Gold and silver have now had three “outside reversal” days to the upside within the last three weeks. Those who follow the precious metals were absolutely shocked (after being shell shocked) to see this type of action the first time in many a moon…not to mention a “three’fer!” For those of you who don’t know what an “outside reversal day” is, let me briefly explain. It is the “outside” part which is important and without it, the “reversal” part is much less meaningful. For this to occur, trading for the day must be both lower and higher than any trades performed the previous day. In other words, the “bar” on the chart must totally engulf the action of the previous day and then close in the opposite direction of the previous momentum. Outside reversal days are very rare in any market. One of these may only occur once in a year’s time or even longer. The important thing to understand is when you do see a reversal day and accompanied by big volume, the “trend” is probably changing!
That said, “charts” in today’s marketplace are not what they once were. There was a time when charts were very reliable, this changed many years ago. I say “changed” because if you go back to 1988, President Reagan by executive order created the “working group on financial markets” as a result of the ’87 crash…otherwise known as the “plunge protection team” to prevent stock market crashes. Initially, this may have been a good idea with “good intentions.” The problem is this, the “PPT” has morphed into something out of the old USSR which tries to “manage” everything, everywhere, ALWAYS! This obviously changes the value of charts, if they can be “painted” (they are), then they don’t show a true picture, rather they show a picture those doing the painting want you to see.
Yes, I am sure some will call me a conspiratorial nut job for saying that all markets are manipulated all the time, they are! I don’t even have anything to prove, the banks and brokers have already done this for you by paying fines for “rigging” in nearly every market. Why would they pay these fines if they were innocent? Please don’t tell me because of the “nuisance factor,” $30 billion+ in fines is a little more than a “nuisance!” In my opinion, these fines have been paid for two reasons, one more important than the other. First, these firms do not want to admit guilt. If they actually did admit guilt they could be shut out of various markets as admission of guilt in many cases by law requires them to cease and desist on various exchanges. This is a very important factor …but not THE important factor. THE important factor is the process called “discovery” where the firm (or firms) in question must open their books or pull their pants down so to speak and allow outside attorneys to see nearly everything. “Discovery” allows outside lawyers to see the books, ALL the books of the firm that a judge allows. In other words, much, if not ALL of the dirt becomes visible! You do see the problems this may raise? The process of “discovery” means you can see what firm A was doing …AND “who” they were doing it with! Confidence in our “free and fair” markets would evaporate and the game we call everyday life would end. Can you imagine what would have happened were Enron’s records not destroyed one day in 2001? In any case, if you do not believe markets are manipulated every day by now, then please stop reading because there is nothing I can say to enlighten you.
Now, back to the precious metals. We have now had three outside reversal days within three weeks and on VERY HIGH VOLUME! Normally just one outside day would suffice but we have had three. Normally the outside day would be a very good signal that the trend has changed, I do not doubt this is the case now. What I do doubt is the reasoning behind what has happened. I believe the outside days have occurred because of “front running.” Gold and silver “prices” have been forced to levels where it is not profitable to mine in many cases. These low prices have also created far more demand than normally would be for the other side of the equation. Gold and silver have been in a supply demand deficit for years which has been exacerbated by the price suppression. In other words, “price” was not allowed to rise to ration demand and entice new supply. There is a giant problem though, it’s called “mathematics.” If there has been a supply/demand deficit then where has the deficit been funded from? Yes, you got it, Western central bank vaults.
I believe we have seen these outside day reversals because someone, somewhere “knows something” or at least think they do. Someone (the Chinese and others) have done the math and can “smell” the bottom of the barrel. Maybe this bottom of the barrel is being exposed by the hugely negative GOFO rates or backwardation? Maybe someone has tried to make a big purchase and can’t do it …or cannot do it without a big premium?
