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FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Maximizing Profits from The Real Gold and Silver Bull

Commodities / Gold and Silver 2011 Sep 03, 2011 - 03:08 PM GMT

By: DeepCaster_LLC

Commodities

Best Financial Markets Analysis Article“There has been a pattern developing in the Federal Reserve’s weekly money supply reporting, however, that is worthy of note, with surging M2 growth being reported in the Fed’s now-broadest money measure.  The growth largely can be accounted for by an apparent flight from large time deposits and institutional money funds (officially ignored components of the Fed’s once-broadest money measure, M3).  The cash flows here are suggestive of concerns over banking-system solvency (see Hyperinflation Watch).

(Ed. note: Indeed, the U.S. M2 Money supply accelerated 2.2% in July, 2011 from the prior month; the fastest pace in 52 years.)


Indeed, the U.S. systemic-solvency and economic crises remain in broad deterioration, with banking-system solvency issues likely to drive the Federal Reserve into some form of QE3, soon, despite Fed Chairman Bernanke’s qualified protestations to the contrary in today’s (August 26th) speech.  Any further liquefaction of the system, though, likely will be under the guise of propping a weakening economy…

Just a month ago, the markets recoiled in revulsion and disbelief to the U.S. government’s unwillingness and inability to address its long-term fiscal insolvency.  In response, rapid flight was seen from the U.S. dollar into gold and the Swiss franc…

Massive, fundamental dollar dumping and dumping of dollar-denominated assets could start at anytime, with little or no further warning.  With a U.S. government unwilling to balance or even address its uncontainable fiscal condition; with the federal government and Federal Reserve standing ready to prevent a systemic collapse, so long as it is possible to print and spend whatever money is needed; and with the U.S. dollar at risk of losing its global reserve currency status; much higher inflation lies ahead, in a circumstance that rapidly could evolve into hyperinflation.”

“Commentary Number 386: GDP Revision, July Durable Goods Orders and New Home Sales”

John Williams, Shadowstats.com, 8/26/11

John Williams’ Shadowstats.com provides honesty and accuracy which is a refreshing change from Fed, Government, and Mainstream Financial Media Spin and occasional outright Prevarication.

And it is important to consider Shadowstats.com’s Real Numbers as opposed to the Bogus Official Ones, in order to Maximize Profits from The very Real Ongoing Golden (& Silver) Bull.

It is especially important to consider the Real Inflation Numbers, with, for example, U.S. CPI already at the Hyperinflationary Threshold level of 11.21% contrary to the Bogus Official level of 3.63%. See Chart** below.

There are two Seductive but Utterly Incorrect Arguments which would lead one to conclude that the recent Gold Price Takedown from $1900ish to the low $1700’s was because Gold was “Overpriced” and because we are, it is claimed, in a “deflationary” economy (in fact we have deflation only in some sectors like housing, and rampart inflation in most others like food and energy). If one is seduced by those Arguments, it could lead to making much less profit and achieving much less Wealth Preservation from The Golden Bull than one might otherwise make, or, possibly, to missing out entirely.

But before addressing those two profit-robbing Arguments, it is essential to identify the Cause of the recent Takedown from $1900ish to the mid $1700s.

Regular readers will already know that a Fed-led Cartel* of Central Bankers and Factota has for Years conducted an Ongoing Campaign to Suppress Prices of Gold and Silver.

That is because increasingly strong Gold and Silver Prices increasingly delegitimize the Cartel’s source of Power and Wealth – their Fiat Currencies and Treasury Securities.

*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.

Specifically, regarding the Cartel’s most recent Price Takedown Operation in mid-August, Gold Expert Bill “Midas” Murphy, describes in convincing detail the Typical Cartel “Trifecta” Takedown Operation (See our article last week – “The Opportunity Antidote to Cartel Created Crises (8/26/11)” posted in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com).

But the claim of the Gold TOP Callers is that Gold “should” have “corrected” anyway because it was “overpriced”.

That Argument is an Argument by comparison. Since 1913 when Congress created the private for-profit Federal Reserve, Consumer Prices are about 50 times higher (an accurate measure of the extent to which the Mega-Bank Cartel has confiscated the wealth of Generations of Investors and Savers).

But since, they say, Gold is 90 times higher than it was in 1913, it is “overpriced”.

But that is a fallacious inference because, while it does accurately reflect the fact that the U.S. Dollar’s purchasing power has declined 50 fold over the past 100 years, it Neglects the “Forward-looking” Aspect of the Gold Price.

In other words, the Gold Price not only reflects Past Purchasing Power Degradation but also prospective Purchasing Power Degradation.

