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A Precious Opportunity in Gold and Silver? Have they Topped?

Commodities / Gold and Silver 2011 Apr 30, 2011 - 08:50 AM GMT

By: DeepCaster_LLC

Commodities

Best Financial Markets Analysis Article“They say the cover-up is worse than the crime…

Until we rip the seal off the Fed's books, we will never discover the depth of the Fed's looting of taxpayers…

You see, the government and the Fed put taxpayers on the hook for $14 trillion during the financial crisis.


Trillions were funneled to Big Banks, Big Labor, and Big Auto during the economic collapse, which was caused by the Fed's reckless monetary policies and debt-fueled housing bubble.

And those were just the trillions we knew about!

Recently, it was revealed that the Fed funneled over $4 trillion to foreign bankers during the economic meltdown.

You and I only learned of the Fed creating money out of thin air to funnel to globalist bankers because a federal court ordered Ben Bernanke to release a select few documents - and Congress responded to our pressure by passing a limited audit.

Who knows what other unholy alliances, secret schemes, or trillions of stolen dollars Ben Bernanke is suppressing from the American public?

A half-hearted audit isn't enough.”

John Tate, Campaign for Liberty, 4/27/11

“Yesterday's speech from the Fed was an acknowledgment of the continuing of the strategy by the Fed and Washington ... to monetize our debt, and basically to devalue the dollar…

The metal markets are recognizing that and it is being priced in. What monetization means is that, down the road, we will have more inflation.”

Robert Lutts, Chief Investment Officer Cabot Money Management, 4/28/11

“The silver buyers do include some billionaires, undoubtedly, but most of them are simply folks who watched Jeffrey Christian's testimony at the well publicized CFTC position limits hearing back on March 25, 2010, and came away with the distinct impression that a small group of London banks have been creating alchemic silver. The banks were ostensibly "selling" and then "storing" so-called "unallocated silver bars" for silver investors. In reality, they seem to have been maintaining a fractional banking system in which only one physical ounce is really purchased for every 100 ounces they supposedly sell.

Let's go over that again...because once you understand the particulars, the reaction of the price of silver becomes perfectly understandable.

1) Bank sells silver, a very precious item, for big money;
2) Bank doesn't buy the silver it sells, or, if it does buy it, leases out or sells 99 ounces for every 1 ounce in the vault;
3) Bank gets paid "storage fees" from all its customers, even though their silver is not in the vault;
4) Bank profits are equal to 99 times what it sells initially, and then, the value of the stream of storage fees after that. Nice work if you can get it.”

“Short Sellers Now Screaming About a Buy Side Silver Conspiracy”
Avery Goodman, Esq., Seeking Alpha, 4/26/11

“Inflation picked up in recent months, but underlying Prices Remain Subdued.”
Gist of Fed’s Oxymoronic position on Inflation, 4/27/11

Just after The Fed released its Statement this past Wednesday April 27, a Senior Representative of a Mega-Bank appearing on a Main Stream Financial Media Show  opined that Gold and Silver had likely topped out, and that they had been rising mainly because the rest of the Commodity Sector had been. And he implied the next Big Move would be down.

Utter Nonsense of course, but it is Nonsense which many poorly educated Investors believe, and thus miss out on the Gold and Silver Bull’s Mighty Run. But while the legitimate question of whether Gold and Silver have topped out in the mid and long term can be answered with a resounding “NO”, answering the question for the Short term requires some analysis.

Consider that the aforementioned Mega-Banker Nonsense flies in the face of the very Obvious Market Consequences of the Fed’s recommitment to continued Monetary Inflation and ultra-low Interest Rate Policies. The Real Effect of the Fed’s “Stand Pat” Policy was demonstrated that very Wednesday since after the Fed announcement the U.S. Dollar dropped like a stone, while Gold soared up $20 and Silver up a Staggering $3.

No Other Commodities were up nearly so powerfully. Not surprising to Us, these powerful Gold and Silver Moves, and not merely a result of U.S. Dollar Weakness.

But it is important to examine why Gold and Silver responded much more powerfully than other “commodities”.

And it is important to understand why Critics are wrong who say that Gold and Silver are Monetary Relics, and are not good Stores of Value and use as an example the fact that Gold and Silver Prices were taken down dramatically during the 2008 Market Crisis, Silver by over 60%.

Specifically, how does one Respond to these Critics who say the Precious Metals have topped or that they will be taken down in the next Market Crash?

Are we in for another Cartel* (see below) engineered Takedown soon? Can/Will Silver be taken down by 60% again like in 2008?

How does one avoid missing an Opportunity to ride the Gold and Silver Bulls? Is it too late to get on board?

To adequately answer these questions, we need to take a step back to consider the Markets in light of what the Fed has been doing, is doing and is likely to do.

The Fed’s Action on April 27 signaled its Intention to continue to debase the Fiat U.S. Dollar. Real Money – Gold and Silver – responded by soaring Upward.

