Best of the Week
Most Popular
1. 2019 From A Fourth Turning Perspective - James_Quinn
2.Beware the Young Stocks Bear Market! - Zeal_LLC
3.Safe Havens are Surging. What this Means for Stocks 2019 - Troy_Bombardia
4.Most Popular Financial Markets Analysis of 2018 - Trump and BrExit Chaos Dominate - Nadeem_Walayat
5.January 2019 Financial Markets Analysis and Forecasts - Nadeem_Walayat
6.Silver Price Trend Analysis 2019 - Nadeem_Walayat
7.Why 90% of Traders Lose - Nadeem_Walayat
8.What to do With Your Money in a Stocks Bear Market - Stephen_McBride
9.Stock Market What to Expect in the First 3~5 Months of 2019 - Chris_Vermeulen
10.China, Global Economy has Tipped over: The Surging Dollar and the Rallying Yen - FXCOT
Last 7 days
QE Forever: The Fed's Dramatic About-face - 21st Feb 19
Gold Technical Perspective – Why So Bullish? - 21st Feb 19
Sheffield "Mi Amigo" Memorial Fly Past at 8.45am on 22nd Feb 2019 - 20th Feb 19
Here’s The Real Reason You Stress About Money - 20th Feb 19
Five Online Marketing Predictions that will Matter in 2019 - 20th Feb 19
Has Gold Price Reached Upside Resistance Near $1340-1360? - 20th Feb 19
So Many Things are Not Confirming Stock Market Rally - 20th Feb 19
Forex Trading Management: The Importance of Being Prepared - 19th Feb 19
Gold Stocks are Following This Historical Template - 19th Feb 19
Here’s Why The Left’s New Economic Policies Are Just Stupid - 19th Feb 19
Should We Declare Emergency for Gold? - 19th Feb 19
Why Stock Traders Must Stay Optimistically Cautious Going Forward - 19th Feb 19
The Corporate Debt Bubble Is Strikingly Similar to the Subprime Mortgage Bubble - 18th Feb 19
Stacking The Next QE On Top Of A $4 Trillion Fed Floor - 18th Feb 19
Get ready for the Stock Market Breakout Pattern Setup II - 18th Feb 19
It's Blue Skies For The Stock Market As Far As The Eye Can See - 18th Feb 19
Stock Market Correction is Due - 18th Feb 19
Iran's Death Spiral -- 40 Years And Counting - 17 Feb 19
Venezuela's Opposition Is Playing With Fire - 17 Feb 19
Fed Chairman Deceives; Precious Metals Mine Supply Threatened - 17 Feb 19
After 8 Terrific Weeks for Stocks, What’s Next? - 16th Feb 19
My Favorite Real Estate Strategies: Rent to Live, Buy to Rent - 16th Feb 19
Schumer & Sanders Want One Thing: Your Money - 16th Feb 19
What Could Happen When the Stock Markets Correct Next - 16th Feb 19
Bitcoin Your Best Opportunity Outside of Stocks - 16th Feb 19
Olympus TG-5 Tough Camera Under SEA Water Test - 16th Feb 19
"Mi Amigo" Sheffield Bomber Crash Memorial Site Fly-past on 22nd February 2019 VR360 - 16th Feb 19
Plunging Inventories have Zinc Bulls Ready to Run - 15th Feb 19
Gold Stocks Mega Mergers Are Bad for Shareholders - 15th Feb 19
Retail Sales Crash! It’s 2008 All Over Again for Stock Market and Economy! - 15th Feb 19
Is Gold Market 2019 Like 2016? - 15th Feb 19
Virgin Media's Increasingly Unreliable Broadband Service - 15th Feb 19
2019 Starting to Shine But is it a Long Con for Stock Investors? - 15th Feb 19
Gold is on the Verge of a Bull-run and Here's Why - 15th Feb 19

Market Oracle FREE Newsletter

The Real Secret for Successful Trading

Great Silver Crash of 2011 May Not Be Over

Commodities / Gold and Silver 2011 Jun 13, 2011 - 04:10 AM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleAccording to the calendar, Summer doldrums should now be taking hold of the financial markets. Perhaps this year, though, those hot day blues might be replaced with greater than normal excitement. We know some interesting events might take place.

First, QE-2 is scheduled to be completed by the end of the month. With no discernable positive effect on the U.S. economy from that program and U.S. Senate wisely blocking the filling of two Board seats at the Federal Reserve, QE-3 seems unlikely.


Second, a significant change will be made in the trend for the deficit of the U.S. government. While the ultimate shape of the deal to raise the U.S. debt limit is unknown, it seems certain to imply some reduction in U.S. government spending growth.

Third, the Obama Regime's nationalization of U.S. healthcare system may be ruled unconstitutional. That possibility, a 60/40, could lead to a substantial lowering of wealth destruction in the U.S. through enforcement of the founding fathers' intentions for commerce clause of U.S. Constitution.

Some other happenings will be important, as they will likely not happen. Among those is hyperinflation in the U.S., the ever popular forecast of the past three years. The graph below is of the U.S. money supply, M-2 NSA. That red line is the year-to-year percentage change in the U.S. money supply. As is readily apparent, U.S. money supply growth has been anemic. Hyper inflation does not sprout from a measly 4% expansion of the money supply. Without QE-3 and some growth in the money supply, hyperinflation in the U.S. is a non issue.

US Money Supply

With the end of QE-2 and without QE-3 we can also discard "dollar is going to zero" forecasts. That one alternates, seemingly weekly, with "Euro is going to zero" forecasts. Sometimes we have trouble keeping track of which one is on the way to zero on any particular day. In any event, neither seems likely to happen this Summer.

Where does all that leave investors? Despite sounding somewhat positive on the world in the above discussion, politicians have a tough time shedding their Keynesianism. They simply enjoy too much the power that comes from extracting wealth from the citizens. For that reason, we certainly want to hold onto our existing Gold positions. However, buying $Gold at what might indeed be over extended prices might not be advisable. Exception to that view is with EU-based investors. EU€Gold has recently been over sold and has languished for sometime, suggesting that EU-based investors may want to add to Gold positions on any price weakness in their currency.

Part of the reason too for the above thinking is that the Great Silver Crash of 2011 may not be over. As it continues to unfold, it could have a seriously dampening effect on investor attitudes toward precious metals. Chart below portrays the price of US$Silver over the years. Annual lows, highs, and closing values are indicated in the chart. The parabolic rise in which Silver had been trading, and is now collapsing out of, is obvious and irrefutable.

US$ Silver

How badly Silver suffers for the failure of that pattern is now the only discussion topic of merit. The longer term trend line drawn across the lows suggests a fairly steep correction remains. That view is consistent with the normal penalty extracted by such pattern failures. Silver investors should continue to average out of Silver at current prices. If Silver breaks the recent low of US$32.25 in the cash market, the ensuing penalties could be quite high.

Aside from retaining Gold, despite the strong possibility of a move to US$1,400 this Summer, what other choices might investors consider? Both Rhodium and Chinese Renminbi-denominated deposit accounts offer what seems to be excellent longer term potential. These should be considered investments, with a time horizon more than a "few" weeks.

Finally, we are somewhat excited about our new collaborative research effort with Xinye Management Company of the People's Republic of China. Xinye is a premier new investment consultancy serving precious metal investors in that nation. Their web site is: www.goldxy.com

¹ These estimates are preliminary, and subject to change.

By Ned W Schmidt CFA, CEBS

Copyright © 2011 Ned W. Schmidt - All Rights Reserved

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To receive copies of recent reports, go to www.valueviewgoldreport.com

Ned W Schmidt Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules