Best of the Week
Most Popular
1.Oil Wars 2016 - US vs Russia vs Saudi Arabia vs Iran - Nadeem_Walayat
2.Crude Oil Price Crash Triggering Global Instability, Trend Forecast 2016 - Nadeem_Walayat
3.Stock Market Crash - Last Week was The 2nd and Final Warning... - Clive_Maund
4.Stock Market Crash Apocalypse or Bull Market Severe Correction? - Nadeem_Walayat
5.TShipping Said to Have Ceased… Is the Worldwide Economy Grinding to a Halt? - Jeff_Berwick
6.Crude Oil Price Crash Catastrophe, Independant Scotland Literally Begging to Rejoin the UK - Nadeem_Walayat
7.Summers: Global Economy Can't Withstand Four 2016 Fed Hikes - Bloomberg
8.Gold And Silver: New World Order: Public Be Damned, Preferably Dead - Michael_Noonan
9.Rigged U.S. Ttreasury Bond Market Double Barreled Hidden Q.E. To Infinity - Jim_Willie_CB
10.Major Stocks Bear Market Awakening - Zeal_LLC
Last 5 days
Gold Stocks Something has Changed - 6th Feb 16
UK Interest Rates, Economy GDP Forecasts 2016 and 2017 - 6th Feb 16
Gold Price, Mining Stocks Rocket Higher - 5th Feb 16
Crude Oil Price Bottoms and Blues - 5th Feb 16
Gold and Silver: Ripe for a Recovery! China May well Change the Game - 5th Feb 16
How Pension Plans are Responding to Financial Repression - 5th Feb 16
Senior Gold Producer Goldcorp Takes Large Stake in Nevada's Gold Standard Ventures - 5th Feb 16
Tips for Smart Oil and Natural Gas Investing 2016 - 5th Feb 16
Another Corporate Giant Is Leaving the U.S. – What This Means for You - 4th Feb 16
TPP is Economic Warfare, Trade Can Make Everyone Worse Off / Governments are Stupid - 4th Feb 16
Gold and Stock Markets Inflection Points Galore - 4th Feb 16
Putin Cries Dyadya (Uncle), Is Saudi Arabia Listening? - 4th Feb 16
Gold Price Golden Bottom? Video - 4th Feb 16
Look North for Value-Priced Growth in Healthcare Biotech Stocks - 4th Feb 16 - TLSReport
BrExit EU Referendum - Britain's FINAL Chance for Freedom From Emerging European Superstate - 4th Feb 16
HUI Now Confirming Gold Price Move Higher - 4th Feb 16
Crude Oil Price Forecast 2016 As Good As It Gets - 4th Feb 16
Gold and Silver More 'Flight To Safety' Active February - 3rd Feb 16
Raytheon Company: A Defensive Stock for a Defensive Market - 3rd Feb 16
Is Silver Really a Weak Link - 3rd Feb 16
Gold to Beat Stocks 2016? - 3rd Feb 16
David Chamberlain Cameron, Britain's Last Chance for Freedom From Emerging European Super State - 3rd Feb 16
EU UK Draft or Daft Agreement By Donald Tusk to Members of the European Council in Full - 2nd Feb 16
Europe: Why It's Going to Get a Lot Worse Before It Gets Better - 2nd Feb 16
The Next Generational Bust Is Coming, Stock Market 70% Collapse - 2nd Feb 16
The Coming Stock Market Decline May be a Monster - 2nd Feb 16
S&P 500 Has Likely Entered a New Bear Phase - 2nd Feb 16
How and Why To Move Your Assets Offshore Before the Financial Collapse - 2nd Feb 16
Central Bank Created Silver Price Rally - 1st Feb 16
The Fed Is Not Hiking Rates: Risk Assets To Perform - 1st Feb 16
US Dollar and US Treasury Bonds Big Picture - 1st Feb 16
BOJ Negative Interest Rates Central Banking Crime Syndicate's War on Cash for Triggering Panic Consumption - 1st Feb 16
Elites Set to Wipe Out Stock Market Shorts Before Next Downwave... - 1st Feb 16
Stock Market A-B-C Correction Unfolding - 1st Feb 16
Nice week for Gold : It’s All about Sentiment - 31st Jan 16
Silver Price Breaks Higher on Rising Anxiety - 31st Jan 16
Stocks Bear Market Rally Underway - 30th Jan 16
Gold And Silver Current Prices Do Not Matter - 30th Jan 16
Gold Price Potential Upside 2016 - 30th Jan 16
Stock Market Bears Pulverised by BOJ Knock Out Punch, Non Technical Take Video - 30th Jan 16
Lacy Hunt: Inflation and 10-Year US Treasury Yields Headed Lower - 30th Jan 16
The Curious Case of Copper... - 30th Jan 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Global Financial Crisis 2016

Gold and Silver Bullion and Mining Stocks Short Covering Squeeze?

