I have closely followed most of the industry stories that discussed the recent ambush of gold and silver. Opinions vary as to who was responsible, why they did it and when the fall will end. I think it’s safe to say that when hundreds of tonnes of “paper” gold are dumped on the market in a matter of hours, the sale was not profit motivated. If it wasn’t profit motivated then I have to believe it was engineered with a specific purpose in mind – to smash to price in a fast and furious manner that would engage further hedge funds selling and push the price ever lower and lower.
Just before all of this happened, the “big guns” were called out – Ben Bernanke, Paul Krugman, Mario Draghi and Goldman Sachs. They all made public statements not supportive to gold. Coincidence? There aren’t any coincidences, not in this arena.
Merrill and Goldman were reported to be the big sellers. They were, no doubt, positioned to make a lot of money on the fall. But the profit motivation is not enough to explain the size of the drop. This was not just an ordinary bull market “correction.” They don’t happen out of the blue without any particular reason, with this kind of intensity. No, there was a reason for this.
The Fed held a meeting with the heads of most of the large banks and insurance companies the day before the attack. Coincidence? Once again, I don’t believe in coincidences.
“We’ve traded gold for nearly four decades and we’ve never … ever… EVER… seen anything like what we’ve witnessed in the past two trading sessions,”
– Dennis Gartman, via The New York Times
Fed and Bank of Japan caused gold crash
Commodity prices have been falling since September, culminating in a rout over the past two weeks. That is a classic warning for the global economy.
– Ambrose Evans-Pritchard, The Telegraph, April 17 2013
In 1975 Gold “corrected” by 40% down to $100/oz and then shot up to $850 by the end of 1979. But the “correction” in 1975 was spread out over a much longer period of time. It didn’t happen in a day. The only thing remotely like this was the complete collapse in early 1980 and it did signal the end of the bull market. Of course, interest rates were allowed to rise to over 15% then, and that is what put an end to the bull market in gold. Now, interest rates are near zero and are less than inflation. “Negative” interest rates fuel the rise in goId. In such an environment, it is safe to say that the bull market in gold is NOT over; in fact it is about to launch to new all-time highs as soon as the bottom is in. We are not far off now. If the rapid rise, early Friday morning follows through, the bottom is already in.
Several people have written to me and asked, “What do you think of Larry Edelson now?” I think he made a great call! But I don’t believe it would have happened without help from the Fed and their partners on Wall Street. The collapse to $1,350 was not a natural event, it was orchestrated. Trying to predict prices in a manipulated market (unregulated, for sure) is impossible. But Larry’s call will not help anyone unless he directs his readers back into gold near this bottom.
The last I saw, he was still waiting for gold to move back above $1800 before he would become bullish and usher his readers back in. If he sticks to that line of thinking, and lets people ride this all the way back up, without taking advantage of these fabulous prices, he hasn’t done them any favors. We are getting people into gold and silver at these prices. We are helping our readers buy now because the supply, especially of silver, is dwindling. We believe it is a mistake to chase the rising stock market. How many of you entertained the thought that you would ever be able to buy gold at these prices again? I never did! Not to take advantage of these prices a mistake. For the last week, we have sold more gold and silver than at any time in our 23 years in business. Our readers see this for what it is – a gold-wrapped GIFT. Larry won the first half of the game, but the second half is now in play. Let’s see how he handles this portion; the move back up.
My issue with Edelson, and I have written about this before, is not picking the price. It’s that he influences gold buyers (physical gold) to trade in and out of their positions. He also suggests hedging and there is nothing wrong with that. We do not believe the average person should be trading precious metals. Trading is not a game for amateurs. Most of us should be accumulating them. You buy when the price is high, you buy when the price is low; it averages out. In fact, cost-averaging is prudent. But you are NEVER out of the market and you never sell (your physicals) unless it is absolutely necessary. Gold, for the umpteenth time, is not an investment. It’s money.
And yes, I still believe it is an inflation hedge. This is but a normal price “correction” in a two decade-long bull market (and it will be that long before it’s over). That is normal. If anything, gold hasn’t had enough corrections along the way. You can’t look at these markets as a freeze-frame moment-in-time. You have to step back, look at the big picture and the long-term performance. If we own gold because the Fed is printing too much money (and they are), because the government is borrowing too much money (and they are), and because we are concerned that the dollar will lose value (and it will), then nothing has changed, except we can buy more gold and a lot more silver for less. And that dear readers, is a really good thing.
I’m sure many of you remember Gold’s spectacular fall from about $1000 to $680 circa 2008. How many of you have regretted not buying at those levels while you have been watching Gold’s inexorable rise since? You’ve been waiting for a price drop, haven’t you? So what are you waiting for?
– Gordon Gekko’s Blog, April 17 2013