Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
UK Energy Firms Scamming Customers Out of Their Best Fixed Rate Gas Tariffs - 23rd Sep 21
Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Should School Children be Jabbed with Pfizer Covid-19 Vaccine To Foster Herd Immunity? - UK - 23rd Sep 21
Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
Trading Crude Oil ETFs in Foreign Currencies: What to Focus On - 22nd Sep 21
URGENT - Crypto-trader event - 'Bitcoin... back to $65,000?' - 22nd Sep 21
Stock Market Time to Buy the Dip? - 22nd Sep 21
US Dollar Bears Are Fresh Out of Honey Pots - 22nd Sep 21
MetaTrader 5 Features Every Trader Should Know - 22nd Sep 21
Evergrande China's Lehman's Moment, Tip of the Ice Berg in Financial Crisis 2.0 - 21st Sep 21
The Fed Is Playing The Biggest Game Of Chicken In History - 21st Sep 21
Focus on Stock Market Short-term Cycle - 21st Sep 21
Lands End Cornwall In VR360 - UK Holidays, Staycations - 21st Sep 21
Stock Market FOMO Hits September CRASH Brick Wall - Dow Trend Forecast 2021 Review - 20th Sep 21
Two Huge, Overlooked Drains on Global Silver Supplies - 20th Sep 21
Gold gets hammered but Copper fails to seize the moment - 20th Sep 21
New arms race and nuclear risks could spell End to the Asian Century - 20th Sep 21
Stock Market FOMO Hits September Brick Wall - Dow Trend Forecast 2021 Review - 19th Sep 21
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Another Healthy Correction for Gold and Silver Price

Commodities / Gold and Silver 2012 Mar 17, 2012 - 10:53 AM GMT

By: Jason_Hamlin


Best Financial Markets Analysis ArticleI have received several emails this week asking my thoughts on the current price action in precious metals. Some subscribers are asking how low gold and silver might go in the short term and my honest response is “I have no idea.” Anyone that claims they can predict the short-term price movements in a market as manipulated as this one is blowing hot air. The banks can utilize leveraged paper contracts to take gold down to $1,200 and silver to $20 if they want to, in the short term.

However, they absolutely can not keep prices this low for very long, as free market forces will bring things back into equilibrium. In fact, recent take down attempts have been met rather quickly with buying from strong hands, much of it likely coming from China. While I still believe that the manipulators can create rather substantial take downs that scare weak hands out of their positions in the short term, they are becoming less effective and more impotent each day. This has been obvious in the charting, where buyers are stepping up to take advantage of these paper-driven artificial sell offs. I view this manipulation of paper prices as insignificant. Whether gold falls to $1,200 or only drops to $1,600 and bounces, I have no doubt it will continue to preserve wealth and continue to increase the purchasing power of those holding it over time.

I believe it is important not to give into emotions during corrections such as these. If you have been staring at your computer screen and stressing the price action this week, you are doing yourself a great disservice. I would suggest that your focus should be mustering the strength to stick with your convictions, ignore the noise and keep your eye on the longer-term picture. I see nothing wrong with hedging via put options or inverse ETFs, but I’ve found it easier and more effective to simply hold onto core positions and buy the dips.

I am convinced that gold and silver will eclipse their previous inflation-adjusted highs before this bull market is over. This means that gold will climb above $2,400 and silver above $150 at an absolute minimum. If we use more realistic inflation numbers such as those calculated by John Williams of Shadow Stats, the true inflation-adjusted highs are more than triple the prices listed above. Whether gold climbs to $8,890 and silver to $517 remains to be seen, but I believe we are likely to see the lower price targets listed above within the next 12 to 18 months.

If you agree with this assessment of the situation, then there is no reason to be concerned when silver falls by 5% or 10% in a week. When silver is trading anywhere from $150 to $517 per ounce, will it matter much if you bought at $30 or $35? Will the temporary decline that we are currently experiencing have any meaning at all?

