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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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credit to the Fed


The Fed is like the loan guy in that video. The fun times can't continue unless that loan guy (the Fed) gives more money to the ones doing the partying.

Simply put, the Fed is still relevant...for now. I wrote an article in September of 2008 with that title (see quote below from it). They have been relevant simply because they are making the party last longer with QE. This by no means they will be successful as I wrote in 2008.

"The Fed will continue to bailout anyone as long as people still believe they are relevant. At some point, this “belief” will disappear. We all know what will happen next. We won’t like it, but hopefully one is prepared. I think this will only be strike two. In 1929, the stock market crashed but the dollar was still around.
But in 1933, the government needed to confiscate the People’s gold to prevent them from becoming insolvent. Bernanke has praised this action in his past speeches. The last thing our government and the elitist politicians that want to stay elitists want, is for any type of Sound Money or Honest Money system. What will their choices be if push comes to shove? We all know “they” can confiscate any and every “thing.” This will be strike three for the Fed."

I have said in many of my articles that this is like the tortoise (gold) vs. the hare (debt). We all know who wins the race.

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

Eric Sprott's 2014 price predictions


Immoral funding of Military Industrial Complex by Federal Reserve and US taxation system must stop!!!! End illegal/unconstitutional wars! Preserve US currency!

Excellent and useful post.

I bought some silver today at $19.40 per.

Any sub $20.00 silver is a bargain I believe.

I could be wrong of course, but am putting my money where my beliefs are.

Next year on any significant dips in gold or silver, I'm going in as far as I can afford to.

"We have allowed our nation to be over-taxed, over-regulated, and overrun by bureaucrats. The founders would be ashamed of us for what we are putting up with."
-Ron Paul

Good deal. $22.50

in Sacramento, CA was cheapest I could find locally.

When a true genius appears in the world, you may know him by this sign: that the dunces are all in confederacy against him. ~J. Swift

This is like a huge puzzle,

I love puzzles, taking information and trying to figure out how everything fits. Thanks for posting!

And don't miss the fact that

And don't miss the fact that the Fed's been buying $94B/mo vs the stated $85B/mo. http://www.aei.org/article/economics/monetary-policy/federal...

So the $10B cut is actually just getting them back down to the $85B they've been printing all along! LOL!

Everything is fraud. DOW, S&P, GDP, Unemployment, CPI, etc etc all manipulated propaganda fraud. All of it.

Yes, you live in the Matrix.

Give me control of a nation's money and I care not who makes the laws - Mayer Amschel Rothschild

And it sure doesn't appear as innocent, it looks ominous

The ultimate question is this.

Qui Bono? Who benefits?

And the way in which the Federal Reserve enters the bonds market to set interest rates....when these same Reserve banks including JP Morgan happen to control that bond market..makes it a very vital question indeed.

Time for the debate.

This article will appear on Seeking Alpha today

This article will appear on Seeking Alpha today as they told me to change the title from "Why Gold and Silver Will Break to New Lows" to "Why Gold and Silver Will Break to New Lows and Then Rise" to portray my bullishness for gold in the article.

Seeking Alpha editors don't like articles that promote physical gold and silver ownership. They have told me (and I have battled with them for years before they even had a "Gold and Precious Metals" category) they prefer their articles "talk about ETFs, Mutual Funds and Stocks only."

More bias in media. Imagine that...

What is good about Seeking Alpha, is that once you have an article approved, and I suggest more go there to write articles, and if the articles do include the symbol GLD or SLV in them, they are included in all the financial websites (like Yahoo Finance and CNBC) news stories under that symbol.

So I play their game...but still promote physical ownership over paper substitutes or "Illusions of Wealth." I also thrown in some subliminal political commentary.

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

This article on gold and silver just published on Seeking Alpha

Just an update, and hopefully an incentive for the many of you that like to write on Precious Metals. Seeking Alpha, who have very stringent editors who like their paper investments to be touted versus ownership of physical gold, just published my article.

The nice thing about it is the article is now on Yahoo Finance and CNBC websites where I get to talk about gold and silver investments, but as I mentioned, also get in a political slant.

I am simply using their platforms to get the message that many of us here at Daily Paul support via the articles I write, at least to the financial crowd.

Hopefully some of you can do the same.

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

I don't think so. COT's are

I don't think so. COT's are extremely bullish. Physical metal is being bought, not sold. This down move is nothing more than commercial banks getting out of a net short position in silver. once that is over, watch what happens as the banks are hugely net long Gold.


I didn't down vote you, someone else did. If you read the article, I say that we will have an up January, which fits in with my tax reasoning whereby the professionals will be buying back that which they sold to get the 100% write-offs (wash rule makes them wait 30 days to buy back).

This will be short term bullish. I then expect one more "smack down" by the Market Makers. This is what Market Makers do, and can easily do with such a small controllable market as gold and silver. I want to see the screaming one more time before I write my all-in article, an article that I can't wait to write.

