Regarding the question of current and near-future prices of precious metals, it occurs to me that we might be in the midst of a revealing test.
Are prices now - finally - “breaking out” and heading skyward? Or: Are the Powers That Be still in control and easily able to cap prices wherever and whenever they like?
The answer to this question might be revealed shortly - perhaps as soon as this week or in a few weeks.
Last Thursday precious metals prices surged, silver going up more than five percent in one day. Over the past 30 days, silver prices have risen from $18.70/ounce to (as I write) $20.84/ounce.
Many gold and silver prognosticators are essentially telling us that “this is it” - the long-awaited price increase or “correction” is finally upon us.
On one hand, fundamentals as well as geo-political and economic events seem to back up the confidence of these bullish pundits. A partial list of “bullish” precious metals events includes the following:
1) Inflation is rising, something even the Fed now acknowledges, although it dismisses this as mere “noise.”
2) Wars continuing, breaking out or threatening to break out all over the world (Ukraine, Iraq, Syria, etc).
3). Interest rates either at near zero or even negative ... and, per Fed “guidance,” set to remain so indefinitely.
4) Continuing reports that the economy is NOT recovering as was predicted. The possibility even exists that we will soon officially be in a recession (two consecutive quarters of declining GDP).
5) Stock market “bubble” still expanding, creating (in some investors anyway) the thought that when it finally burst the fallout will be immense (and presumably make “safe haven” status of precious metals even more appealing).
6) Demand for physical gold and silver remains high especially in China, India, Russia and among “stackers” of bullion coins.
7) Growth of governments and government deficit spending continues unabated.
The list could go on, but I’ll stop here. The point, hopefully documented by the above, is that there is no shortage of solid, common-sense reasons precious metal prices should be rising in such a world.
On the other side of the coin (pun intended), is the mind frame of TPTB - a mind frame that is terrified of rising precious metal prices and has made the containment of precious metal prices a priority of “national security” stature.
All done to protect the dollar as the reserve currency of the world, which ensures that the U.S. government can continue to print money as needed to pay its bills. To, in other words, preserve the Status Quo.
The ‘keys to the game’
So in attempting to predict future prices, one must consider which dynamic/event/mind frame should be given the greatest weight.
Who or what consideration will carry the day? Pro precious metal “developments” or the resolve of powerful entities who many of us assume are completely committed to preventing a “break out” in prices?
If you were a betting man, who would you bet ultimately prevails?
Or: what’s going to prove to be the deciding factor in establishing today and tomorrow’s prices?
After all, we all are making bets, aren’t we? This is going to happen or this is NOT going to happen. Lay your money down.
When betting on the outcome of, say, a football game don’t those of us who have checked a line sheet in our lives perform a mental calculus on what factor will prove most important in deciding a game and the final point spread?
I know I do. Is the home-field the most important consideration? One team more motivated than another? One coach better in big games? Does one team have the stronger offensive line, which will wear down the other team in the fourth quarter?
When making (hopefully) an educated wager, we assign “weights” in attempting to predict a future occurrence.
There might be seven reasons for betting on, say, Auburn, to cover the spread but what’s the one factor that trumps all the others?
Last November, I bet on Auburn over my team (Alabama). I made my bet with a close friend of course. The Tigers were getting 11 points at home. I bet on the Tigers because I knew how hungry they were (as a team and their fan base) and how strong and efficient they were in the fourth quarter. They might lose, I figured, but it would be a close game and they’d have a chance to win in the end. They certainly wouldn’t lose by more than 11 points. As it turns out, it was easy money. My hunch/insight was right on.
Betting on investments is not that different than betting on football games. You identify one or two “keys to the game.” If you feel strongly about these “keys” (and think that the betting public maybe hasn’t fully appreciated their importance), you make your bet feeling you have an “edge”- one piece of solid knowledge you can bank on, if you will.
Long bets vs. short bets ...
For three years now I’ve been betting on silver as a smart investment. My “key to the game” - and the reason I’ve made these bets - is simple enough: America, I’m betting, is effectively broke and must print money to stay in business. This assessment tells me that, at some point, the purchasing power of the dollar will decline precipitously and that demand for gold and silver will become much greater.
In investing parlance, I’m “long” precious metals. I don’t know when my hunch will be validated by events, just that at some point that it will.
Is that time now though? What about a short-term bet? A bet I’d have to place today and cash in or pay out in a couple of weeks or months?
Which brings me to the “test” I mentioned at the beginning of this column.
Are the long-term fundamentals finally starting to prevail and push prices higher, with more increases to be expected in June, July, August?
Or is the other hunch I’ve acquired - that The Powers That Be control prices and will do EVERYTHING they can to keep them “contained” - still “the key to the game?”
Who do I bet on? What betting variable is THE KEY?
If I was a betting man, I’d have to bet on The Powers that Be right now. After all, my working assumption is this: When everything points to prices going higher, the people who establish the price no doubt know this. If this is indeed a worst case scenario from their point of view, doesn’t it make sense that they are going to pull out all the stops to prevent this occurrence (rising prices) from happening?
Three quick questions:
Is “capping” prices vital to them? Check.
Do they have the means to cap (and reverse) prices? Check.
Is this, therefore, what will happen?
If I had to, this would have to be my bet. To me, the most important “key to predicting the game” is the fact that one group of people and institutions CAN determine the price (and said desirable price is not “through the roof”).
Considered differently, if “they” do not knock-down the price today or in the near future (and, as assumed, they possess the means to do so), then maybe this price control operation was not as crucial to them as we’ve been led to believe it was.
The test we might be watching right now then is a test to see how important price control is to The Powers that Be. If it’s as important as many of us believe, prices will be nipped in the bud soon enough.
To not take this action is to let “fundamentals” and the “free market” do what they will.
This would effectively represent a surrender - or at least a major change in strategy - on the part of the Manipulators.
For my part, I don’t think TPTB are willing to surrender just yet. Or think that they have to surrender just yet.
But, just like in a football game, we will know what happens soon enough.
If TPTB were going to raise the white flag and change strategies, with all that’s happening in the world and with what happened to precious metal prices last week, now might be the time they tip their hand and signal that they are through intervening in the precious metals markets.
Maybe this is what’s going to happen and indeed is happening even as I write. In which case, I’d lose my short-term bet but cash a winner with my long-term bet on silver.
I’d be happy to lose, just like I would have been happy to lose my bet on Auburn last November.
But, for now, I don’t think I’m going to lose. The key to this bet is still the fact that The Powers That Be want to keep prices contained. And, for now, can still do this. In my wager analysis, this is the consideration that should carry the most weight.
But this week might be a test that proves whether this “key” still applies.
Is the game still rigged or are all bets (outcomes) finally possible?
As mentioned, the answer to this test question might be coming as soon as this week. Like most silver “fans,” I’ll be watching closely to see what transpires. What happens could tell us much about where we place our wagers in the months to come.
***
Bill Rice, Jr. is managing editor of The Montgomery (AL) Indepedent. He can be reached by email at bill@montgomeryindependent.com.
About the author
