Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Pre-COVID US Economy Wasn’t All That Great Either - 4th Dec 20
Bitcoin Breath Taking Surge - Crypto Trading Event - 4th Dec 20
Platinum Begins A New Rally – Gold & Silver Will Follow - 4th Dec 20
Don't Let the Silver (and Gold) Bull Shake You Off! - 4th Dec 20
Stronger Risk Appetite Sends Gold below $1,800 - 4th Dec 20
A new “miracle compound” is set to take over the biotech market - 4th Dec 20
Eiro-group Review –The power of trading education - 4th Dec 20
Early Investors set to win big as FDA fast-tracks this ancient medicine - 3rd Dec 20
New PC System Switch On, Where's Windows 10 Licence Key? Overclockers UK OEM Review (5) - 3rd Dec 20
Poundland Budget Christmas Decorations Shopping 2020 to Beat the Corona Economic Depression - 3rd Dec 20
What is the right type of insurance for you, and how do you find it? - 3rd Dec 20
What Are the 3 Stocks That Will Benefit from Covid-19? - 3rd Dec 20
Gold & the USDX: Correlations - 2nd Dec 20
How An Ancient Medicine Is Taking On The $16 Trillion Pharmaceutical Industry - 2nd Dec 20
Amazon Black Friday vs Prime Day vs Cyber Monday, Which are Real or Fake Sales - 1st Dec 20
The No.1 Biotech Stock for 2021 - 1st Dec 20
Stocks Bears Last Chance Before Market Rally To SPX 4200 In 2021 - 1st Dec 20
Globalists Poised for a “Great Reset” – Any Role for Gold? - 1st Dec 20
How to Get FREE REAL Christmas Tree 2020! Easy DIY Money Saving - 1st Dec 20
The Truth About “6G” - 30th Nov 20
Ancient Aztec Secret Could Lead To A $6.9 Billion Biotech Breakthrough - 30th Nov 20
AMD Ryzen Zen 3 NO UK MSRP Stock - 5600x, 5800x, 5900x 5950x Selling at DOUBLE FAKE MSRP Prices - 29th Nov 20
Stock Market Short-term Decision Time - 29th Nov 20
Look at These 2 Big Warning Signs for the U.S. Economy - 29th Nov 20
Dow Stock Market Short-term and Long-term Trend Analysis - 28th Nov 20
How To Spot The End Of An Excess Market Trend Phase – Part II - 28th Nov 20
BLOCKCHAIN INVESTMENT PRIMER - 28th Nov 20
The Gold Stocks Correction is Maturing - 28th Nov 20
Biden and Yellen Pushed Gold Price Down to $1,800 - 28th Nov 20
Sheffield Christmas Lights 2020 - Peace Gardens vs 2019 and 2018 - 28th Nov 20

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Gold and Silver Prices - Been Here Before but This Time Is Different

Commodities / Gold and Silver 2013 Apr 19, 2013 - 01:28 PM GMT

By: Dr_Jeff_Lewis

Commodities

The precious metals have seen dramatic sell-offs before, although the primary difference between previous precious metal declines and the recent drop is the current shortage of physical metal.

It is also worth considering how well the commercial bullion traders are positioned for a rally after these past two days of sharply dropping prices, especially when the latest price drop came on top of a physical market signaling tightness all along.


The Developing Physical Shortage and Goldman’s Selloff Signal

Major dealers in North America and the EU seem to be out of physical precious metal stock almost across the board. This physical shortage had been developing for some time, in contrast to the 2008 drop.

In terms of the supply fundamentals, the loss of Kennecott’s Bingham Canyon mine last week, in addition to further postponements for Barrick Gold’s big Pascua Lama Project were as bullish as can be.

Goldman was also openly signaling the rest of the market by notably revising their gold price forecast lower just ahead of the big down move, followed by more major banks revising their price forecasts lower.

Price and Positions

Precious metal prices have now been falling overall or range bound for almost two years. Contrast the current situation with the historical September 2010 to April 2011 period, when 30 percent down moves occurred after a short covering rally as a speculative pile-on ensued.

This time, physical demand had been surging just before paper price declines led by the manipulated futures market. Also, hedge funds have also been piling in to short the market to a historic degree based on the negative technical picture.

In contrast, J. P. Morgan Chase et al have been slowly exiting or reducing their notable precious metal short position over the last month without a drop in the market’s open interest. Normally, heavy downside direction in price tends to be accompanied by a reduction in open interest.

Frankly, the most recent selloff seems like just an orchestrated opportunity for the big shorts to cover.

The Economic Backdrop

Record highs in equities have been seen recently, despite persistently soft economic data that misses one week after another virtually across the board. Complacency and universal bullishness seem to prevail, despite data indicating that little if any real economic recovery is actually underway.

Another notable occurrence has been the persistent referencing of CPI and employment numbers by authorities and the mainstream media, despite the obvious disconnect of this data from the reality faced by most people.

The last straw was the blatant early release of FOMC Meeting Minutes so that the markets could react when precious metal sentiment was already horrible.  According to the latest FOMC Minutes, money creation via asset purchases by the Fed seems likely to subside later this year. Furthermore, London seems to be anticipating that Mark Carney's arrival at the Bank of England will see a more activist monetary policy stance arise in the UK too.

Nevertheless, the world's stock of fiat money is not contracting — quite the opposite, in fact. Japan has just launched another round of monetary stimulus on steroids, which will see the developed world's most indebted economy create a proposed $1.4 trillion in Yen in a bid to break the country free from depression and the perceived threat of deflation.

Price Patterns and Key Retracement Levels

Once again, the same price pattern seems to be emerging. A massive dump in early overnight trading, followed by a margin increase pulls the rug out from under precious metals support as the market approaches key technical levels.

The panic selling feeds on itself as stops are triggered. The market moves much farther down than statistical or historical norms would suggest seems probable. This latest sharp decline, led by the Asian session, resulted in the biggest two day decline in the price of gold seen over the past thirty years.

From a technical perspective, the sharp move down seen a few days ago broke below the 38.2 percent retracement level of the big post-2008 gold rally from 681.40 to 1920.75, prompting traders to shoot for the 50 percent retracement level at 1301.07.

This 50 percent Fibo level now seems to offer the market both a target and a rallying point to buy gold ahead of. The substantial bounce already seen from the recent 1321.09 low just ahead of this objective indicates that the market’s desire to sell may well already have been satisfied.

Interestingly, it often seems to be the case that when market sentiment is apparently beyond repair, the seeds for a new rally are quietly being sown.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com and Hard-Money-Newsletter-Review.com

    Copyright © 2013 Dr. Jeff Lewis- 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.

Dr. Jeff Lewis 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