As I wrote a couple of days ago, “price” will affect both supply and demand. I believe what this current change in trading activity points is “price” has now affected supply and demand TOO MUCH! I believe we will look back at these three reversal days as a very big inflection point. The future action I now anticipate is an outright explosion upward in price as the physical market takes the pricing ability away from the paper markets. Gold and silver are very different “animals” compared to stocks, bonds, other commodities and even other currencies. Gold and silver are “money” and carry with them more “emotion” than any other asset class. Hard money advocates are more passionate regarding the metals than anything else. The naysayers are more dispassionate (hateful of) gold and silver than anything else. Governments and central banks are obviously more disdainful of gold and silver than anything else because the metals are a direct (and real) competitor (understand THREAT) to their “product.”
I mention this “emotion” factor because this is at the heart of the argument. Gold and silver cannot be allowed out of control …otherwise “confidence” in the status quo will be shaken to destruction. One other “emotion” factor is that “man” always wants something he cannot have. In fact, I would say that man will sometimes want something he cannot have even more than something he needs but this is arguable. The game over these past years has been to depress gold and silver prices in order to display them as poor choices and plentiful in supply. This has allowed interest rates to trade far lower than they otherwise would be. Artificially low interest rates have aided the central banks in their numerous “reflation” exercises. The problem now is supply in the physical market has become very tight and pressing prices lower are no longer scaring any more apples to fall from the tree. In other words, those who would be scared out of their positions have mostly sold. Now, lower prices are only acting to bring more and more value investors into the market and increasing demand. The “fulcrum” (price) must be moved to create a balance as it has been incorrectly placed for many years. I believe the old saying “there is no fever like gold fever” is about to surface. So I now wait patiently for the upside explosion as something has changed very drastically in the trading patterns. Though Mother Nature can be mocked via leverage for a spell, her laws can be ignored for only so long because there is such a thing as the real world with a real supply and demand equation!
Having been involved personally with an action I know how discovery can work against the side that has committed the action causing harm.
I do not believe for one second that this will be allowed to go to discovery.
The old adage will likely apply here.
Your first loss is usually your best loss.
Those that have have manipulated will run for cover.
Who knows the manipulation of precious metals may soon be over.
Stay tuned we will likely know before the end of the month.
You can ignore reality for a while, but you cannot ignore the consequences of ignoring reality…Eventually, mother nature trumps all.
Excellent article, Bill. Thanks for making the complicated clear.
thank you Brad.
Bill, I know the TPTB can manage price in any direction but given the current supply/demand situation I can’t see how they can “manage” prices of AU/AG higher in a slow and controlled manner. It would not surprise me one bit that one day we will wake up in the West and AU/AG will be revalued substantially higher. The scramble would then be on in the West to accumulate but there will be no supply.
exactly, this will be known as a “re set”.
Sorry to say, but it’s unlikely a price explosion upward in Gold or Silver will happen until the paper pricing mechanism collapses. Not to say it won’t happen, it will when we most likely don’t see it coming from left field. The Chinese have a very patient mind and they also will try to allow us to save face. Anything else is bad jo jo for them. Because of this the Chinese most likely will pull the pull plug when the financial system is in full blown collapse. That way they can save face because everyone will be running for the nearest exit.
Just my thoughts.
had you considered that the change in trading may just be the passing of the baton from paper to real? Paper has pushed too hard and now, physical is beginning to take precedence. Happy Holidays back at you!
The pricing mechanism has already collapsed, in the form of fines imposed on the bullion banks who have been caught in manipulation in the monetary metals, the massive paper to physical ratio. However, it won’t be any western government that suddendly raises the dollar price of the metals, I believe it will be the Chinese who will do it. They have been extremely patient with the western governments QE shenanigans and they have mentioned the extremee expansion of the fiat currency issuance. This is why they have stopped adding any more U.S. debt and have started to shed themselves of U.S. paper.
The Asians have been purchasing massive amounts of gold for far longer than anyone is reporting. My best estimate is they have been accumulating for the better part of two decades. When they make their announcement of their gold reserves, “Shock and Awe” will be defined on a whole new level.
yes Tim, of course it will be the Chinese.
