Moving on to the gold and silver markets, anyone who believes that the gold and silver prices aren’t being manipulated evermore aggressively by the BIS, the Western central banks, and their bullion bank accomplices, is very simply denying reality.
~ John Embry
Gold Is Money!
Many analysts refer to gold as a commodity, but gold is not a commodity, gold is money and has been for thousands of years. Paper money is often backed by gold for that very reason, because gold is money.
As fiat paper money loses value due to excessive printing, gold increases in value in relation to the fiat currency you are comparing it to. Therefore, holding gold will always make you whole when the value of your paper assets decline. It amazes me how many people, including so called professional analysts don’t get this concept.
There is currently a significant shortage of physical gold and silver. These are finite assets and only so much can be mined out of the ground every year. Much of the available physical gold is held by sovereign nations; therefore, it’s taken out of circulation. The levels of consumption by governments and central banks, especially China, Russia and India, not to mention everyday investors, greatly exceed the amount of physical metal available.
Under normal circumstances this supply shortage in combination with the high demand would lead to a huge increase in the price of these precious metals. But those same governments and central banks who are hording gold are also manipulating the price of gold by using paper derivatives in the COMEX and LBMA futures markets.
So the price discovery over the past 5 years has not been based on actual free market supply and demand metrics, but rather, artificially suppressed by those who have the most to lose if natural price discovery was allowed.
You see, gold and silver are traded on a fractional reserve basis on the COMEX and LBMA. This means that paper derivatives are sold to investors at many multiples of the actual amounts of physical metal held in reserve. If all investors holding these paper derivatives suddenly called in their chips, there wouldn’t be enough metal to fill all the orders outstanding.
This would cause a run on gold and silver reserves and create a huge spike in the price of physical metal, which would collapse the paper derivative markets of the COMEX and LBMA. This is one of the reasons why the powers that control the markets don’t want to see the gold price soar.
The problem now is that fiat paper currencies around the globe are being debased at a record rate due to currency wars between nations. Many believe that the so called US gold reserves in Fort Knox have been sold or leased and that our vaults are empty.
That’s why there has been a call by some politicians to audit the Fed. The Federal Reserve hasn’t been audited since the 1950’s and the Fed is adamantly against any such audit and fights it with all the political muscle they can muster. Seems suspicious to me!
The central banks and their respective governments are losing control and this has caused an increased demand for gold and silver by investors and nations seeking safe haven and insurance against economic collapse.
Gold has been the best performing asset since the beginning of 2016 and the bull market in gold is building momentum. This bullish action is just beginning, but this action is also a huge threat to the fractional reserve markets of the COMEX and LBMA.
As a result, the central banks are colluding with commercial banks to manipulate the price back down again, just like they did since 2011 when the price of gold was getting out of control. Only this time, they are fighting a losing battle. Every time they try to bring the price down, it pops right back up.
Now there are new exchanges coming on line globally that allow for the free trade of metals in physical form only. Those exchanges include the Allocated Bullion Exchange (ABX) currently online this year and the Shanghai Gold Exchange (SGE) which goes online this April 2016.
This will lure investors away from the paper derivative markets to the safer physical exchanges causing the COMEX and LBMA to lose market share. The current price suppression should cease to continue and the price of precious metals will snap back to the mean at an alarming rate.
If you are not invested in physical gold and silver or gold stocks now, you may not be able to get a position once the system breaks, which could happen at any time. The rubber band is getting stretched to the breaking point and gold and silver may go ‘no bid’; which means you will not be able to place a trade.
There is no better time to buy physical gold and/or silver as the price will never be this low again.
Well I was right about the FOMC announcement Wednesday causing a spike in the gold price, but I was wrong in expecting them to raise rates this time. I also expected gold to experience more of a retrace right before the Fed announcement, but it seems the bulls are finally in charge.
The important thing now is that the trend is bullish. Precious metals are cheap in relation to the past 5 years of price suppression, so it doesn’t really matter if they are technically overbought, they can stay overbought for a long time when a bull market is in full play.
All we need now is for the stock market to start back down and I don’t think that’s too far away, as the stock markets current bear market rally should lose steam soon.
Below is the weekly chart of the US Dollar. We had a double top in 2015 and now the dollar is rolling over into a bear market. In addition, we have a divergence in dollars vs. stocks. In 2008, as the stock market fell, the US Dollar gained momentum as a safe haven, but in 2015 to present day, just the opposite is happening, the dollar falls hard when the stock market crashes.
As the dollar drops lower, this will be bullish for gold and once the stock market rolls-over from its current bear market rally, I expect gold stocks to really take off and that could be any day now.
The time has finally come for gold bulls, so if not positioned yet, now would be the time to get in with some long term Calls and sit back and watch them grow.
Stock Market: (SPY) (QQQ)
The FED was spooked by the sudden crash in the markets at the beginning of the year and that was mentioned at the FOMC meeting as the reason they decided not to raise rates on Wednesday. The current bear market rally will turn out to be a bull trap for many investors as this rally is extremely overbought and approaching resistance. (See chart below.)
Global economic indicators are anything but bullish and in fact getting worse every week and the smart money is selling into this rally with gusto. The only reason for this current rally is due to company buybacks to prop up the market, but that can only last so long.
Once this stock market rally loses steam and rolls over, things will get bad in a hurry. I doubt we will see any more rate hikes from here on out by the Fed. If anything, I expect they will resort back to QE and NIRP to try to prop up the stock market as it begins its terminal fall from here.
This will be bullish for gold and silver stocks as investors losing confidence in the stock market and the FED will rush into precious metals as the safe haven asset.
Energy Stocks: (XLE) (UNG) (USO) (LNG)
The recent breakout of oil is following the same pattern as the stock market. This is a short squeeze initiated by the commercials to weed out the weak hands before things turn around and start back down again.
A break of a downtrend line is always a good indicator of a new up cycle, but this one will be short lived as the fundamentals do not support a much higher oil price. If you took a position in oil as it broke the trend line, then good for you, but now it’s time to take your profits.
As you can see from the stochastic oscillator, oil is extremely overbought right now and could turn the corner any day. A roll over here will also be the catalyst for a rollover of the stock market.
Financial Stocks: (XLF) (IYF)
Nothing new to report here, just watch for a rollover of the S&P.
Commodities: (FCX) (JJG) (DBA)
Commodities are benefiting from the same short squeeze as oil and any uptrend right now should follow the same path as oil once it turns around.
US Treasury Bonds: (TLT)
US Treasuries have turned back up and are extremely oversold right now. This is a good indicator for a change in direction for stocks. Treasuries need to break through the downtrend line for confirmation, but it appears they could be making a move slightly ahead of stocks.
(SLW) January 2017 CALLS
(GDX) January 2017 CALLS
(ABX) January 2017 CALLS
(FNV) January 2017 CALLS
(RGLD) January 2017 CALLS
(SPY) December 2016 PUTS
(IYF) August 2016 PUTS
Why The Fed Is Paralyzed - Its Economic Model Is Junk