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Several of our readers questioned why we were suggesting a switch from gold to silver?  Usually we do not suggest switching from one metal to another, but there are reasons for this recommendation.

The silver to gold ratio is near the top of the graph, now sitting just below 62 to 1.  We believe it will correct back into the 50s, 40s or even lower.  In other words, in the future, we believe silver will be worth much more, relative to gold than it is now.

We also believe that 2013 could be the last year in a long, long time where one may be able to take a TAX LOSS on gold.  It makes the most sense to take that loss when gold is at or near a bottom (the greatest tax loss) and by the end of 2014, we expect gold to be much, much higher than it is today and the tax loss option may well be off the table at that point.

We are committed to servicing our clients, and refuse to sit back and not make helpful suggestions.  Whether or not you chose to follow them, I feel it is our responsibility to share our thoughts with you, most certainly, as we believe strongly that the suggestions we make will help YOU.

Will we be right with this particular suggestion?  Write down the ratio – 62 to 1 – and see what it is one year from today.  Then you will see why we felt this was the right thing to do, especially IF you have a tax loss.  As you know, you need not take the loss this year – it can be rolled forward until such time as you have a taxable capital gain to write it off against.  And that would include the day you finally decide to sell your gold and silver, at MUCH higher prices.

As always, before making decisions regarding a tax loss, speak with your tax professional to make sure it works for your situation.

WHY did the price of gold and silver fall since the Fed’s announcement – well, here is what Ted Butler had to say and I agree 100% with his conclusion:

Technical funds, as their name indicates, trade on price signals alone; particularly selling when new price lows are recorded, as was the case this week. Technical funds don’t care a whit about anything except price movement and not a one pays any attention to outside supply/demand factors or what the Fed does or says. These trading funds sold and sold short on Wednesday and Thursday because gold and silver prices were down to new lows; pure and simple. Therefore, the unanimous conclusion that gold and silver prices fell because of the Fed announcement is pure poppycock.

The far more compelling explanation for the price downdraft is that the counter-parties to the technical funds, led by JPMorgan and other commercials acting in collusion, used the Fed announcement to illegally set prices lower on the Comex in order to induce technical fund selling. The Fed’s announcement was merely a convenient cover story for the commercials to rig prices lower so that they could buy as much as they could from the technical funds. I can understand how easy it is for the media to get the story completely wrong; what I can’t understand is how some precious metals market commentators still profess not to see the real story.

– Ted Butler, ButlerResearch.com, December 21 2013

Here is my answer to Rick Ackerman’s view that deflation will act as a huge headwind to a rise in the price of gold:

The gold story will be told here.

80.496 -0.155 (-0.20%)

2013-12-20 11:11:30, 30 min delay

-Jim Sinclair, jsmineset.com, December 20 2013

The inflation v. deflation debate has been going on since before I started in the business in 1983.  In fact, when I first started writing, my newsletter was a “deflation” based publication.  I wrote about deflation v. inflation often in the early and mid-2000s.  This is nothing new.

Much of what Ackerman writes is true, EXCEPT the chart, above is the deciding factor.  Deflation, or stagflation is the result of a soft or falling economy.  But gold will rise due to cost-push inflation due to a failing US dollar (not cost-pull from falling demand).  Like Sinclair says, “It’s all in this chart.”  As the dollar loses traction in 2014, 2015 and 2016, rising prices will be a fact of life since commodities are priced in dollars.  The first episode of Arab oil for other, non-dollar currencies will be the final act, but the curtain call for the bull market in gold and silver.

Here is Rick Ackerman’s article:

Deflation vs. Hyperinflation – RickAckerman.com

by Rick Ackerman on December 23, 2013 3:48 am GMT

Most of us understand that the audacious fraud that has sustained the U.S. economy and the global financial system can only end badly. But how?  As far as I’m concerned, there are only two possibilities: deflation; or less likely, hyperinflation.  In any event, it’s time for another go-round in the continuing debate.  This issue seems to pop up in nearly every forum discussion no matter what the topic, so let’s use the holiday lull to focus on something that is almost certain to be more interesting than the markets. To get things rolling, here are some bullet points of my own:

  • Because of its quadrillion-dollar size, the financial bubble cannot be inflated or deflated away via a gradual process; only a catastrophic implosion or explosion is possible.
  • The most deflationary event we can conceive of – i.e., the banks failing to open one weekday morning – is also the most likely.

Continue reading on RickAckerman.com

Here are Larry Edelson’s latest thoughts on gold.  He has been pushing the date that gold will bottom back from November, to January and now even a bit later.  I don’t know if he is right or not.  I am not a short-term or timing person.  I focus on where gold is headed from early 2014 and beyond.  On that, we agree.

The Two Most Important Questions About Gold Today – MoneyandMarkets.com

Larry Edelson | Monday, December 23, 2013 at 7:30 am

Most analysts and traders say you should never try to pick a bottom in any market. Most of the time I agree. It can be like trying to catch a falling knife. You’re likely to get hurt, and possibly quite badly.

But in gold, it’s second nature for me. I cut my teeth in the gold market way back in 1978.

I called the top in gold in 1980 and the ensuing 20-year bear market.

I nailed the bottom in 1999, putting out my first buy recommendation in 20 years and within $5 of the bottom.

I nailed the financial-crisis bottom in October 2008 when gold plunged over 33 percent, and I told everyone: “Don’t worry, increase your holdings. Gold’s next move will be to over $1,400.”

I then called the top in gold in September 2011, just days after the top.

And as you know, I have been bearish on the yellow metal since then, looking for a final low to occur either in 2013 or 2014.

Gold had a couple of chances at a final low in 2013, namely in June and October, but it didn’t precisely touch major support at those times. So I then told you to expect a January 2014 low.

Here we are today, mere days before the new year and gold has plunged yet again … it’s below $1,200 as I pen this column … and it’s making a beeline for a major low next month.

Moreover, everything I told you that gold indicated to me — based on all of my systems and 35 years of trading the metal — has come to pass.

Deflation rules in Europe, the result of draconian austerity measures, and the latest, European Union-wide Cyprus-style confiscation policy of innocent bank deposits should another bank go under.

Interest rates all over the world are heading higher.

And here in the U.S., the latest Fed move, tapering its bond purchases, is part and parcel of the forces driving all metals lower, into what should prove to be major lows early next year.

I’ll get to the actual support levels you should watch for bottoms in gold and silver in a moment. First, I want to answer a couple of questions that I am sure are on readers’ minds:

Continue reading on MoneyandMarkets.com