Forward

And not in a politically progressive sense.

Forward is the direction of the price of precious metal. We have been in a 3-week mini-correction, almost identical in duration and magnitude to the counter move of January 2011. Back on Saturday, I gave you projected lows of $1700 + 10 in gold and $31.50 in silver. So far this week, we have seen the Dec12 gold trade down to a low of $1698.70 and the Dec12 silver reached $31.53. That ought to do it.

I firmly believe that we have now seen the bottom of this pullback. Though a V-shape with no retest is possible, we must still expect some angst and volatility over the next 3-5 days. The fresh shorts will not give up easily so expect them to attempt to game every opportunity to restart the momentum to the downside. Again, as The Old Man says: Let om. They won't be successful.

There are clear lines on the chart now where, above which, shorts will begin to capitulate and cover. Eventually, it becomes apparent to nearly all market participants that a bottom has been reached and the rebound begins to create its own momentum. Soon, bargain hunters begin to charge in as they realize that fundamentals are once again in control. As we finish October and head into November, I then expect a consistent and, at times, sharp rebound.

Here are your charts. Let's start with silver where the bottom is more clear and the breakout through the downtrend line appears to be more imminent.

And note that on the daily chart with the Relative Strength Index, silver has reached a level of "oversoldness" not seen since the price bottom of late last summer.

The gold chart isn't quite as compelling...yet...as gold likely has a little more work to do in building a base. Regardless, I'm extremely confident that we saw the lows yesterday.

And, like silver, gold is quite oversold, from a momentum standpoint.

So, what does this mean? History and current fundamentals tell us that this correction has now run its course. From here, though, do not expect a rapid recovery, at least not initially. Let this play out over the next week or so. Traders should be utilizing this time period to begin building positions by buying dips and adding incrementally.

History also suggests, though, that this next move in the metals will be significant. Let me just remind you that, after a nearly-identical rally and pullback in the post-QE2, 11/10 - 1/11 time period, silver soared nearly 90% in 90 days and gold rallied from $1308 to $1920 in 7 months. And I would further add that the current fundamental case for acquiring precious metal is even stronger than it was then. Be ready.

Lastly, you may have noticed that I've not yet commented on this "German gold repatriation" story. ( http://www.dw.de/germany-to-check-gold-reserves-stored-abroad/a-16329995 & http://www.washingtonpost.com/business/german-auditor-office-urges-central-bank-to-control-gold-reserves-held-in-us-france-britain/2012/10/22/a986448c-1c63-11e2-8817-41b9a7aaabc7_story.html). That's by design because, quite frankly, I can't decide how significant the story is. Is it just more anecdotal evidence of conspiracy and proof ongoing swaps, leases and manipulation of the metals OR is it the final straw, the first major crack in the facade of illusion regarding unallocated and allocated gold? Below is the story from yesterday by Ambrose Evans-Pritchard. The brief article is worth reading but this seems to me to be the key paragraph:

"Peter Hambro, chair of the UK-listed gold miner Petropavlovsk, said the Bundesbank may have withdrawn its bullion in self-protection since it did not, apparently, have its own specifically allocated bars in London. "They may have decided that the Bank of England had lent out too much gold, and decided it was safer to bring theirs home. This is about the identification. Can you identify your own allocated gold, or are you just a general creditor with a metal account?"

http://www.telegraph.co.uk/finance/financialcrisis/9631962/Bundesbank-slashed-London-gold-holdings-in-mystery-move.html

As you might expect, Bill and Chris are all over this story and their site is rich with links for you to ponder. Here are just a few that you should make time to review:

http://www.gata.org/node/11868http://www.gata.org/node/11866 & http://www.gata.org/node/11856

But I urge you to take the time to read all of the way through this: http://www.gata.org/node/11862. Here, let me get you started...

