Friday, September 23, 2011

Precious Metals Mayhem; Gold Down $100; Silver Slammed

There are plenty of theories on what took place in precious metals markets over the past few days, but the best possible explanations really don't hold up to closer scrutiny.

Some say that there were margin calls in stocks and that traders trundled out of gold and silver, though that would not explain why the biggest hits were today, unless there were some overnight desperation calls.

Others suggest that this is all a coup by central banks in anticipation of a major monetary event, such as a Greek default or a major Euro-zone banking collapse, or possibly even the shutdown of the US government, which, if our nitwit congress-people have it in their power (and they do) may just occur as early as October 1 (nice that it falls on a weekend, too).

That maybe makes more sense, as anyone with half an interest in current geopolitics knows the central banks are working in a coordinated fashion these days, knowing that the time left for successful fiat money may be measured in days or months, no longer in years. With the Fed turning 100 in 2013, that would seem a fitting date to implode the entire global ponzi fractional reserve scheme, smack dab in the first year of a new president's term.

Of course, there is still the famous short silver position of the fabled Blythe Masters of JP Morgan, which could explain quite a bit, especially in terms of the solvency of that fine financial institution, in particular.

Whatever the case, haters of real money are having a field day, supposedly impressed that gold has fallen back to levels last seen at... hmm, the beginning of August (yes, less than two months ago) and silver is currently where it was at the start of 2011. These short-sighted individuals should bear in mind that all of the major indices of US stocks are BELOW where they began the year.

The public lovers and hoarders of silver and gold have been making "back up the truck" references all day long, seeing this latest price movement as either a liquidity or solvency event and are prepared to scale in buying at these levels while hoping the price foes even lower. With them, there is overall agreement that whatever is causing the price of the precious metals to shudder over the past 48 hours has more to do with the sustainability of current political and monetary factions rather then the intrinsic values of two metals which have stood the test of time as currencies for the past 5000 years.

Whatever the cause, it should be seen as a buying opportunity, with caution to purchase only physical metal, not ETFs or mining stocks, and to scale in according to your risk perspective. With the weekend on hand, prices should firm up in a few short hours, and the metals are currently well off the lows of the day, when gold was down my more than $100 briefly and silver had printed - for a short time - at a $29-and-change handle.

That was where all the action was today. Stocks were essentially flat, which is something of a surprise, following a day-and-a-half of vicious selling pressure.

A good idea would be to head to your local precious metal outpost and make the best deal you can on gold or silver, bars or coins, take your pick, because there is going to be a break between the paper prices of the EFTs and the physical market, which is splintered amongst thousands of coin and bullion dealers scattered around the globe. The CFTC has done nothing to protect PM investors from raids like these, allowing big outfits (like HSBC, JPM and central banks) to run naked shorts in violation of position limits without so much as a quiet "no, no." And, when the fiat currency regime ends, as have all paper currencies backed by nothing but "trust" which has now been broken a thousand times over, gold and silver will re-emerge as "real" money.

Precious metals prices may go even lower in a deflationary environment, but, as the central banks engage in more easing, money printing and currency debasement, gold and silver will take on their own lives as legitimate currencies and soar in value. Any way you look at it, this is a godsend for anyone underinvested in precious metals, because, unlike stocks, currencies or bonds, they are not debt-based instruments and there is no counter-party risk.

God Bless Ron Paul!

Happy Friday!

Dow 10,771.48, +37.65 (0.35%)
NASDAQ 2,483.23, +27.56 (1.12%)
S&P 500 1,136.43, +6.87 (0.61%)
NYSE Composite 6,770.73, +44.11 (0.66%)
NASDAQ Volume 1,987,216,125.00
NYSE Volume 5,639,933,500
Combined NYSE & NASDAQ Advance - Decline: 4195-2340
Combined NYSE & NASDAQ New highs - New lows: 11-477
WTI crude oil: 79.85, -0.66
Gold: 1655.00, -81.50
Silver: 31.15, -4.69

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