Disclosure: I expected the triple bottom in gold and silver to hold. It did not! Silver crashed lower (from $19.28 on August 28 to $17.26 on October 29 to under $16 on October 31) and then gold plunged below $1179 to about $1160.
What now?
- More of the same. Both silver and gold fall further. The High Frequency Traders and central banks have plenty of “dry powder” and can push prices lower. From the perspective of the Asians who are buyers, what is not to like? Or,
- Both rally from here, flop around, and then fall further. Or,
- Both build a base at these prices and maybe collapse again, but the “longs” stand for delivery and the COMEX is forced to default and “cash settle.” Or,
- Both rally from here because breaking lower support was merely a consequence of the political and financial elite boosting the stock market and the dollar index prior to the US elections. Markets have a history of making unusual moves prior to elections. Or,
- Both rally from here and make new highs, probably in 2015.
Does it really matter?
- These prices will force the mining industry to consolidate. There will be casualties. Eventually supply of gold and silver will decline and prices will rise.
- The more gold and silver fall the more “weak hands” will bail out and move to cash or buy something they hope will move up. Eventually gold and silver will rally and the spike up will be as powerful as the crash down.
- Large traders and others who have positioned themselves to profit from the take-downs and the subsequent rallies can book huge profits. Buy low and sell high, or sell short high and buy low. It is much easier when a trader has the inside track knowing when the paper market take-downs will occur, or if the trader can actually create the take-downs.
- Because you were wise enough to walk away from the financial casino and the sharks on Wall Street and safely stack your silver and gold in a private vault.
What do I think? When the data does not confirm the expectation, it is time to revisit the plan. Gold and silver crashed below support. So, back to basics….
- US official national debt is increasing roughly $1 Trillion per year. It will increase. More debt means more currency in circulation. Over the past 100 years more currency in circulation has created higher prices for gold, silver, food, energy, cigarettes, beer, Wall Street bonuses, and payoffs to legislators.
- The Fed and other central banks will do almost anything to avoid deflation in stocks, bonds, and most consumer prices. Expect more “money printing” and higher inflation.
- Stocks and bonds can be levitated but not forever.
- Gold and silver can be crushed, but not forever. After all, they are real money.
- Asian demand for gold and silver is strong and expected to remain strong. It seems that western vaults are being emptied, gold is sent to Switzerland, recast into 1 kilo bars, and shipped to China, India, and Russia. It will probably continue until no more gold can be shipped from west to east. Price rises will occur.
- Wars are inflationary as more currency is borrowed and printed to pay for bombs, jets, bullets, military contractors, and soldiers. More wars are on the horizon.
- There are 100 other reasons why silver and gold will eventually rise substantially. They include more QE, Ponzi finance, Japanese QE, bond and currency market bubbles, massive debt, demographics, delusions, and deflationary forces.
But WHEN will gold and silver prices rally? I don’t know. Ask the HF Traders, but US elections are Tuesday and that might be important.
What do the charts show? Obviously they show silver and gold prices falling, almost relentlessly since 2011. Prices have collapsed, technical indicators are deeply “oversold” on quarterly, monthly, weekly and daily charts. Expect prices to rise when they are finally ready to/allowed to rise. When? Ask the HF Traders. But oversold conditions are usually corrected with rallies. The more “over-sold” the more likely a strong rally will develop. Not inevitable – just likely.
Conclusion:
Debt is rising. Prices will eventually follow. Demand for gold coins, silver coins, and gold bars is strong. Yet prices fall. Strange!
More wars and larger wars are on the horizon. Currencies will be devalued and printed to finance the wars. Some investors will buy gold, silver, art, land, and real estate for protection from the inevitable inflation and devaluing currencies. Higher prices for gold and silver are coming.
Darryl Robert Schoon is correct when he says “buy gold, buy silver, have faith.” And yes, stacking now is a good idea. For more information on higher gold prices, read my book: “Gold Value and Gold Prices From 1971 – 2021.”
Gary Christenson
The Deviant Investor
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