By Lars Schall
Wednesday, October 24, 2012
It's strange what you encounter when you try to take a serious look at the gold policy of central banks and their agents, the bullion banks.
Some observers, including the Gold Anti-Trust Action Committee (GATA), estimate that Western central banks have on hand nowhere near as much gold as they claim. These observers suspect that much Western central bank gold has been sold or leased largely surreptitiously to restrain the gold price over the last two decades.
Here is the explanation provided to me in an interview by the Canadian financial analyst and fund manager Marshall Auerback when I asked: Do you think that the Western central banks and the International Monetary Fund really have in their vaults the gold they say they have?
Marshall Auerback: "In a strict accounting sense they might, but it might be irrelevant. I suspect that the central banks have not been selling much gold over the past few years since the inception of the Washington Agreement on Gold, but I think they have still been leasing considerable amounts into the gold market. From a flow standpoint, it's irrelevant whether the gold is sold or lent, as it still appears as supply in the market. So the key question becomes: Can the leased gold be recovered by the central banks? The work of GATA and others such as Bob Landis and Reg Howe suggests that the gold cannot be recovered. In effect you have a 'prison of the shorts' situation, whereby the gold that has been lent out and melted down to become, say, part of some Indian bride's dowry will not be coming back into the market.
Ultimately, I think, the central banks will ratify this in an accounting sense by reclassifying the leased gold as sold, so from a stock standpoint, that will validate GATA's argument that there is far less gold being held by the central banks than is commonly believed...

And here is the author, Lars Schall, being interviewed by Max Keiser last week:

http://www.youtube.com/watch?feature=player_embedded&v=QYWWwIYS5Pk

If you have the time, here are some more links for you to look over:

http://www.dailyreckoning.com.au/why-german-gold-could-be-as-good-as-gone/2012/10/25/

http://seekingalpha.com/article/946601-the-significance-of-the-row-in-germany-about-inspecting-their-gold-reserves-held-abroad

http://www.zerohedge.com/news/2012-10-24/why-did-bundesbank-secretly-withdraw-two-thirds-its-london-gold

Again, I'm not certain yet as to how big of a deal this is. Form your own opinion and act accordingly.

As I close, I see that prices are holding firm at $1715 and $32.15. This is good. Buy a little more today and get ready for an explosive end of the year and an historic 2013.

TF

272 Comments

Istack's picture

They don't scare me

Katie Rose's picture

Top Three?

This is a miracle!

silver66's picture

second

second

babaganoush2307's picture

Thurd!

Or fourth maybe

GeraldBostock's picture

V

V

silverace's picture

Thank you!

I enjoy reading your posts. Keep up the good work!!

Nana's picture

The Only Way To Go Forward Is to Go Back

http://www.healthfreedom.info/Federal_Reserve_Fraud.htm

Most people assume that the Federal Reserve Bank is federal--that is, part of the united States' government. However, the Ninth Circuit Court put that issue to rest in 1982 when they adjudicated:

"Examining the organization and function of the Federal Reserve Banks, and applying the relevant factors, we conclude that the Reserve Banks are not federal instrumentalities for purposes of the FTCA, but are independent, privately-owned and locally controlled corporations." [Lewis vs. U.S., 680 F. 2d 1239, 1241]...

....The passage of the Federal Reserve Act was unconstitutional because 1) the US Constitution prohibited "bills of credit" (i.e., paper notes) and 2) the US Constitution would have to be amended to go off the silver and gold coin standard for money. The US Constitution, the supreme Law of the Land, can only be amended pursuant to Article V. The US Constitution cannot be amended by statute.

Dr. Fix's picture

Eight

blush

That's what happens when you can't ignore natures call any longer!

(speaking of turds)

Jan Roos's picture

Silver

Glad to see the article about the chinese starting to hoard silver as well. Now if Central banks start buying silver that will be something..

