The Precious Metals RollerCoaster - From The Experts
Summary of information from Ted Butler, Larry Edelson, & John Embry
SG&S: With the high volatility in the precious metals market this past week, I thought I would provide you with some good resources to help you understand what this has been all about, and what forces are impacting the price of precious metals right now.
Larry Edelson - Financial Advisor, Weiss Research & Uncommon Wisdom Publisher.
Notes: Larry talks about how the markets are all in 'chop city', which means that when they are moving up and down quite violently they have a 'tendency to chop up short term traders with a lot of losses and a lot of sideways action'. He says this is due to the fact that many of the important cycles are now in a transition phase; indicating that the next big move, while certainly around the corner, is just not yet here yet. So all the major markets-all of them-- are floundering and swinging wildly trying to find their next positioning for their next big moves. This market could continue to be choppy for another 4 weeks.
He believes that gold on the short term will hold above its floor position swinging between the $1060 mark and the $1160 range…with wild swings. On the other hand, if it breaks through the support level of $1000, there will be no long term trend change. He is still very bullish on gold. On the flip side there is mounting evidence the gold will hold its own, and rise above the $1160 range and take off again.
As for the dollar, it's been 'rallying' lately because of the imminent threat of sovereign debt default in Greece, Italy, Spain & Portugal, which are valid concerns. So many European countries holding these currencies are being driven into the dollar… pushing it higher. However, the long term trend for the dollar is substantially lower. So this short-term rally for the dollar is not so much of a real 'rally' in the strength of the dollar, bur a reflection of the weakness of other world fiat currencies.
Ted Butler Butler Research
Notes: The Big Commercial Bank Shorts (i.e. JP Morgan) in silver have begun covering their short positions in the last few weeks. They have reduced their net short position by about 20,000 contracts (100 million ounces). This is the largest 2 week decline in the net short position in 2 years and represents about 80% of the total short position.
The good news, is that it's really improved the situation; they've liquidated just about as much of the technical accounts as they can liquidate. It's a very exciting development, and very encouraging because while painful, when they are done, they are unlikely to short again, paving the way for a price explosion.
And, from his recent newsletter,
"Silver is not money, it is Super Money, a kind of money that's different than any of us has ever experienced. It's sort of like there is ordinary man, but then there is Superman, who can bend steel in his bare hands, has x-ray vision and can leap tall buildings in a single bound. The main characteristic behind Super Money is that it is outside any government's edict. The value isn't based on what a government says. Simply stated, there is less silver available as money or investment to the world's citizens than at any point in history. Silver's rarity is unlikely to change in the relative near future. And remember - rarity is the first determinate of value.
As long as there are far more efficient mediums of exchange, like cash and electronic payments, silver or gold can't function as a realistic medium of exchange. This is Gresham's Law ; bad money will drive good money out of circulation. Here's a corollary to that law; Super Money drives itself out of circulation. As people start to realize the great difference that exists between money and Super Money, more demand for Super Money is certain.
Silver, more than gold, is the true Super Money. That's because, as time has evolved, there is less of it, relative to total world population. There is less above ground silver bullion in the world than there is gold bullion. Due to relentless industrial consumption over the past 70 years, there is 90% less silver bullion in the world than there was back then. This is something that cannot be said of gold.
Super Money is money that can't be created at will; it only comes from blood, sweat and tears, and at great expense. It is money that can't become worthless. It is money that can be passed to future generations without fear of what the future may hold. It is money whose value will be determined by the collective judgment of the world's citizens. One of the main factors that guarantees that silver is the Super Money of the present and future is how few people are aware of the facts surrounding silver. As those facts become increasingly known, the demand for silver must grow. The next time someone tells you that silver is money, please correct them. Let them know it is Super Money, and make sure you own as much as you can."
John Embry - Chief Investment Strategist at Sprott Investment Management
Notes: John talks about what he considers to be the final death throes of paper currency market.
On gold detractors: There is a lot of angst among mainstream commentators fearing a drop of $300 or worse… these are the same individuals trying to frighten the public with prophecies of falls in the gold price. Despite this ongoing aggravation John is even more bullish on the prospects for gold than he was a year ago.
On how price affects psychology: This is a classic example of where gold has moved nicely higher but people are still afraid. Psychology is a big part of the arsenal of the anti-gold group. Price action creates commentary and if you can knock gold value you can come up with all sorts of reasons that are false which does keep people away from the metals. He says, "I think that's part of the plan".
He says, "I still have the strong feeling that the vast majority of people have no clue about gold and aren't aware that gold is experiencing an historic bull market with much, much further to go. What we have seen today is merely a prelude to the appreciation we are going to see in future years which is going to greatly exceed what we have seen today. "
On Gold re-establishing itself as money: If you go back and look throughout 6000 years history, gold has always been the mainstream currency . It always tends to come back and re-establish itself when fiat money founders or comes under suspicion. We're in a period right now with a lot of debt problems, and sovereign debt is becoming strongly suspect (TP Notes: with just this past week several European countries in danger of default having a dramatic volatile affect on the market). I believe gold is really going to come back to the forefront, because people aren't going to be able to trust any paper currency on this planet.
Parting shots: Most of the experts are saying this: Use this short term down-trend to buy as much as you can.