When fear creeps in and you begin to doubt your investment beliefs, remember these numbers. Then go out for a long walk, read a book, play with your children or do something other obsessing over short-term price fluctuations in precious metals. It will most often drive you mad, mess with your emotions and cause you to make bad investment decisions.

Analysts are claiming that the recent weakness in precious metals is due to the strengthening of the economy and stock market, causing investors to move away from safe haven assets and into equities. There is also the assumption that the sovereign debt issue in Greece has been resolved in a neat and orderly way, so that the threat has been removed.

Nothing could be further from the truth, in my opinion. While the media is reporting only $3 billion at risk, the true impact of the Greek default is probably going to be measured in the hundreds of billions, if not trillions, and cause much more harm than is currently believed. The CDS settlement next week and future bond auctions will shed more light on the extent of the damage. And while there may be some deflationary impact from the bond haircut, the proposed solution to the debt problem is once again more debt.

And let’s not forget that the ECB just pumped over $1 Trillion into Eurozone banks to keep them from crashing the entire system. This was an unprecedented move from the ECB that will prove to be incredibly inflationary and bullish for precious metals. The ECB balance sheet is now at a record $3.9 Trillion, which is now more than a third bigger than the U.S. Federal Reserve’s $2.9 trillion and eclipses the 2.3 trillion-euro gross domestic product of Germany, the world’s fourth largest economy. Even if they manage the Greek default in such a way as to hold together the Ponzi Scheme of a financial/monetary system a while longer, they will soon be facing Portugal, Italy and Spain. I doubt these countries will be nearly as easy to manage.

Then, just when you thought there was light at the end of the tunnel, here comes Japan, the UK and the United States with their own monstrous debt problems that will surely blow up the system, if the smaller countries don’t do it first.

I hate to be so drab, really I do. But I refuse to drink the Kool-Aid. By the very nature of the monetary system, all people and nations will become increasingly indebted until the bankers soak up every last penny of wealth and then demand our slave labor to pay off the imaginary debt they have created out of thin air. The situation can not change course and get better suddenly, unless we agree to eliminate all debt, eliminate the FED and fractional reserve banking and begin utilizing some form of interest-free money. What are the chances of that happening?

So, the only resolution comes from cascading defaults or all-out hyperinflation. While things have been unfolding relatively slowly up to this point, I think most people will be shocked at how quickly the pace accelerates and how close we are to some type of tipping point. In either scenario, I want to be holding precious metals that are outside of the banking system and in my possession.

I also believe it is wise to consider other preparations to ride out the storm, such as food and water storage, gardening seeds, methods of self defense, etc. After kicking the can down the road for so long, if and when the system finally crashes, we are likely to go through a rather ugly transition period marked by bank runs, hyperinflation, civil unrest, food supply chain disruptions and other difficult challenges. You don’t have to become a hard core Doomsday Prepper, but taking a few common sense steps is entirely rational at this juncture. Specific details on how to prepare, with links for the top ten items to acquire, can be found in the Premium Member PDF guides.

It will keep you sane to ignore Bernanke and the mainstream media shills that continue to spew their nonsense. The debt situation in Greece is not resolved, QE is not over, gold is nowhere near a top and our economic problems are much greater than anyone wants to admit. While soaring stock prices are giving many investors the illusion of prosperity, there are plenty of less obvious signs that things are beginning to fall apart. One such event was recently pointed out by Bix Weir (, regarding the resignation and whistleblowing of Goldman Sachs executive Greg Smith:

What is VERY important about this article is the person who is quitting – Greg Smith.

“Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.”

Holy Cow Batman! It’s the HEAD of European Derivatives for one of the biggest CDS players in the world, Goldman Sachs! He’s running for the hills just days before the settlement of the largest CDS payout in the history of the industry! Lay this fact on top of the retirement of the CEO of the CME and the removal of the CME as a European Derivative Clearing Organization and you have one toxic brew.