Response to: Silver
SilvBel's picture

remember when gold was at 500

remember when gold was at 500 or so .. central banking were selling gold (at the bottom)

at this moment they are buying gold (at the top)

Jan Roos's picture

@Silvbev

Still newbie stacker and more recently trader here. Why did they sell gold at the bottom exactly? I know they are stupid but I am sure they must have had a good reason to sell at $500.

Cheers

Dr. Fix's picture

The the Chinese will help silver vanish.

Since silver is such an extremely small market,
I would think that the Chinese could annihilate it overnight if they wanted to.

Then again, if they keep making metal disappear off the market surreptitiously like they have been doing with gold,

Then they may be able to maintain this game just a little while longer.

I still think it all implodes by years end.

Beastly Stack's picture

TURD you will Know

Turd<I definitely do not want to get you angry.

I noticed several postings by Kcap last week and agreed with some of what he was saying about TA,however did not comment about it because of his interpretations of what SANTA was saying.I know Santa has great respect for your work as do most of us here in Turdville.

In the next couple of trading sessions,however if these lows are obliterated by the CARTEL which I am of the opinion they will be.I really think you should think about not posting these charts for everyone to see.I do NOT think you take any gratification that you got the BAD GUYS attention.

I just think you give them extra motivation to pick the pockets of the less experienced!

If new lows do come to fruition in the next couple of days,I am just asking you to really think about what I and others are trying to say.

I am with you and everyone else as far as our beliefs in the metals but there are too many things at play right now in this world that could give the CARTEL a shot at more HUGE THEFT!

Be CAREFUL and Patient.

If new lows don't come,I'd rather wait until we get back above 1740 convincingly and silver 3350 and hold those levels for a couple of sessions.

GOOD DAY TO ALL!

4406PACK's picture

just buy it and become

just buy it and become

the more you buy the more you win in the end and its comming soon

rxman's picture

Interesting Glitch on Kitco

Normally you see the glitch to the downside. This one was to the upside. Maybe someone testing and algo to the upside? One can only dream. I do know that dreams do become reality.

Vermilion's picture

Why did they sell gold at the bottom?

Silvbev - because they were advised to - in the case of the Bank of England, by GoldmanSachs...

ReachWest's picture

Maybe I Own Central Bank Gold

I've never understood the concept of "leasing" Gold. It just doesn't make any sense to me. It's obviously a "Banker" concept. Hey - here's a great idea (says Mr Central banker) we have Gold gathering dust in the vault - lets lend it out to others for a monthly fee and still show it on our books as an asset. (Lets put our Gold to work - make it a productive asset, as Charlie Munger would say.) BAD IDEA - fast forward a few decades and the borrower has re-leased or re-hypothicated the Gold to others, who have in turn done the same numerous times. AND, when the Central Banks need to get that Gold back due to some financial calamity (created by them) - it's gone. Gone for good.

Somewhere deep down in the base of my brainstem there is the idea that Gold is only valuable if you hold it in your hands - if you control it directly - if you can hide it and find it.

I like to look at my wee stack once in a while and ponder that the Gold in it was actually leased out by some stupid Central Banker a few decades ago - those morons still hold it on their books as an asset of theirs, but it's now just a book entry for something they owned years ago. You see,  it's been re-hypothicated and melted down a few times - and guess what - now it's mine.

Monedas's picture

Keep the pressure on the Cartel !

Play the futures .... play into their hands .... and agin your fellow Turds ?    BTFD ?    Tampoco !      To keep the heat on the Cartel Cruds .... BED !     Buy Every Day !    Not emphatic enough for us Turds ?   OK, then BEFD .... Buy Every Fornicating Day !  (For Katie Rose: Buy a little every day ! Although I have a feeling she's fully hoarded .... takes one to know one, eh ?)    And you know I mean physical !      Monedas      1929         Comedy Jihad Taking It To The Next Level World Tour     devil

Xeno's picture

@Lars

What a great phrase and one that will probably be adopted by turdites everywhere - "prison of the shorts".