And John Tate’s and Avery Goodman’s remarks above provide additional evidence that the Policies of the Fed are not only highly destructive of the U.S. Dollar but also greatly injure the U.S. Economy and U.S. Taxpayers, via, for example, The Fed’s Putting the U.S. Taxpayers “on the hook” for $14 Trillion, including $4 Trillion  funneled to Foreign Banks. No wonder Gold and Silver have been skyrocketing in recent weeks.

The Fed’s policies are Impoverishing Taxpayers-in-general and the Middle Class in Particular by diminishing the purchasing Power of the U.S. Dollar and thus effecting Massive Wealth Confiscation. This fact alone is sufficient to explain why these Precious Metals are soaring and why, in the mid and long term, they will continue to soar.

Thus the Key Question Now is whether, in light of Gold and Silver’s strong recent run, have they topped out in the Short term, and if we are to suffer a Takedown, how severe will it be?

One salient fact cited by Robert Lutts above is that to fund the massive nearly $15 Trillion National Debt, and over $100 Trillion downstream unfunded liabilities, The Fed will have to continue to Monetize U.S. Debt, and that is very Inflationary. And the only Safe Havens are Gold and Silver. So it is likely any Takedown would be short-lived and not nearly as deep as the 2008 Takedown. (See Deepcaster’s latest Letter for specific Forecasts.)

Moreover, on an inflation-adjusted basis the Precious Metals are still far below their 1980 highs. Indeed, one way of telling just how far below the Ultimate tops we now are is to adjust the 1980 Gold and Silver Highs – approximately $850/oz and $50/oz respectively, for Real Inflation, and not merely to employ the Bogus Official Inflation Figures.

When adjusted for Real Inflation as calculated by Shadowstats.com, the 1980 Tops would be, translated to today, about $8,400/oz for Gold and $420/oz for Silver.

But Real Monetary and Real Price Inflation are far more pronounced than in 1980, as inter alia the following Shadowstats.com data, and data from the St. Louis Fed show. (According to the St. Louis Fed, the Real U.S. Monetary base shot up from a mere $800 Billion in 2008 to $2.4 Trillion today. In the early 1980’s, it was around $200 billion.)

Shadowstats.com calculates Key U.S. Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider

Bogus Official Numbers      vs.      Real Numbers (per Shadowstats.com)

Annual U.S. Consumer Price Inflation reported April 15, 2011
2.68%                            10.2% (annualized March, 2011 Rate)

U.S. Unemployment reported April 1, 2011
8.8%                              22%

U.S. GDP Annual Growth/Decline reported March 25, 2011
2.78%                            - 2.21%

U.S. M3 reported April 17, 2011 (Month of March, Y.O.Y.)
No Official Report             - 0.87%

Thus it is reasonable to infer that the Ultimate Multi-Decade Tops for Gold and Silver will be substantially above $8,400/oz and $420/oz.

So should one merely Buy and Hold Physical Gold and Silver? That is certainly a Rational Conclusion, and, indeed, one we advocate for those who are very well capitalized and willing to hold through Great Volatility.

But those less well capitalized can more efficiently Buy Gold and Silver near the Interim Bottoms of Natural Pullbacks and Cartel* Takedowns. We now inform those who are not regular readers that indeed, we think the next Takedown Attempt will be implemented by The Cartel of Mega-Bankers and their Allies, some time this year and we think they will have some modest albeit temporary success (For detailed Forecast see Deepcaster’s latest Alert in the ‘Alerts Cache’ at www.deepcaster.com.)

The Cartel* has for years (as our regular readers know) conducted a Price Suppression War against Gold and Silver Prices because rising Precious Metal prices tend increasingly to delegitimize their Fiat Currencies and Treasury Securities.

However, we believe that while the upcoming Takedown attempt will be substantial, compared with Previous Takedowns, it will not result in nearly as severe a drop as in the past years, though as an Industrial as well as Monetary Metal, the Silver Price is more vulnerable than Gold. (See our Forecast Targets in our latest Alert in the ‘Alerts Cache’).

A Major Reason we expect a drop to be temporary and not as severe as 2008 is because evidence published by GATA, Deepcaster and others (see excerpt from Avery Goodman above) indicate that Major Precious Metal repositories do not have all the Physical Precious Metal they represent they do. Therefore, Buyers are wisely increasingly demanding delivery and personal possession.

*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.

Indeed, in what may be a harbinger of a Cartel Takedown Attempt later this year, earlier this week Gold pulled back from its all time record nominal high to near $1500/oz.

Likewise, Silver pulled back from its Rocket Launch which attained the Hunt Brothers Era high near $50/oz., down by 10% to $45/oz at Tuesday’s close – Quite substantial for a two day move. Looks like a Trial Cartel Takedown Attempt to us.

But note well that Gold and Silver gained back those losses on Wednesday and rocketed to record highs on Thursday and Friday after The Fed announcement.