Another great article. Thank you.
It is plain to see that every thing is manipulated and the whole game is a rigged casino, but all you have to do is tell the sheeple that it isn’t so and they seem to actually believe it.
I guess we could go to the sheeple’s houses and take every thing of value and if they catch us we can just say it wasn’t us and they may just believe it.
I’ve been telling my wife for years that I have never seen a time where so many people can not think for themselves! You think it is bad now, just wait until “common core” education has had about 20 to 30 years to reshape the brains of our youth.
Oklahoma figured out that common core was a brain washing job and our legislature banned it from the state, in other words, “…thanks federal govt, but NO THANKS…”
I wish the sheeple could think for theirselves because I sure don’t want the job as thinking for myself is a full time job.
I would be nice if gold ad silver did break away from the manipulators and their ponzi scheme. If so, put away the ponzi game because it would be about over.
Again, thank you for keeping us 1% to 2% non sheeple updated.
common core for those with no common sense.
Hi Bill, I was planning to buy a few (1/4) ounces of gold and silver later this month, but I have to turn to plan B. I’ll be buying today or tomorrow, because I just don’t trust everything I now see, read and hear (tanks, migs, f16, gofo, repatriation stories, Japan QE, …). The list is too long. Thanks for the article.
you’re very welcome.
It’s interesting that you talked about balance…”The “fulcrum” (price) must be moved to create a balance as it has been incorrectly placed for many years.”
Recently, a youtube video showed a black horse floating in the sky by Jeddah, Saudi Arabia.
And when he had opened the third seal, I heard the third beast say, Come and see. And I beheld, and lo a black horse; and he that sat on him had a pair of balances in his hand. Rev. 6:5
Interesting times indeed. I think you are correct that we are very close. Thank you for your articles, I enjoy them very much.
Thanks for the steady insight, Bill.
I have a question that no one seems to be addressing yet. Once gold and silver jump, be it to $2000, $7000 or whatever, the game will change again. Suddenly some of us who have been buying gold will sell to profit, and shuttered gold mines will begin producing again. With this increased supply will come a steadying of price. I’ve heard some estimates of up to $18000 for gold, based on matching available gold to the QE trillions out there; but long before that could happen there will be a big expansion of gold supply. Any thoughts on whether that will represent a plateau, or the price peak before a drop?
Doug, you have this a little bit wrong. Pick a price, no price will surprise me. Supply will NOT expand greatly until a new currency, one that can be trusted is introduced. Any new currency MUST have confidence in it. Mine supply is VERY INELASTIC to higher prices.
There *might* be a few people selling their metals for paper profits adding to the supply, but not enough to make a difference in paper pricing. The specualtors have already been shaken out and the moms and pops have already sold their metal to the Cash for Gold places for pennies on the dollar. Most of ones left with skin in the game already know that both gold and silver is not an investment, but rather a insurance against a currency collapse, which is unfolding before our eyes.
The ones who are foolish enough to sell after any reset will wish they hadn’t let go of their metal, because once it’s sold, they will never get it back. These are the ones who never understood gold.
Bill, You have suddenly become a technician!! You maybe right, however outside reversals do not mean what they used to (meaning higher risk of failure than before). Going against the dollar, which just astounds me in its rise, is also iffy. Silver is acting iffy today also. Gold stocks are also iffy here, they cannot get above the 50 day. I am not trying to be argumentative just pointing out the other side. Even though everything is manipulated, charts still matter. Reading them may change through time, but an uptrend still is up and down is down. That is why us goldbugs are hurting. We (I) ignored the charts and have paid the price. To make matters worse, we (I) have ignored one of the greatest bull markets in stocks. Profit and Loss statements still mean the same. But I will end this in agreement with you Bill, this is the best looking potential reversal in gold in years.
3 very high volume reversals and a monthly chart which is highly compressed with screaming fundamentals? And no, I am not a technician but the latest action is certainly different and seems to have gone outside of the manipulative box.
