I mentioned last Friday that I thought it was an important day. We traded down to the $1,560 level in gold which was the 3rd or 4th time. At the time we were down $18 or so and again near that $1,560 level, I thought that a turnaround from there would begin to solidify the bottom process. We did in fact get a positive close (albeit only 60 cents) and have chopped this week between $1,575 and $1,600. This has been the longest correction “time wise” since the beginning of the move back in 2001 and has taken sentiment to levels only seen (if even then) back in 2008.
I believe that what has been happening is akin to “Custer’s last stand” by the fiat banking cartel. Let me explain. The world over is very close to “hitting the wall” of debt. Debt (and derivatives), or too much of it got us into the mess in the first place and then was used and overused again as the way out of the problems. Many Western sovereign governments (and central banks) have now blown their balance sheets to levels that are clearly and mathematically not workable. In other words they have and are throwing the “hail Mary” pass. Yes they have gotten stock markets to high levels but that is all they have done. The real economies of the world are stagnating at best which means that “earnings” in a macro sense cannot grow fast enough to justify current prices… that is IF currencies don’t “inflate” in response to all of the money printing.
This is a big IF and so far gold and silver have been held price hostage to mask the printing. Speculators have been blown out and we are now going into our 6th month of bondage. At the same time we also know that physical demand the globe over has increased from already high levels. My point is that there are 2 types of investors; “traders” who have been killed and long term investors who just keep on stacking their piles. The legion of “stackers” is and has been growing, taking more and more of the finite supply off of the market at the same time the central banks are creating more “firepower” (money) that eventually leaks its way into the metals. In other words the central banks are creating money at a faster and faster pace, some of which is used to to purchase “anti Dollars.” They themselves are creating the bullets that will eventually be (currently are) shot at them!
As far as this being the “last stand,” it just makes common sense. The U.S. itself is now in the fiscal spotlight no matter how hard they try to shine that light in other directions. Fiscal cliff, debt ceiling, sequester and credit rating all loom which is EXACTLY why they had to put pressure on gold and silver because they (in the real world) are the light itself and cameraman. Only so much can be done with the “paper markets” to suppress the physical prices. There are only so many weak handed speculators that can be forced out and fleeced. There is only “so low” a level which will bring out real buyers who purchase and say “gimme the goods.” We know that since December at least, this price level was triggered as physical purchases were stepped up, demand has come from the little guy to foreign sovereigns and everyone in between.
It seems to me as if the heavy caliber stuff (physical supply hitting the market) has already been spent and now it’s only a bunch of noise with small caliber paper sales. All you need to do is look at the action, previously gold would be “pushed” down and held there. Now, the price gets knocked down but it can’t be kept down, as the saying goes “what won’t go down… will go up.” We have held in tough this week (so far) and I think that next week we should see a move above the $1,600 level which will finally mark a turn in “sentiment.” You see, it is not so much the “price” that the cartel worries about. If it were, $1,500-$1,600 gold would surely be something to worry about! No, it is the “sentiment.” When “bad stuff” in reality is occurring behind the scenes, metals “sentiment” must be destroyed because it is the ONLY investment with an “exit sign” over the door. These “doors” must be mentally locked or “confidence” in a system that only has “confidence” holding it together will be lost. Once turned, in my opinion the metals will put in rallies in both percentage and actual dollars unlike anything seen so far. I can say this simply because we have gone nearly 6 months with the most heavy handed and blatant manipulation seen throughout the entire bull market episode. There had to (has to) be a reason that they made their stand SO publicly and blatantly. Hang in there, the action is about astound!