By Steve St. Angelo, SRSrocco Report
It didn't take long for the hoards of zombie bank analysts to come out with their bearish precious metal forecasts now that the price of gold and silver are down 25% and 40% respectively since the beginning of the year. Coming straight out of the bankers play-book, it looks like we should get used to seeing more of this sort of high quality analysis in the future.
Barclays Smiles as it Forecasts Lower Silver Prices
Silver sits on shaky ground: Barclays was published on Bullionstreet, July 13th. According to the article:
LONDON(BullionStreet): Sizeable, cash-negative and physically backed ETPs expose silver prices to considerable downside risk, major global financial services provider Barclays said in a report.
“Silver has been the worst performer across precious metals, but we believe it faces further downside risk in the near term. While there is some scope for industrial demand to improve and lend support to prices as the year unfolds, given the muted response to lower prices thus far, we believe this cushion is unlikely to materialise in the coming weeks,” analysts at Barclays Plc said.
What a surprise coming from Barclays. They believe the market will see LOWER not higher silver prices going forward. You will notice that they now believe "Industrial demand" will pick up in the latter part of the year, but this won't help offset the "muted response to lower prices thus far."
What they really meant to say was this, "Due to the manipulated take-down of the price of silver by fellow member banks, the psychology of the investing public in silver has presently been destroyed. Furthermore, we believe as we push prices down lower by naked shorting of paper contracts, there will be even less investment demand until the latter part of the year."
We must remember, as the price of a commodity or item falls to an extreme, the public becomes increasingly wary of purchasing additional units. Even though the fundamentals may be outstanding for an oversold item, the public doesn't want to be buying and holding onto what they perceive as a LOSER. The public only wants to buy things that are increasing in value -- hence the warm feeling associated with being a WINNER.
For example, I have friends in Hawaii who were trying to purchase a home recently. Where they live, a home worth $500,000 is considered below average. So if they wanted something decent, they would have to fork over at least $750 grand. With the help of the FED buying $40 billion a month of MBS, and willing mortgage brokers who could get them financing for upwards of $1 million, all they had to do was find a home.
As they went to look at some of these higher-end homes, they found out that buyers were bidding up the prices, and at times there were five individuals competing for the same property. Hawaiian real estate (as well as what is taking place in the states) is now immersed in another wonderful speculative bubble. Another well done job by the Federal Reserve.
This is a perfect example of human buying psychology at the opposite end of the spectrum compared to what is taking place in the gold and silver market. Where were these buyers when the prices of homes in Hawaii were 20-30% lower in 2009? Nowhere, because no one wants to be perceived as a LOSER.
Getting back to Barclays, it's not surprising at all to see their analysts coming out with bearish analysis on silver. It would be more strange if they weren't. We must remember this is the same bank that was subpoenaed along with JP Morgan (custodian of the Silver SLV ETF) on supposed rigging of the Libor rate:
JPMorgan, Barclays Subpoenaed Over Libor Scandal
JPMorgan Chase & Co. (JPM) and Barclays Plc (BARC) are among seven banks subpoenaed in New York and Connecticut’s investigation into alleged manipulation of Libor, according to a person familiar with the matter and company filings.
The gold and silver investor must realize that in order for these dead zombie banks to give the illusion that they are still alive, they have to control precious metal market sentiment by lowering price and destroying demand. Even though higher prices are very problematic to the fiat monetary institutions, ongoing high physical demand is actually more damaging.
The banks have the ability to control paper prices, but they do not have an unlimited supply of physical gold and silver bullion to meet an insatiable demand.
NEXT: The Ghouls from Natixis Economic Research are Bearish on Gold
Today, as I did my morning web-surfing from the list of websites that I check daily, I came across this article on Mineweb, Gold supply surplus could send prices plummeting--Natixis:
The negative momentum being generated by investor gold sales is a natural market stabilizing mechanism, which could send gold to below $1,000 oz., says Natixis Economic Research.
....“Our best guess is that, if selling by investors persists, short-term equilibrium would be reached somewhere between $1,000/oz and $900/oz,” Natixis advised.
However, the analysts suggests that once investment demand returns to its long-term “normal” of around 6-9% of the global market, “so we should return to a price level that compensates mining companies for their continued participation in the gold market.”
Well, according to Natixis, $1,200 gold is just not low enough for their blood.... looks like they want to see sub $1,000 for the yellow metal. They mention that "negative momentum is being generated by investor sales." This is a peculiar piece of analysis as we know investors are not selling their physical gold at these prices. From the articles and reports I have come across, buying is still out pacing selling by a wide margin.
Then they say "once investment demand returns to its long-term 'normal' of around 6-9% of the global market, we should return to a price level that compensates mining companies." What they really mean to say here, is that they don't want gold investment demand ABOVE its normal 6-9% of the global market.
You see, investment demand at say 10-15%+ of the global market would put severe stress on physical supplies, thus pushing the price of gold higher. This would then cause gold market sentiment to rise which in turn would make the psychology of buying gold positive again. Thus, we have a positive feed-back loop that scares the living hell out of the bankers.
Basically, the fiat bankers don't care if investors buy a little gold -- nothing wrong with allowing the public to pick up a few crumbs here and there. However, when the price of gold was getting ready to break above $1,800 in the beginning of October, 2012, investment demand was starting to get out of hand. With bullion banks sitting on record short positions after the FED QE3 announcement in Sept, drastic measures had to be done to save the fiat monetary system.
For those who read this article and are not familiar with Natixis Economic Research, they are a part of the Groupe BPCE, France's second largest banking group.
Zombie Banks Stick Together
While its true that not all bankers or analysts see gold and silver as a threat, the overwhelming majority do. The whole global banking system is based on a fiat monetary system that is still becoming weaker each passing day. Gold and silver are a real threat to the banking system because they offer a competing monetary currency that has 2,000 years worth of solid experience.
Furthermore, gold and silver are real money as they contain a store of value locked in each ounce. On the other hand, the store of value in a Federal Reserve Note is just a few cents worth of printing costs.
The Zombie Banks and their analysts will continue to put out bearish precious metal forecasts, because.... IT'S IN THEIR BEST INTEREST to protect their fiat monetary system.
Fortunately, for the precious metal investors, we have time, fundamentals and the "Energy Factor" on our side. More about the Energy Factor in future posts and articles that will be found at the SRSrocco Report.
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