outside of the US are far more enlightened...and that is what matters.

“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy.”
― Ron Paul

Agreed

I meant GDP though...

You're right, exports as a percentage of GDP is the lowest of the larger nations.

USGDP vs Exports

Where would we be without the Military? Obama is simply utilizing the same Bush game plan because this is the only thing they have going for them.

And yes, I do agree we are heading the way of Rome. One of the first articles I ever wrote almost 6 years ago was "Which Would You Prefer, Higher Taxes or Higher Inflation?" http://bit.ly/1lxbLpy

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

yeah...I don't believe those

yeah...I don't believe those GDP numbers for a second. I believe they have been massively overinflated to make the debt to GDP ratio smaller. The latest method of measuring GDP is about as fraudulent as it comes. Actually, it's like fraud on top of fraud.

No doubt...without coercion, the US would have went 3rd world status decades ago.

You and I have mostly the same views...I just believe the collapse is going to be VERY disorderly and will get here MUCH faster than most believe.

“Let it not be said that no one cared, that no one objected once it’s realized that our liberties and wealth are in jeopardy.”
― Ron Paul

Good call

Watch the shorts and and spreads to see what really goes on.

Obamacare will change every thing in 2014

no one is going to have extra money for spending and keeping this economy going. I see prices starting to rise as retailers put the squeeze on people that have money.

To think they will be able to suppress gold and silver forever is laughable. Gold and silver will have a correction soon and silver may just blow through the $50 ceiling.

Gold standard: because man can not be trusted to control his greed

More blah

blah blah.

The only new low for gold would be <$100.

VR

Just to be clear on your "blah, blah, blah" comment, here's exactly what I said;

"We are close to breaking the 52 week closing low in gold at $1,192 and do think we break the 52 week lows in both gold and silver and push toward $1,000 now in gold. It is even possible that Market Makers will push gold below the $1,000 mark into the $900′s, on one or two panic sell days."

That's a potential of $292 below the most current closing low.

Here's some more of my "blah, blah, blah;"

Called the $10 billion token taper; http://bit.ly/1hQLYcT
Called the taper bluff; http://bit.ly/196sABe
Called the July top: http://bit.ly/12dw1ca
Called the dead cat bounce in April: http://bit.ly/ZTixuq

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

Best of luck

with your sales

VR

I write to help people. If I wanted to make big money I would simply sell what all the other gold dealers that Glen Beck and Sean Hannity promote as those dealers make 15% to 30% commission selling you stuff that won't appreciate more than the bullion value of gold or silver.

My sales are realized from a 1% commission. My clients don't complain.

Meanwhile I am working on my passion which is a book that can change America for the better. I am confident in its message and success. From there, it's in God's hands.

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

Again, Best of luck

Not sure why you felt the need to defend yourself.

Thank you. Not defensive, but

Thank you. Not defensive, but based on your first comment combined with second, responded the way I interpreted.

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

You are a seller

When you speak on the subject of your product, you speak to customers or potential customers. I was simply a potential customer expressing my perception of your 'delivery'.

Wishing you a prosperous new year.

Thanks for your explanation

I have over 1800 comments on Seeking Alpha where I constantly get those who believe I have an agenda because I sell precious metals. It is clear I am not always bullish and I do think that has helped my clients with their timing.

I am looking forward to being extremely bullish VR. You'll know it when I am.

Wish you a prosperous New Year as well!

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

Peter Schiff, Bill Murphy & more 2014 predictions

http://radio.goldseek.com/shows/2013/12.27.2013/GSR-12.27.13...

All sensible predictions very well in line with discussions here.

Immoral funding of Military Industrial Complex by Federal Reserve and US taxation system must stop!!!! End illegal/unconstitutional wars! Preserve US currency!
http://facebook.com/NoPropagandaZone
http://twitter.com/the_chiefe71

chief

thanks for the links...

2014 will be an interesting year.

Many like Celente were calling for a crash in 2010. Some were calling for hyperinflation. Most don't give the Fed credit for still being relevant. The dollar is still above 80 and things can last longer than most think, especially when you throw $75 billion to $85 billion a month at it.

But the Fed's balance sheet is what I keep an eye on and their ability to unwind their purchases are in my humble opinion, impossible to do without taking losses. The more interest rates rise, the larger the losses will be. We already have seen them lose $10 billion or so on GM. That's peanuts for what's to come.

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

Giving credit to Fed

What do you mean by "giving credit to Fed"?

Is this in G. Edward Griffin's fashion of stating: "Over 100 years, the Fed has done a very good job of satisfying their original [implicitly criminal --- my words, not his] charter"?

Immoral funding of Military Industrial Complex by Federal Reserve and US taxation system must stop!!!! End illegal/unconstitutional wars! Preserve US currency!
http://facebook.com/NoPropagandaZone
http://twitter.com/the_chiefe71