Saturday, May 19, 2012

"The Gold and Silver Liquidation is Over"

Ben Davies CEO of Hinde Capital writes:
The sell-off in gold is reminiscent of the 2008 deleveraging process... There were buyers of course, seller and buyer volumes must match.  But the need to sell overwhelmed the need to buy. 
When you have redemptions time is against you to liquidate, so it becomes a case of sell at any price as time becomes finite. Gold buyers picked up some bargains then and they will now.

Before FOMC minutes two nights ago the seller was back at the close.  And then the FOMC minutes changed the dynamic of market with the mention by some members that QE would be back if they saw renewed economic weakness.  This is the association for us all of why the market stopped going down but in truth the seller was done.
Davies concludes:
  I humbly believe the seller is done.  For one week there has been several but mainly one entity selling Comex gold futures, as well as some physical to liquidate on the open and closes.  This suggest to us it was a CTA commodity type fund.  They use volume areas of the day to transact.
Bottom line: We may have 3 factors pushing gold and silver to the upside in a "perfect storm" type event. First, we have a very oversold market. Second, we have may have a major seller out of the market and third, the Fed may be about to increase its money pumping.

I tend to buy gold for the long-term and not pay too much attention to short-term fluctuations, but given recent weakness in gold and what appears to be developing upside factors, it may make sense to step up gold buying at this time.


  1. I agree with Bob...and believe precious metals should be looked at from a long-term perspective.

    In fact, my view is that you want to own gold because it's important to have *real* money. And with that view, it really doesn't matter how many pieces of paper or electronic digits you trade for it. The purpose is to have it.

    And as much as I hate to reference Warren Buffett, my view is hold onto real money forever. In other words, not to someday trade them in for monopoly paper again.

    But it is perfectly understandable to want to buy gold as cheap as possible. With that in mind, gold may be bottoming right now. But my personal opinion is that it still has about $200 on the downside to give.

  2. geez, Jim Rogers was just saying the other day he was waiting to buy.
    Wouldn't the price go down more if Spain and the rest of the PIIGs went belly up?

    1. The majority of people see the USD as a safe haven. As people flee the Euro they buy the USD thus lower gold and silver prices. If interest rates in the US increase down goes the metals. If US interest rates go extremely high then gold and silver will beat it hands down.

  3. Anon @ 1:33:

    I'm not making predictions, I'll instead make some points.

    1. Jim Rogers is a self-admitted poor market "timer".

    2. What are the odds of the ECB letting Spain and all the other countries (except Greece) go "belly up"? All they have to do is print more money to keep the charade up for a while longer. Greece they can afford to let die on the vine(but even Merkel is trying to prevent that), not the rest of them though. If the ECB prints more money what are the implications for precious metals and the dollar?

    3. If for some reason the ECB decided not to print anymore(a doubtful proposition from my viewpoint) you still have to wonder about where the remaining Euro wealth will flee for safety.

    In such conditions as sovereign fiscal failure there's a good chance that more wealth would go to precious metals than US dollars...which again means metals go up.

    1. I apologize first for not being ready to spew exact figures on debt you the above statement should be emphasized.

      "3. If for some reason the ECB decided not to print anymore(a doubtful proposition from my viewpoint) you still have to wonder about where the remaining Euro wealth will flee for safety."

      The amounts of debt owed by PIIGS to other member states is so large that there is notr sufficient wealth in those supporting state to hold up the defaulters....period. Unless Germany taxpayers want to support all of Europe there will be NO alternative to the printing of money to pay debts. Math is a funny thing; it does not belong to a political party. IMHO

  4. Gold and silver may have declined but so have oil, other commodities and stock markets. This is a general across the board decline.

    Despite money printing (and I am sure that Ben will fire up the presses), there is a major rewrite happening here. It is not about the economics at the moment, it is about the loss of confidence across the board that is occurring.

    This is about a crisis of government and political will. You see it unfolding in the European elections and the excessive regulation and control governments exert. Its all become too hard!

    In bygone days it was always about political economy. The experts specialized and forgot the link. Now we see political breakdown impacting on economics and markets.

    Further I see the great Financial Assets Bubble of the 1975-2007 period bursting and despite the printing presses and all the king's men, the cycle of stupidity is almost set to complete.

  5. I think it's mainly the problems in Europe causing the dollar to strengthen. Also, Austrians need to pay attention to bank credit contraction. It doesn't matter how much money the Fed prints if the banks just sit on it and people are paying down debt.

  6. I hope the sell off is over, silver has dropped a lot since the high of almost $50 in the spring of 2011.

  7. Thanks for the response, Anonymous @ 10:56 AM.

    Gary North wrote a bit about, "2. What are the odds of the ECB letting Spain and all the other countries (except Greece) go "belly up"?"

