This morning, the gold market duplicated its strong move up on Wednesday in the Thursday pre-New York hours. Investors finally come to their senses? I doubt it. Probably just JPMorgan letting up a bit. Above $1,400 is where we want to close by the end of the week. $1,478 will solidify the price even more.
“If the gold and silver market, are rigged and manipulated (which they are), why should I bother owning gold or silver?” Some of our readers ask that question. My answer is that the market has been suppressed and manipulated all the way up since the beginning of the bull market in 2001, with gold at $252 and silver around $4.50. Without the manipulation, you would most likely be paying multiples of what it costs you now, to acquire this timeless, real “wealth.” Would you rather pay $3,500 an ounce – or $1,400 for your gold? Gold will find its “real” supply/demand value at some point (in the next few years), so why not take advantage of a price structure that cannot last.
Let the hedge funds and bullion banks knock each other around in the name of leveraged, short-term profits. They can all take a flying leap, as far as I’m concerned. The winners in this comedy are the Chinese, the Russians, the Indians, and our clients. Cheap gold and silver is like “a dead man walking.” It doesn’t know that its days are numbered. You can’t fight the central bank buying of physical metal, not if you want to win. Gold started to rise rapidly when the Western central banks stopped SELLING their gold (up to 500 tonnes a year, plus what they leased out and swapped). Now the big central banks are buyers.
Monetization of debt (QE) is inflation! And if you believe the Fed will stop, you are betting on the wrong horse in the race. They can’t stop. Japan, the US and even the EU are all inflating their currencies – against each other, so it is hard to see the immediate result. But they are also inflating their currencies against gold and silver and once the bottom is in and this turns around, the good times will be back, with a vengeance.
Today Bernanke says they won’t stop the QE now, but a “step down” COULD come soon, more jawboning. Even Goldman Sachs says it will continue at least to 2015 (what they say is the stock market will continue to rise until then, but it can’t rise if the Fed cuts off QE). As to be expected, the hedge funds sold gold and silver on Bernanke’s comments. Can they really be that stupid? How can anyone honestly expect that the Fed will cut back their bond purchases? Talk, talk, talk – that’s all we get. And it works, for a short while. Why would anyone TRADE gold and silver? They whipsaw up and down every day. They move in counter-intuitive ways. It’s a rigged game. But that is no reason to avoid the physical metals. It is this very manipulation that allows us to buy gold for far less than its (monetary) value would other wise be.
Do not let the manipulation worry you. For now, it is your friend. Do not sell at these prices unless you absolutely need the money and have no other alternative. Hold tight or if you are able to fight your “emotions,” this is the time to buy. As Lord Rothschild said, “Buy when there is blood in the streets.”