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Q:  You must hear this all the time from your clients and readers, but I need to know where you think the bottom is for gold and silver now?

David Schectman’s Answer:

Everyone has an opinion, and no one knows for sure, but when in doubt, I usually contact my friend, a very experienced and qualified professional trader, David R.  Here is what Trader David R had to say…

The volumes are very low and market is very bearish all commodities due to USD Strength.  I would look to buy gold under $1160 and silver under $17.00. Silver has more downside potential due to all the length.  I just understand these markets and I think we are due for some massive moves in bonds, equities and commodities…… and there will be no liquidity….. going to get very ugly for many sometime soon!

Good Luck and Happy New Year,


Q:  I was in Mexico in 1991-92 and watched their currency event (hyperinflation). I have been preparing for a 1 to 2 year event here. Could you give us a better picture of your 3 day event!

Bill Holter’s Answer:

I lived in deep South Texas at the time and can still remember the “Federales” toting machine guns at all of the border towns in preparation for unrest.  Mexico has devalued many times, always a sure sign of a coming devaluation were “3 denials” of a devaluation and the stationing of Federales prior …has always been a sure bet.

As for my “three days” scenario, my point was that it may only take 3 days to go from “normal” to whatever the “new” is.  This could be and is likely to occur over a weekend (3 days) in my opinion.  It may play out over a month or more but I seriously doubt it as the derivative structure is so levered and leaning that once some sort of event “sets it off” there will be no stopping it.  Add to the leverage the fact that we live in an instantaneous information age where something could break in Australia, Asia or Europe and our markets may not even open a few hours later.  In this instance, “you have what you have and that’s all you have.”  In other words, you will not be able to “readjust” your holdings and will be stuck with what you had until the markets reopen at new “re set” valuations.

I also think it very important to understand how “globalized” we are now.  A default anywhere can trigger defaults at the other side of the world while they are sleeping.  A default in any market anywhere can and I believe will spread faster than wildfire and affect other and even unrelated markets.  A sovereign default could for example affect oil or natural gas, a real estate default could affect banks, a default of corn or sorghum or whatever could affect silver, cattle the stock markets or whatever.  They are all tied together with derivatives which often have less than “1%” margin behind them.  It is ALL based on confidence now, once confidence breaks, so will “contracts and currencies” everywhere.  Ponzi schemes live and grow on confidence and die once confidence is broken.  It has always been this way from the beginning of time, it just so happens that we are now living in the largest and most widespread Ponzi scheme of all time.

Q:  I just read this from yesterday’s Silver Investing News. Jorge Ganoza, president and CEO of Fortuna Silver Mines (TSX:FVI,NYSE:FSM), said last week that silver’s current low price won’t be a problem for his company. “We’re quite confident our mines are resilient to lower silver prices,” he said, adding, “San Jose is a mine that can operate below $10. Our cash costs at that mine are $4.” Is this possible? If this is possible, how many mines do you think are in this position?

Andy Hoffman’s Answer:

This is pure accounting semantics.  “Cash cost” refers only to the variable cost of already operating mines, not the all-in cost of exploring for, developing, and operating it.  The world’s best mines are “profitable” at current prices, when all the other costs are not accounted for.  However, most are not, and the all-in cost of developing mines, producing them, and replenishing (or growing) reserves is far more – no doubt, for Fortuna as well.  FYI, the industry has essentially agreed to stop using the misleading term “cash costs,” yet a handful of promotional executives will continue to selectively use this term to promote their stock prices.