And given the Fiat Money with which Central Banks are flooding the System all over the world, that prospective Purchasing Power Degradation is considerable.

And a similar rejoinder applies to the claim that: since Gold and Crude Oil have historically maintained a 10 to 1 price ratio and, therefore, because that ratio now is appx. 20 to 1, that Gold is overpriced.

Again, the prospective (as well as retrospective) character of the Gold Price is neglected.

The other Seductive but Subversive and Incorrect Argument is that Because the U.S. (and International) Economy is Stagnant (the U.S. Economy is actually Contracting – see chart below**), that, therefore that Deflationary Force will cause a decline in Asset Prices, including the Price of Gold.

But, in fact, we are in a Stagflationary Economy on the Threshold of Hyperinflation as Shadowstats.com** Statistics show (11.21% CPI in the U.S. e.g.) – see chart below.

And we are soon to move into a Hyperinflationary Economy.

Proponents of this Deflationary “School” argue we cannot be in an inflationary Mode, because long-dated U.S. Treasuries are at their record strong highs, with the 10 Year Yield at just above 2%.

But as we have explained in other articles, the record U.S. T-Notes and T-Bond Strength is Artificial, Artificially Maintained these by the Trillions of dollars of Derivatives available to the Fed-led Cartel in the form e.g. of Interest Rate Swaps, e.g. $364 Trillion in the second half of 2010, e.g. see www.bis.org, path: Statistics > Derivatives > Table 19.

Besides, a strong long Bond Market and a Strong Gold price are utterly incompatible. One of them is “lying” as it were, and that one is the long bond. (In the long run the long bond will be revealed as the biggest asset bubble in history.)

So much for the aforementioned arguments that Gold is overpriced.

Further, consider that Gold historically provides protection against Deflation as well as inflation -- in the Great Depression the Gold Price increased by over 200%.

The Final Consideration essential to Maximizing Profits from the Ongoing Golden Bull is that the Stated Position of the Fed is that it will continue to inflate to whatever extent it must to ward off Deflation (“Money from Helicopters” etc.).

This virtually guarantees Monetary Inflation in excess of GDP growth (actually, contraction in the U.S. – see chart** below) and that ensures increasing Price Inflation and eventual Hyper Stagflation.

And that is Super Bullish for the Gold Price, even though it must be noted that the condition of Hyperinflation will lead to Great Pain around the world. Jim Willie has it about right.

Witness the rooted perception and horrifying awareness that the United States is moving gradually and unavoidably into a systemic failure. The perception is that neither governments nor bankers have any solutions to help the people, who must impose their own gold standard. The Gold price registered a new high over $1900 per ounce, this after mental midget clowns and propaganda wags in May pronounced the bull market as finished. Their opinions are worthless. Watch them vanish behind the tall shrubbery when Gold surpasses $2000 this autumn…

Americans are awakening to the unfixable nature of the USEconomy and the broken fraudulent nature of the US financial sector.

The Achilles Heel, the broken leg, the ruined road, and the toxic field is HOUSING & MORTGAGES. The contaminated blood, the leaking gangrene into the circulation system, the sewer line in the water supply is BANKING & FINANCE. The USEconomy grew dependent upon the two-sided asset bubble. No resolution or remedy or liquidation means rotting flesh and gangrene on the body economic. Americans have noticed. The US banking system remains insolvent, worse each quarter from toxic assets. Home prices have resumed their decline, despite all incorrect announcements by banking, political, and economic leaders over public address propaganda loudspeakers. The crowd control devices are not working, as the people are deeply worried…

The compromised clowns have been busy citing how the Gold price is $150 to $200 too high based upon price inflation, or even 50% over-valued based on some cockeyed Fed Business Model. They overlook the broken distorted market is the USTBonds, supported by powerful usage of Interest Rate Swaps, aided by USFed monetization still and the migration from stocks to bonds. The volatile moves in the Gold market can be interpreted with high predictability.”

“Panic & Anxiety Swirl a Storm”

Jim Willie, GoldenJackass.com, 8/24/11

Thus the Primary Force that exists to takedown the Gold (or Silver) Price any time soon is Cartel Intervention, not the other ostensible causes mentioned above.

Thus one must track, as best one can, the Interventionals (Tracking them has allowed Deepcaster to recommend*** (see below), taking profits on three Gold positions in the 3 Weeks preceding the recent Big August Takedown). 

Now consider why Gold and Silver are Profit Generators and Wealth Protectors going forward, as a Prelude to Guidelines for Profit Maximization.

Gold

Throughout the Process from Monetary Inflation (QE 1, 2…3? 4?) to Price Inflation (e.g. beginning now) to Price Hyperinflation and Depression, Gold has and will continue to appreciate (Caveat: But beware of “Paper Gold” and ongoing Cartel* Price Suppression Attacks).

