Precious Metals Drive By
Over the last week metals markets has been swept away by turmoil to the downside. Silver fell nearly 30% and gold fell 200 hundred dollars, well north of 10%. As the US dollar firms up, many commentators are calling an end to the precious metals bull market. They ignore that, in fact, the Euro is currently in more immediate trouble than the US Dollar. And so, money has rushed into long-term US treasuries and the dollar so as to escape the uncertainty. It won’t be long before the trouble in which the US Dollar finds itself is once again the main topic on mainstream news shows. It might show signs of strength at certain points during the ongoing economic crisis, but, in the end, physical precious metals are the only means by which to protect ones wealth.
With economic crisis breaking apart the Eurozone, world leaders are calling on the EU to demonstrate “unity” across borders, which has more political implication than it does economic. Instead of economic sovereignty in each nation, more and more pressure will be put on the US and German economies to stabilize the region. A continent-wide bailout program will make more dependent all countries now under the European Union; that is, if the Germans eventually go forward with such a plan. The International Monetary Fund will play a larger and larger role in Europe, using US taxpayer money, perhaps even relying on the structural adjustments and the austerity measures embarked upon in the historically poorer regions.
On Thursday of last week, the DOW moved down 500 points, pulling down metals as it traditionally does on such a violent downward move. On Friday, CME margin requirements were hiked 21% in gold and 16% in silver. CME has hiked gold margins three times for a total of 55% since August 11. On Monday, thus showings its true colors as in the pocket of the international banking cartel, the Shanghai Gold Exchange hiked silver margins 20%.
Silver never even had a chance. When such exchanges hike margins, those traders leveraged must liquidate some or all positions for capital. This drives out weak money and makes room for more long-term holders of the metal. As prices dropped in gold and especially silver, physical holders were buying silver en masse.
It is important to remember why we are buying metals in the first place. Sit tight and be right. The fundamentals are the same in these markets, for, in the long-term, fiat currencies are being devalued in a coordinated manner by central banks. Buy when you can, try and buy the dips. Don’t try and be too smart, because when markets are manipulated in the short term like these, there is no knowing what is right around the corner. In the long term, though, it is rather obvious these prices will be much, much higher in the years to come.
There are many reasons we saw this huge dip in gold and especially silver. Part of it is psychological: the higher the prices of precious metals, the poorer fiat currencies then look, thus making governments and central banks look bad. This then entices people to seek out protection in times of such absolute economic decline. It is also now an opportunity for institutional buyers to scoop up massive amounts of cheap precious metals, in preparation of making huge short term gains on the next run-up. Expect a massive run-up for silver in the next six months. Silver could make a run of 100 to 200 percent in a very short time period. $2,500 gold, furthermore, is by no means out of the question in the coming six months.
The takedown of these markets is an example of what Max Keiser has termed “financial terrorism” by the keystone international banks, such as HSBC and JP Morgan, but also the Federal Reserve and central banks the world over. Make no mistake, this is economic warfare.
Most of the damage is done heading into the end of this week. Silver is firming up quick after testing $26 in Asia on Monday. Keep in mind there has not been much evidence of any real major sales of gold or silver. Some have suggested European banks are selling gold, but it wouldn’t surprise many if these banks didn’t actually own gold. Bob Chapman believes we are seeing another bottom in these metal markets, and I agree. These markets will become more tumultuous over time, but keep in mind that is just the strange new world in which we live.
JP Morgan and other banking establishments which short the metals have made a killing this past week. Not only have they brought down world financial markets 5%, probably with insider knowledge of the selloff, but so too have they made a killing on their shorts in gold and especially silver. The bright side is it is a great buying opportunity. The JP Morgan boys must also be very relieved that their $30 share price does not look so pathetic when compared to silver—at least for this week.