Commodities / Gold and Silver 2013 Apr 24, 2013 - 12:45 PM GMT

By: Jeb_Handwerger

Commodities

A week ago I wrote about a potential rebound after capitulation and panic selling in precious metals and the miners. It now appears Goldman Sachs (GS) is covering its short on gold as it rebounds above $1400.

Meanwhile, many banks have helped confuse and misdirect the investment community out of gold (GLD) and silver (SLV). This was a classic shakeout and bear trap which may start a major short covering rally.


Be ready to see increased short covering combined with record physical demand. These are the two elements to spark a price spike and breakout higher in both gold and silver.

These markets are ready to start moving higher after basing for 2 years and having a major short attack by the big banks too big to fail and the media.

Right when gold and silver were about to gain some momentum after bouncing off key support for most of 2012, simultaneously Goldman Sachs came out with a bearish prognostication on precious metals, old Fed minutes are brought up and Cyprus says they will sell gold.

This resulted in a shakeout below $1535 and a massive bear trap for momentum traders who may have been stopped out. The markets will do whatever it must to confuse, misdirect and obfuscate the long term trend investor.

In my opinion, gold and silver are still below 1980 inflation adjusted highs and miners (GDX) are trading at record low valuations. Precious metals bubble talk is gibberish.

One should not even discuss irrational exuberance when the miners are in the midst of a hysterical fear which has dropped junior mining valuations (GDXJ) to all-time lows. Until we witness new price paradigms when the consensus understands the wealth in the earth approach we should not even discuss bubbles.

The real bubble is in U.S. debt which has risen more than 17 times 1980 highs, but still many refuse to recognize the real bubble and the possible ramifications of the bond bubble bursting. Bonds have been in a thirty year uptrend and are being manipulated ridiculously higher as investors seek liquidity and yield.

Incidentally, these shakeouts can lead to breakouts as a major rotation occurs near the bottom and long term value investors acquire at a discount. Notice the increase in physical demand and thin inventories for gold and silver worldwide.

Market makers or shorts in precious metals and mining stocks are squashing every breakout and in fact using technical analysis as a contrary signal to shakeout momentum traders over the past two years. I have learned that these players use the charts to go against the market.

When technical signals fail repeatedly in precious metals and fundamentals are ignored by the market many investors leave the arena and fold. This may be a ploy from policy makers to foster an environment with cheap commodity and precious metal prices to make it appear inflation is subdued.

This would support more easy money policies to pay down soaring debts and try to boost a struggling economy.

A few weeks ago, it was discovered that the Fed sent out the minutes early to a small group of recipients which may have included Citigroup, JP Morgan, Goldman Sachs and Barclay's. Investors began to panic that the Fed would exit Quantitative Easing. Then I observe major banks coming out with bearish analysis saying troubled Central Banks would sell gold. Could there have been trading based on this information? Does this occur more often giving some Washington insiders an unfair advantage in the marketplace?

I know many of our elected officials in Washington investigating these banks are shareholders or former employees. Its the old case of the fox running the hen house and questions the credibility of our elected officials and representatives. Too big to fail seems like modern day cronyism reminiscent of the Tammany Hall days.

Investors are realizing that the major U.S. banks may be losing their credibility and their hold on fiat currency. They are hitting new highs based on government support through record low interest rates, cutting costs and creative accounting. We are not seeing increase of earnings or revenues from organic growth.

Unemployment remains high and inflation may be greater than many yet realize. Look at the move in natural gas over the past year of over 120% and lumber. Inflation is still present.

Eventually, more investors will look into alternatives currency hedges in gold and silver bullion, where we have witnessed demand rising exponentially after this pullback.

When I see these Wall St. firms bearish on the yellow metal, I know the goal is to make short term profits on their record short positions before they cover.

I believe the gold bull market will recover from this short attack and continue with a breakout into new highs past $1900 sooner rather than later. This may be an accelerated move sooner rather than later after many of the weak hands have been shaken out. When gold and silver breakout, watch the small junior miners priced at Armageddon 2008 prices soar. Some of these discounted junior mining stocks could see exceptional gains from these low decade low levels.

Not only is Goldman negative on gold and silver prices but they advised clients to go short, only to cover a few days later. This is a risky tactic in a market with a powerful longterm 12 year uptrend and goes against all textbook rules.

What is their reason? The mess in Cyprus didn't trigger a run into precious metals and that gold is not seen as a safe haven. Also they were concerned that the Fed will exit QE and that troubled Central Banks will sell gold.

To me this is short sighted analysis with the goal to stimulate panic and uncertainty on the precious metals. The fact remains that not one of these Central Banks sold any gold and $85 billion worth of QE is being funneled into the banks and housing sector every month.