Nonetheless, we think Gold, and especially Silver prices are in for an intensified Cartel Price Suppression Attack in the next few months. (For Deepcaster’s recommendation of a particular form of Investment in Gold and Silver which is maximally resistant to Takedown, see Deepcaster’s recent Letters and Alerts.) Another non-confirming (of the Gold and Silver price rise) Bad Omen is that the HUI (the ‘Gold Bug’ Miners Index) has been eroding since the second week of April – not good.

Finally, consider the Time of Maximum Cartel Leverage, especially on Silver prices and Silver and Gold Mining Shares would be during the next Equities Takedown. Longs in the Equities Markets, especially longs on margin, would be scrambling to cover their long positions. And for those Equities Longs who also had long positions in Precious Metals Bullion, they would be selling long Silver and Gold positions to meet margin calls.

In sum, longer term, all the aforementioned reasons for the Precious Metals Meteoric Rise to date still exist and will drive these Precious Metals higher.

Finally, consider that even with the recent Bull run, the Precious Metals Market is no where near overcrowded.

Consider Silver, for example.

When Silver was $35/oz. all ETFs backed by that Metal had less than a quarter of the Market Cap of Macdonalds and only about 5% of the Market cap of Exxon-Mobil, according to excellent analyst Jeff Clark.

If the Anticipated Cartel Takedown Attempt is at all successful, Thank your Good Fortune, and Buy more.

Best regards,

By DEEPCASTER LLC

www.deepcaster.com
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation         Wealth Enhancement

© 2011 Copyright DeepCaster LLC - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

DEEPCASTER LLC Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

mo
30 Apr 11, 21:13
Silver bubble

People say silver is entering bubble territory.

But if you compare today's silver bull market to that of the 1970s you can see that we're not even close.

http://www.planbeconomics.com/2011/04/29/comparing-the-present-silver-bull-market-to-the-1970s/


Onc' Scrooge
01 May 11, 03:55
Silver at $593 ?

Hi,

there are 2 recent studies done by a German private University called Steinbeis. Its "Research center For Financial Services" made an analysis about the investments of Germans in gold and silver I think one can take a lot of conclusions from this. It proofs that we are not in silber bubble.

They found out:

There are 163.000 metric tons (about 5240 million Oz) of gold above earth

- 83600 metric tons (about 2688 million Oz) in form of jewelry

- 27300 metric tons (about 878 million Oz) in form of physical investments (coins, bars ...)

- 29700 metric tons (about 955 million Oz) is held by Central Banks (my comment: if not lent out ?)

- 22400 metric tons (about 720 million Oz) held by others not central banks nor private (ETF's, Museums, Religious Objects, Art...)

Germans held in 2010 in Gold

- 3566 metric tons (115 million Oz) in form of jewelry

- 3992 metric tons (128 million Oz) in physical investments (coins, bars ...)

- 3407 metric tons (110 million Oz) held by German Central Bank (if not lent ?)

= total physical in gold 10965 metric tons (353 million Oz)

in addition:

- 1388 metric tons (45 million Oz) in Paper Gold (Stocks, ETF's .. only in parts backed in physical gold)

Germans held in 2010 in Silver

- 8701 metric tons (280 million Oz) in form of jewelry

- 9829 metric tons (316 million Oz) in form of tableware, cutlery..

- 10430 metric tons (335 million Oz) in physical investments (coins, bars ...)

- near 0 metric tons (0 million Oz) held by German Central Bank

= total physical in silver 28960 metric tons (931 million Oz)

in addition:

- 23292 metric tons (749 million Oz) in Paper Silver (Stocks, ETF's .. only in parts backed in physical silver)

We can easily calculate

931 million Oz (Silver) devided by 353 million Oz (gold) = 2.64

means that Germans are invested in physical gold and silver in a ratio of 1 to 2.64

If we think that this ratio could be applied worldwide (?) we should have about 430000 metric tons (1382 million Oz) of silver above ground in any form and with a price for one Oz of gold today ($1565.60) silver should trade at about $593 per Oz even yet. We see clearly that we are not in a bubble.

Here are the 2 studies:

http://www.steinbeis-research.de/pdf/20101102_Goldstudie_RFS-Steinbeis_Kurzfassung.pdf

http://www.steinbeis-research.de/pdf/Silberbesitz_der_Privatpersonen_in_Deutschland.pdf

Cheers


Paul_B
01 May 11, 04:19
This time it really IS different!

When you consider the totally unprecedented reflationary measures taken by banks around the world and the Fed in particular, it appears increasingly inconceivable that precious metals won't completely shatter, in real terms, the previous record set in January 1980. And I don't just mean the phony "real terms" official figure of $2,300; rather I mean a much higher one as calculated the good old-fashioned way by shadowstats.com. There will, I believe, be a lull in the gold and silver markets over the summer as QE2 comes to an end, but the up-trend will resume again in the autumn. Gotta love those pesky gold bugs; they HAD to be right eventually, the lucky blighters!


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