Since early February, gold has fallen by more than $400 an ounce and silver by a gruesome $13 an ounce. It took five months for these losses to occur and it will probably take many months for them to reverse – unless JPMorgan decides to exercise a short-squeeze, in which case the reversal could occur much quicker.
Everyone knows the phrase, “buy when there’s blood in the streets.” We’re knee-deep in it right now. Optimism is running at the lowest level since 2000. Many of the formerly bullish newsletter writers have jumped ship. The Aden Sisters and Richard Russell, although still long-term gold bulls, are very cautious now and speak of “possible” further new lows on the horizon. The Aden Sisters and Richard Russell have been writing favorably about gold since I started in the business in the early 1980s. When old timers like them throw in the towel, there really is blood running in the streets. Jim Sinclair, Bull Murphy, Jim Willie and Eric Sprott are bullish. The fundamentals are über-bullish – they were five months ago when the latest leg of the collapse in price commenced.
What really surprises me is how strong our business at Miles Franklin is – in spite of the falling prices and all the negativity. There are still like-minded investors out there who are not put off by the bad press and low prices. We still do our fair share of six and seven-figure orders. But when the bull market in gold and silver starts up again, and it will, there is an army of potential investors sitting on the sidelines waiting to re-enter the game.
I suspect it will be slow at first, because there will be some lingering doubt as to whether the rising prices are a “trap,” or just a “bounce,” but the rising prices will NOT be due to the investors in physical gold here in the U.S. rejoining the game. The rise will come from the funds switching large sums of money back into gold and silver via the ETFs and the Comex. Most of them are not believers in precious metals (say Paulson, Embry and a few other real Gold Bugs). Most of them follow trends, momentum and rising prices. They will join in. They don’t care if the item going up is gold or pork bellies. They make their living by trading and they trade based on short-term data, and especially moving averages. The trick is to get them back to buying instead of selling and for that to happen, the dollar will have to fall, which it will, and the large orders for physical metals coming from China, India and Russia will have to overwhelm the ability to deliver in a timely fashion, which is already starting to happen.
Andy Maguire told King World News there are delays of 100 days on large gold orders in London (See article in Critical Reads section at the end of the newsletter). Keep an eye on interest rates, which are rising now. Keep an eye on the dollar. Once it drops back into the 70s with downward momentum, gold and silver should be well on their way back toward their previous highs. Sinclair says he expects gold to turn around in July. Larry Edelson, who I have accused of being way to bearish, is on the verge of singing a new song. He has already stated we are at or very near a bottom and it is time to start slowly accumulating gold once again. He is super-bullish once the bull market resumes.
As Bill Murphy so often says, “price action makes market commentary,” and price action has been abysmal for a long time now and that gives ammunition to the Wall Street stock and bond peddlers who love to hate gold.
But our business is holding up well in spite of the negativity. Plus, our newsletter has more readers today than at any time in the past, and that is amazing. We get more new people every week than we lose and we are slowly gaining mass. It seems between Andy Hoffman, Bill Holter and myself; we have offered enough of a lifeline and done a good enough job of hand holding to keep the faithful on board. They won’t regret it. Down the road, when gold is making all the headlines and is the resurrected golden child, everyone will be a bull and tell you how they always had faith and picked the bottom. Bull crap! You can count the loyal in our camp on the fingers of one, or maybe two hands. We have never abandoned gold and for a good reason – the fundamentals and common sense have made a strong case not to jump ship. We are not traders. We do understand gold’s role in a world of exploding fiat currencies. Just remember, you don’t win a war by winning all the battles, you win the war by being the last man standing. Gold has been the last man standing for over 2,500 years and this time is no different.
On Friday I published Jim Sinclair’s graphic of The Five Golden Pillars. That is one of his basic tenants, first published early in the 2000s.
All five pillars must be in place for the bull market to gain momentum. Pillar number three now joins number two, number four and number five. JPMorgan just came out with their first “overweight” call on commodities since 2011. The only remaining pillar is number one, the “Recognized Top in U.S. Dollar.” With QE still firmly in place with no indication that it will be curtailed, with the BRICS trading outside of the dollar, and with record redemptions in Treasuries, the dollar will soon join the rest of The Five Golden Pillars and gold’s bull market resumes. We’re getting very close!!
You may find Yra Harris’s short piece in Jim Sinclair’s section below interesting. The dollar is falling against the Yuan and Harris believes the gold price in Yuan is more important than in dollars. The Chinese purchase physical gold and the stronger the Yuan, the cheaper gold is, denominated in dollars. He thinks we may have hit bottom, based on Yuan price of gold.