LOL pricelessyes

Word on the down low is that the IMF is forcing repatriation of physical assets worldwide. Can't verify but it could be for any reason from they're tired of the games to unwinding of intl. agreements made after WWII. Also seems to fit if you consider the blatant weak reasons given and the salted tungsten stories that scare people away from the phyzz. 

In any case, the world will never be the same.

treefrog's picture

chinese silver

the chinese (and east asia in general) have had a cultural affinity to silver for millennia.  china was trading silver/gold at 8-10/1  while europe was 16/1.  the silver/gold arbitrage between europe and the orient was an important adjunct to the spice trade. 

china was on a silver standard long after the west went to gold.  silver is embedded in their myths, their values, their culture.

the chinese have long memories.  measured in generations, not in years.

when the chinese people, in sufficient numbers, become wealthy enough to buy silver, pow!  to the moon!

hammerman's picture

sure wish da sheep who

claim they gold bugs and silver spoons would stop tryin to time the market and just get in there and get your positions already...  you is holding up the bus for the rest of us.  lets start shaking these dim wits out and makes em chit or get off da pot already.... and you know who you are....   cmon man.....

Missiondweller's picture

That 500 tons of gold China imported....

it had to come from somewhere. And that means someone, either the bullion banks or a central bank has 500 tons less. If it was true that there were derivatives on gold in a ratio of 100 to 1, then at this point it must be higher.

If you believe as I do that China will use their gold as backing for their currency at some point, then you know that that 500 tons are not coming back into the market.

Therefor, gold cannot stay at $1700 level forever. The demand for gold bullion has to be outstripping supply. China is acquiring it at a rate that suggests they know its price is artificially low. The fundamentals of gold have never been stronger.

Jan Roos's picture

@treefrog

I think it is safe to assume that the Chinese are planning on going on some kind of gold standard in the near future.

If silver were going to play a monetary role in this as well, wouldn't the governmnet be importing massive quantities of silver as well?

Maybe they are, I just don't know it yet.

Cheers

SRSrocco's picture

THAT'S A GREAT DEAL OF SILVER

CHINESE & INDIA SILVER DEMAND:  TO REACH ALMOST 12,000 METRIC TONNES IN 2012

According to this GoldCore article posted on Zerohedge, the Chinese silver demand will hit 7,700 metric tonnes in 2012.  Last year India's silver demand was 4,000+ metric tonnes.  We can safely assume they should have about the same figure in 2012.

2012 SILVER DEMAND

CHINESE SILVER = 7,700 mt

INDIA = 4,000+ mt

TOTAL = 12,000 metric tonnes?

12,000 metric tonnes = 386 million oz (more than half of 2011 global silver supply)

This would be nearly 50% of all the silver that was mined in 2011.  Of course we do have a good amount of silver coming from recycling... but regardless, this is a significant demand from just two countries.

While it is true that these two countries have the largest population, I believe we have just begun to see how much silver they will be consuming in the future.

Admiral Ag Bar's picture

Istack <-- mad skillz

I am convinced Istack created a program to ping Turd's site for new posts.  Very impressive indeed.  Perma-first.  I like it!

Another great post Turd.  We are holding fast and keeping the faith.  We will be vindicated.

Katie Rose's picture

Random thoughts

Yesterday I intended to purchase two Canadian Wildlife Series coins. I was very excited about it. That was all I could afford this month and I was jazzed! Just as I was ready to hit "purchase" the phone call came...

I have written about how I was totally blindsided by the lack of available straw in this ranching community. No straw anywhere for bedding for the animals. Without clean straw the barn gets really nasty smelling and the animals get really sick. Who wants to go into a barn and have their eyes water from the stench? Not me!

When I realized there was no straw I made twelve! indecision phone calls to local farmers asking about straw. And I waited and waited and waited. I waited for over a week and was getting very, very concerned. Not having straw is as calamitous as not having alfalfa to me.