I believe this bear attack may indicate that Goldman and other banks may continue to cover their shorts as the weak hands sell their precious metal positions at a potential bottom.

Gold and silver may be staying down because hedge funds have a record short on them. Goldman Sachs may be allowing these funds to cover before an eventual short squeeze which could help catapult gold and silver into new highs. Central Banks may also be using this negativity in the precious metals market to load up before a possible breakout move.

Bloomberg reports, "Gold Prices Tumble Most in Five Months as Cyprus to Sell Bullion". Investors may be momentarily questioning gold and silver as a shelter from turbulent financial weather in the short term.

Now the sectors supported by Quantitative Easing are soaring while precious metals are hitting major support levels. The manipulated dollar (UUP), large caps equities (SPY) and bonds (TLT) appear to look strong, while the commodities look weak. This may be part of the tools of Cental Bank policies. To paraphrase Freddie Mercury, "Is this real life or is this just fantasy? An escape from reality?"

Mark my words eventually the investment community will see the intrinsic value in precious metals in a world of declining fiat currencies and soaring sovereign debts.

We may be hitting multi-year lows in precious metals and the miners. The U.S. dollar and large cap equities may be seen as the safe place temporarily by the masses, but they are in fact possibly the riskiest assets at the moment.

The equity markets are very overbought, hitting a 15 year high. Bargains present themselves in the precious metals arena, which has been a store of value for 5000 years unlike Bitcoins, ETF's, Dollars or Bonds.

It is hard to teach an old dog, new tricks. The majority of investors remain ignorant about potential inflationary hurricanes which could hit sooner rather than later. They would rather stick their hand in the sand and believe good times are here again.

Will I be selling my gold, silver or the miners or be going short because Goldman says so? No. Gold is not just a safe haven from financial turmoil. Precious metals are an alternative to fiat currencies which are losing purchasing power.

Negative real rates exist all over the world and right here where I live in the United States. Remember cash has no intrinsic value and can be printed to infinity.

There is only so much gold and silver in the ground and in the earth. Precious metals have real values and is the obverse of printing unlimited paper money and soaring debts. Do not be surprised to see silver and gold being increasingly used as a means of exchange.

Despite the manipulated financial markets and distorted media designed to confuse simple investors, 13 states are about to recognize gold and silver coins as legal tender. Why are the states making this move?

Historically, a country or empire that used the printing press to pay down soaring debts eventually resulted in hyper-inflation and the destruction of the fiat currency. The U.S. is undergoing quantitative easing and debts are continuing to soar.

Interest payments on that debt are currently low due to the manipulated bond market, but that could change if investors stop buying U.S. debt.

The lawmakers from these states believe that gold and silver will over the long term keep its value. Texas is one state that has been proactive with its sound money approach. The Texas Retirement System owns gold and miners including one of our GST recommendations as a hedge against a dollar collapse.

I believe this trend of viewing gold and silver as real money will continue. Investors in an environment of negative real rates will continue to seek out instruments which retains their value.

Whatever you do, don't let the spinmeisters panic you out of your gold. Look at these pullbacks as opportunities. Buy silver (AGQ) and gold (UGL) when it is oversold and when the pundits are negative.

Don't panic about Cyprus who may be forced to sell their gold to fund the bailout. Many other countries such as China, Russia and India would be glad to buy it.

There was a time in the late 90's and mid 70′s when Central Banks sold gold and the price dropped significantly. This turned out to be a buying opportunity.

Nothing goes straight up or straight down, sometimes price moves sideways or backwards. Patience and fortitude is critical during these down and flat markets.

Be careful of Goldman Sachs' forecast who tend to raise targets during tops and are negative when it may be bottoming time. They expected a major breakdown in gold at a time when the S&P500 and Nikkei (EWJ) soars to record highs due to currency manipulations. Now they are covering their shorts as gold holds $1400.

Investors supposedly are selling their gold due to Fed Minutes being released that states some officials want to end quantitative easing by the end of 2013. This is old news and is based on statements which did not take into account the recent poor jobs data.

The S&P500 has doubled, yet the economy is still weak according to Bernanke. Bernanke is the one whose opinion matters most and he will continue to devalue to boost the economy through record low interest rates and quantitative easing.

Similarly, Japanese Prime Minister Abe has pledged to reverse deflation and the European Central Bank continues to boost liquidity. All these moves will eventually cause a breakout in precious metals and the mining equities which have almost pulled back to 2008 levels, despite gold and silver being close to double 2008 values.

Subscribe to my free newsletter to get up to the minute updates on rare earths, uranium, gold and silver.

By Jeb Handwerger

Disclosure: Author owns no stocks mentioned.

http://goldstocktrades.com

© 2013 Copyright Jeb Handwerger - 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.

Jeb Handwerger Archive

© 2005-2016 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

Biggest Debt Bomb in History