Initially, in the Fiat Currency Monetary Hyperinflation phase, Gold, as The Ultimate Money, appreciates because all Fiat Currencies (albeit in varying Degrees) decline in Purchasing Power vis a vis Gold, as we have already seen in the past decade.

And then, as price Inflation becomes Price Hyperinflation, Gold Soars as Fiat Currencies’ Purchasing Power Plunges.

Then, as Economic Depression Sets in (and thus when Fiat Currencies have lost much of their value) Gold tends to Retain its value vis a vis the damaged or Destroyed Fiat Currencies.

One other consideration relates to Gold (and other Precious Metal) Mining Shares. Their Value tends to track Bullion more or less, except that they are after all, and above all, Stocks. Thus, overall Stock Market performance is likely to be a greater determinant of their Value, short-term, than their Ultimate value as actual or potential Precious Metal producers.

Maximizing Profit in Precious Metal shares (as opposed to Bullion) is thus in large part a matter of Timing… Generally speaking, they are better purchased near the Bottom of Equities Markets Downlegs. (See our Article “Power and Profit for Precious Metals Partisans (3/17/11)” in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.)

Silver

Silver, The Poor Man’s Monetary Metal, can, in the Hyperinflationary Process, be expected to perform similarly to Gold, except for the fact that it is also an Industrial Metal, used, and used up, by Industry.

While Gold has recently powered up to trade above its all-time Nominal High, Silver has been stronger even yet, recently trading around its all time high of $50/oz.

But it is important to note Silver has recently been acting more like the Monetary Metal that it is, rather than the Industrial Metal that it also is.

The prospect of sustained Higher Oil Prices justifiably exacerbates fears that such high prices will dampen Economic Activity, thus dampening demand for Industrial Metals. But Silver as Safe Haven Money has spiked UP along with Gold and Crude. Indeed, Silver prices are spurred by a Critical and Worsening Supply Shortage of Physical.

Thus we have, and will continue to have, this Very Volatile situation in the Precious Metals Arena with the Contenders being: The Cartel vs. Economic and Financial Reality.

Any perceived diminishment of The Chaos and/or a Major Equities Takedown will surely bring renewed and intensified Cartel Suppression Attacks on the Precious Metals Prices.

As we earlier Forecast, we expect an even more Vigorous Cartel Attack on Precious Metal prices to launch in the next few weeks.

In our most recent Alerts, we forecast the Outcome of the “Battle” between Cartel Precious Metal Price Suppression attempts and Upward Price pressure generated by intensifying Supply shortages and Inflation Pressures. We expect the next few weeks will provide the hardest Test yet of The Cartel’s Price Suppression Power.

Guidelines for Profit Maximization

In sum, Deepcaster’s recommended response to Cartel Market Manipulation (i.e. especially in the Precious Metals Market) are reflected in the following 6 Guidelines for Profit Maximization:

  1. Buying on Dips, coupled with a Willingness to Tolerate Great Price Volatility
  2. The Core Holdings of Ones’ Precious Metals Position are best held in one particular form (see our Precious Metal Recommendations) of the Physical Metals, in Personal Possession
  3. that Well Managed reasonably priced Miners with Substantial Reserves be bought on Dips, and, if one is a Trader, a portion sold near interim highs
  4. that a portion of One’s Holdings be in a Dividend Paying Precious Metals Fund such as one which we have Recommended, and
  5. Regarding Silver, since it is also an Industrial Metal, it is especially vulnerable to Slowdown in Economic Activity and (especially for the Shares) Takedowns in the Equities Markets.
  6. Another important Guideline is that Financial and Economic Conditions are such that we do not recommend shorting Gold and Silver, even in advance of a likely Cartel* Takedown attempt, unless one is a highly experienced Trader

We reiterate, finally, that, given the aforementioned Negatives, Systemic Solvency and Hyper-Stagflation Crises are likely already “baked into the cake.” The Fed’s (and Eurozone Bankers) Price boosting via Q.E. can not go on forever, and, in any event, Q.E. worsens the Inevitable Crash because it serves only to pile more Debt upon already Unpayable Debt.

In sum, we expect another Systemic Crisis later in 2011 or early 2012 (and may well already have) and Gold, Silver and Food are the place for Investors to be.

Gold and Silver and Essential Food Products and Producers are the most important Means to Profit and Protect regardless of Economic, Financial, or other Market Conditions, when preparing one’s Portfolio for Hyperinflation and other crises to come.

Consider, concluding Wise words from Marc Faber: “opt out of the fractional reserve system, buy Gold and become your own central Banker”.

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

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


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