I’ve been doing some research into the settlement process of CDS’s for the Friday Road Trip and from what I can surmise they call it the “Big Bang Protocol” for a reason! What a Cluster #!@*! When the DTCC came out and said this was only a $3.2B issue they totally left out all the Greek CDS’s that are not purchased to cover any specific bond investments…which is most of the Greek CDS market!

Another major catalyst is the developing trend of nations around the globe wanting their gold back from the United States. Germany and Switzerland are both looking to follow in the footsteps of Venezuela and repatriate their gold from the NY FED. What happens if the FED has already sold or lent out this gold, or simply refuses to give it back? Gold? What gold?

In getting back to the original topic of the current correction in precious metals, it is a non-event in my opinion. It still amazes me how fast investors lose confidence in gold during the slightest correction. The bears come out of the woodwork to proclaim that the bull market is over and everyone seems to panic, just like they did at $600 gold, $800 gold, $1,000 gold and so on. This is not to say that gold and silver can’t drop further from here, but the upside potential is magnitudes greater than the downside risk.

The chart above suggest that the upside potential for silver over the next several months is around $70, a gain of over 100% from current levels. Conversely, the downside risk (blue line, absent a crisis) is around $28 or (-14%). A drop to the red line which corresponds to the 2008 crisis bottom, would be around $23 (-29%) but only expected if another severe crisis unfolds. Given it is an election year for Obama, I believe the administration will do everything possible to avert or delay another crash until after November. Either way, with upside potential of 100% and downside risk in the 14% to 29% range, it is unclear why so many silver investors are panicking.

The bottom line is that the fundamental reasons to own gold and silver have not changed, but have only continued to strengthen in recent weeks. If gold and silver continue to fall to even lower artificially-suppressed prices next week, I will use this opportunity to buy aggressively, both physical metals and undervalued mining shares. The Gold Stock Bull portfolio has a relatively high percentage of cash waiting to be deployed and any drop below $1,600 gold and $30 silver will be seen as just such an opportunity.

I include this as the last paragraph in every newsletter, but it is worth repeating at this time:

“Remember to think like a contrarian, buy the dips, sell the rallies and never allow the paper shorts to shake you from your positions at temporarily suppressed prices. Gold and silver are nowhere near the end of this bull market and could easily top $5,000 and $250, respectively, before all is said and done. Corrections are a healthy part of any bull market, allowing the bull to rest its legs and providing a base from which the next upleg will spring.”

Despite the negative tone of this email, I want to express that I am optimistic about the future. I believe that the coming financial collapse is necessary to cleanse the system and start over with something magnitudes better. I hope we can implement a system that has long-term sustainability, respect for the environment and a greater focus on cooperation, community and compassion. If you are interested in some potential solutions, I recommend this recent article and assessment of our current situation by author Daniel Pinchbeck:

I believe the leading two films/movements for new solutions are the ones listed below. Of course, I don’t agree with everything within these films, but they both break down the flaws of our financial system in very clear and concise ways. I think there are some really brilliant solutions proposed and I urge you to open your mind, suspend any bias and see what you think.

Thrive: What on Earth Will it Take? Zeitgeist: Moving Forward

If you would like to receive our monthly contrarian newsletter, view the Gold Stock Bull portfolio, receive email alerts when we trade and gain access to a number of detailed guides to surviving financial crisis, click here to become a premium member.

If you would like to receive the GSB Contrarian Report, download my guide to buying and storing physical precious metals and view all of the stocks that we hold in the Gold Stock Bull portfolio, click here to become a Premium Member.

By Jason Hamlin

Jason Hamlin is the founder of Gold Stock Bull and publishes a monthly contrarian newsletter that contains in-depth research into the markets with a focus on finding undervalued gold and silver mining companies. The Premium Membership includes the newsletter, real-time access to the model portfolio and email trade alerts whenever Jason is buying or selling. You can try it for just $35/month by clicking here.

Copyright © 2012 Gold Stock Bull - All Rights Reserved

All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. The information on this site has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any information on this site without obtaining specific advice from their financial advisor. Past performance is no guarantee of future results.

© 2005-2019 - 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