So in the world of farming one 750 pound round bale of straw costs as much as a one oz. Canadian Wildlife series coin. The farmer only had two bales available. That was it. Twelve phone calls netted me just two large rounds of straw.

The straw won the monetary battle.

I often wonder if I am crazy and totally delusional. I keep thinking that with the dollar tanking and the ME exploding, the cost of fuel oil will continue higher. Higher oil means higher farming production, fertilizer, and transportation costs. That translates into much more expensive food. Since the US imports/transports so much of its food, my crystal ball into the future sees not only much more expensive food, but empty grocery shelves as well. Too few farmers and too many city dwellers. And all the farmers I know are beyond retirement age. They are old and tired and their children have fled for easier, higher paying jobs.

I'm betting on the premise that having farming/gardening skills is going to be more valuable than having a few more silver coins. And what I've learned is that you just can't pick up a book, or watch a video and acquire the necessary skills. It takes time. Books make it sound so easy. It isn't.

I'm sad sad about the Canadian coins and glad smiley about the straw.

Only time is going to tell me if my crystal ball is accurate.

Dagney Taggart's picture

Hello Hello Hello.......

The field work is done now that the snow is upon us. Whew! The Vancouver LCS is raided again. Grabbed another 2m Ag on Tuesday..... Scraps of about 10 different products. Damn supply was slim!

Nice article on Chinese silver buying. Word is certainly out in Hongcouver. It is about to be so over for the Cartel. I sh*t you not.

Spent yesterday in Seattle and now it's off to Spokane for the Silver Summit.

The Watchman's picture

Solar Demand=1 gigawatt takes 80 TONS of SILVER

Industrial Use of Silver

In 2008, the world silver demand was as follows: 53 percent was for industrial use, 24 percent for jewelry and silverware, 13 percent for photography, 7 percent for coins, and 3 percent for investment. This means that 66% of the silver produced that year was consumed. Industrial uses of silver include: mirrors, electric cars, silver-zinc batteries, cell phones, laptops, iPods, televisions, and any appliances that have an electronic motherboard. Silver is also increasingly used for a variety of medical purposes. The medical use of silver is expected to increase by 100 million ounces by 2020.[3]

Perhaps the fastest growing industrial use of silver is for solar panels. Production of a typical solar panel uses about 20 grams of silver, or 2/3 of a Troy ounce. It takes 80 tons (or 2.56 million ounces) of silver to produce solar panels capable of producing one gigawatt (GW) of solar power. In July, 2010 the US authorized $1.85 billion in loan guarantees for solar production. India wants 20 GWs of solar power by 2020 (from almost zero now), while China wants 30 GWs (from 5.5). Europe wants total renewable energy to be 20% of energy production by 2020, from 10% in 2008. There was 7.2 GWs of new solar capacity installed worldwide in 2009. This climbed to an estimated 17.5 GWs installed in 2010, with 20.5 GWs expected for 2011, 23.3 GWs in 2013, and 40.9 GWs in 2019.[4]

The estimated total increase of the industrial use of silver by 2020 is around 350 million ounces a year. In 2009 the world silver production was about 680 million ounces. World production is expected to reach 790 million ounces by 2020. Leaving all other industrial use constant for the next ten years, the projected increase of industrial silver consumption is much greater than the rate of silver production. This alone will greatly increase the value of silver over the next decade.[3]

Dr G's picture

History also suggests,

History also suggests, though, that this next move in the metals will be significant. Let me just remind you that, after a nearly-identical rally and pullback in the post-QE2, 11/10 - 1/11 time period, silver soared nearly 90% in 90 days and gold rallied from $1308 to $1920 in 7 months. And I would further add that the current fundamental case for acquiring precious metal is even stronger than it was then. Be ready.

This got me all sorts of hot-and-heavy excited. You know what I mean.

But also let us add that silver went on to amazing moves and was then beaten back into oblivion by the forces of darkness. Will that pattern repeat once again as well? Not just a smack down, but a $15-at-a-pop type beatdown?

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