As always, on que the bottom callers have come out ….again! Now is the time to back up the truck! How many times have we heard this from $1900 all the way down to where the “Legendary Jim Sinclair” made another wrong call several months ago on how the bottom was in. Sorry folks, still aways to go, especially in $US, you should be looking to get back in under $1000 an ounce. As for $18000 gold, forget it, it ain’t going to happen, $5000 tops depending on how governments react. Of course we’ll have a bounce here, but that’s all it is, still a couple of hundred dollars to go to the downside at least.
yes, excellent advice from someone who says there is “a couple of hundred dollars at least” risk versus his own expected $3,800 upside. Great advice for all the readers!
Great article Bill!
I have a question that no one seems to want to answer. With all the information about the collapse of the dollar and holding precious metals, should a person get completely out of equities and paper instruments and convert to precious metals. In other words, is there a percentage of your assets, in your opinion, that should
be held in silver and gold or is it just a matter of personal discretion? If a collapse, or reset occurs, wouldn’t it make sense to be completely out of dollar assets while the ‘gettin’ is good?
I’ve been following your articles for a month or so and I really enjoy your insite and knowledge and your appearances with Greg Hunter.
Thanks Don. It is your personal decision, I am personally almost completely out of dollars.
Mostly speculation from the author of this piece.
Gold is a long term buy.
Therefore it most useful to look at monthly charts when considering physical purchase.
Just because there were 3 days of shenanigans does not mean necessarily that there has been a trend change.
I am not buying any physical whilst the 5MA is below the mean of the monthly Bollinger bands.
Furthermore, I am not concerned about being unable to procure because of supposed supply issues.
so you are now bearish again today? Bullish a few days ago in a bout of schizophrenia or just in an argumentative mood?
Yes I was bullish in paper and have sold half contracts for a nice profit.
My sell stop on the rest is $1201.
I was in at $1158. That’s not bearish and definitely not schizo. Thats a good trade !
So what anyway?
What has that got to do looking at the still obvious monthly downtrend, which apparently you have not been able to recognise for a couple years now.
Stating an opposite opinion to your regularly incorrect beliefs about lack of supply in the gold markets does not make me argumentative.
Its an open forum,yes?
You look too much at the minutiae but I agree wholeheartedly with you that gold will go no offer. I just think its quite a while off yet ( pretty sure I said that this recent backwardation would likely not last and it hasn’t.)
gold is plentiful? wrong, this bout of backwardation is 2nd longest streak in last 14 years. the longest was earlier this year. There is a supply problem.
If I am regularly incorrect, you are not very intelligent reading for my “incorrect” work.
I sure hope that we are all here to see the outcome of this come this time next year.
The world financial situation will have likely experienced a major change of circumstances by that time.
Sure glad I am holding physical and not some paper promise.
it won’t be pretty.
A strong possibility that the solvency of some bullion banks might have been tested by this time next year.
Thank goodness that I learned a long time ago that a promise means little when one does not have the ability to deliver such a promise.
Thanks again Bill. I truly appreciate the efforts of you and Andy Hoffman here.
It was fun having time this last couple of weeks to follow you here closely.
I likely wont be able to participate much in the discussion over the next month.
all the best
thanks Mike, all the best to you too!
It sounds like it’s time for something to happen, been waiting for years now. I hope there is still time to stack. Does it really seem any different than 2 yrs ago? A part of me feels like this whole game will go on for another 5 or more years. I mean if 18 trillion in debt and over 100 trillion in unfounded liabilities has not brought down the system then what’s another 5 trillion or approx 5 more yrs at the current pace? Why can’t it just keep going on if whole world is printing at same time? Just saying? These things cross mind
because the gold China has imported was exported from somewhere …and there was only so much of it to start.
That about sums it up Bill; nice article.
I’m all in on physical and going for mining stocks.
Ya’ll who wait or are unbelieving of the Central Bank Ponzi scheme will be left behind. Please, at least try to protect your family with some of the above.
amazing how so few can see …or want to see.