    All I can say is, it's not about odds.

    Deft wrote, "and people are paying down debt."

    EPJ had some charts (info? I forget which.) showing that People are not paying down debt, just the opposite.

    Deft also wrote, "It doesn't matter how much money the Fed prints if the banks just sit on it"

    EPJ keeps showing how that money is leaking out. So maybe it does not matter?

    Also, you got that tidal wave of money sitting in foreign banks waiting to rush on back here, so maybe current printing is meaningless in the face of all that money coming back here?

    I don't know,... that's why I read EPJ, I'm just an armature Austrian. I'm a self-admitted poor market "timer" too,... so far. Although, buying gold at $450 and silver at $11 wasn't entirely bad timing.

    I'll never forget the time I was at an auction and the auctioneer kept looking at me to bid for some silver at $12. He knew my name and I was kind of embarrassed, almost made me buy,... I guess I should have. But I kept telling myself, who's going to be crazy enough to buy $12 silver? That's nuts... $12 silver. HAHAHA. OMG, I wish I would have been as wise about Austrian economics then as I am now.

    Maybe I should say, 'more aware' about Austrian economics? I wish I was wise... like some others.

    - clark

  8. This weekend saw more bottom calling by goldbugs than I have ever seen. Even looks likely too...especially for the stocks...

  9. The US is "going greek" too. There is no safety in the greenback.
    Europeans will buy PM stocks (in CND), they will not pay VAT on bullion.

  10. osk osicko ... largest gold prodcuer in canada.....i picked up some half price....

    fortuna silver....half price......

  11. So my question is, if I was some poor Spaniard experiencing a mild case of panic, and I had the option of investing in Swiss Francs, gold or dollars...why would I choose dollars?


  12. If you have 0% of your financial assets invested in PM, you are 100% invested in $US. Is that a wise thing to do? If you are a real estate investor, would being 100% leveraged be a smart thing to do? Over-simplified, I know, but you get the point.

  13. What a crock, NEVER HAPPEN, WHY? too much manipulation and paper silver and paper gold, the ratio is 100-to-1 of paper contracts to real physical. Arrest Blythe Masters and Jamie Dimon of JP MORGAN, Indict HSBC, DELAWARE DEPOSIT, BRINKS, SCOTIA MOCATTA, then metals will move up. They will just smack it down.

  14. Hi!, Patrons Of The Economic Policy Journal Et Al:

    Sharing the basis of HOPE can at times be far more precious than the precious metals themselves? How so you ask me?
    During the French Revolution, with Napoleon and his troops fighting far away from the commercial activities of French cities, Napoleon sent word to the French Ministry, because their currency the Assignants were depreciating before he and his troops could leave their battle positions to go into the cities to spend their Assignants, that the French Minitry would either pay his troops in gold coins or he and his troops were leaving the battlefield, to allow the French Ministry to fight their own war & needless to say he got the gold coins.
    OUR US Constitution, in Article 1; Section 10 mandates that only gold and silver coins are to be used by ALL US citizens as their money....period! No so called redeemable paper money allowed!! What if OUR troops required such specie gold and silver payments for their services instead of tday's present Federal Reseve, I Owe You Noting, fiat paper money? The American Institute For Economic Reserch in Great Barrington, Mass. tells us that we have no real money circulating here in the US, because Federal Reserve Notes are only what is termed "purchasing media" circulating as debt but not as true specie money.
    Should the reader require more instructive truth in this regard, you are invited to look up Fiat Money Inflation In France by Andrew Dixon White who was the co-founder of Cornell University on the internet @ The Von Mesis Institute website which is some 70 pages+ in length or they can sell you paperback copies for around $10 each. If you do read this treatise, you will be far more informed about the longer range effects of inflation than you probably are at present which means your thinking will be more highly guided by history's past declarations of the far reahing effects that inflation has on whatsoever nations incur it.
    Daniel Webster is credited with this statement, following his observations of the effects of inflation on human life: "Of all the contrivances designed for cheting the laboring classes of mankind, none has been more successful than that which deludes them with issues of fiat, I Owe You Nothing, irredeemable paper money!" The senior J. P. Morgan went before OUR US Congress several decades ago to tell them: "Gentlemen, only gold is money and all else is credit!" OUR country by whatever means has been turned into a "credit junky" and it will be up to us; just as it was up to Napoleon, to stop the out of line defiance, destruction and traiterous acts against OUR US Constitution meant to represent all of US as citizens in a Republic living under its' mandates.