In the meantime, I do see an up January (a week away) which would concur with your COT's.

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

Doug, you can down vote me.

Doug, you can down vote me. lol. I bought silver in 2003 under 5.00. been sitting on it for 10 years. The reasons why I bought then are even more glaring today. Today JPM has the lowest silver short position it has had ever since taking over that short position. With the new position limits and the Volker rule being made into law, I don't think these banks will jump back short as price rises. One the free market is truly established, price is going to go higher and faster than most thought possible. What people still do not understand is that there is a difference between the paper and physical market. Physical silver/gold is not being dumped to suppress price. China and others are taking all the phyzz they can find. I can't believe that people are not asking why? It will be interesting. I said a month ago or so we would see 18.00 silver before we go back up. One more final push down then up. Gold and silver will establish new highs in 2014.

Paper manipulation

Doug, you don't drop hint of price manipulations thru paper anywhere in your writeup. And I know it might not be politically correct to wear tinfoil hats, but there is MATHEMATICAL PROOF about manipulations going on. Keeping track of COMEX inventory levels, rate of metal shipments from London to ports of Hong Kong & Shanghai, free-market like heavy markup prices in "rigged" economy like India, US mint sales numbers for silver eagles and on and on and on. It is crystal clear that what's being quoted as spot price is no true market price at all. It is fraud through and through.

Key questions are: How long will it take to flush out all of the fractional reserve poison paper contracts, and on what date will the first physical delivery be failed to be met due to lack on inventory?

Immoral funding of Military Industrial Complex by Federal Reserve and US taxation system must stop!!!! End illegal/unconstitutional wars! Preserve US currency!

Gold manipulation

the_chiefe71, thanks for the comment.

Perhaps you missed the following in the article; "The precious metals market is not the DOW, S&P, or NASDAQ in size and scope. It is a small market that can easily be pushed around. In fact, in 1980, two brothers named Hunt did just that without a computer by cornering the market."

I have addressed manipulation in an article a year ago when the price of gold was $1,700 (see link below). This article simply explained the short term movements of the "perfect storm" I described.

Thoughts On Gold Price Manipulation http://bit.ly/YJ2CxU

It is true I am careful about what I write and I do provide evidence in that 2012 article of a certain J.P. Morgan bank that had increased their precious metals activity in the derivatives market. This isn't a surprise to anyone I don't think, and is part and partial why I have been correctly cautioning gold investors all year long. And I sell gold and silver for a living as I noted. It is quite easy to move such a small market as gold and silver.

My next book, "Illusions of Wealth" will explain next year why I will be dollar bullish AND gold bullish. How can that be? I first explained this scenario in my first book in Chapter 4. I will be happy to send you a PDF version if you care to read. It's also available on Amazon.com where you can read the reviews. Chapter 4 has 100 footnotes, mostly from Austrian economists, who differ from some of the other Austrian economists.

In the end, all of the Austrians will be right. But this last year, some of them have missed the boat.

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

Here's how I see it...At the

Here's how I see it...

At the end of the day...all fiat currencies fail...without exception. People who try to time this OVERDUE collapse are going to have the door violently slammed shut and precious metals will not be available at any dollar price.

“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

Exactly. Not to mention,

Exactly. Not to mention, it's costing the miners more to pull it out the ground than the current price. No telling how many will be bankrupt this year.

“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

2014 metal predictions - Assuming no black swans


Immoral funding of Military Industrial Complex by Federal Reserve and US taxation system must stop!!!! End illegal/unconstitutional wars! Preserve US currency!


I am in agreeance with you.

Short term up, medium term down, long term up and away.

I see Gold Silver going down until Sept 2014.

At which point this will mark the bottom in the commodities complex.
It will go no lower. Then the second large wave begins.

15.5 - 16.5 Is my low for Silver. This would equate to a normal market correction. Then to infinity and beyond.

Happy Trading.

Gold price bottom and next wave up


Those prices are a possibility, sure. Of course no one wants to hear that. Holders of physical gold and silver don't care what the lows are today or tomorrow as they didn't when they bought at $800 in 1980. They hold. Traders of the metals and miners do care, and are the only one's who might feel pain when they are wrong, especially if on margin.

We are still in the 2nd and longest stage of the gold bull market where the Market Makers try and buck you off. This should end with a final smack down before we take off into the 3rd stage. I think this will come next year.

As far as the next wave you describe as being the "second large wave," I do believe it will be the beginning of the 3rd Phase Richard Russell wrote about years ago.

Quote from Russell (who is 89 years old now and still writing Dow Theory Letters):

"First phase is where sophisticated investors, sensing a new bull
market, make their initial commitment.

In the second phase, the public will start to buy gold, this in reaction to increasing political and social uncertainty, rising debt levels and nervousness as to the future of the dollar.

The third phase of the gold bull market will see a frantic rush by the public to buy gold. In this phase, gold will surge to undreamed of heights–a level beyond what anyone now envisions."

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