The Fiat-Conversion Price

Tue, May 8, 2012 - 10:15am

And this matters how? And why, exactly, do you care? Seriously. You need to ask yourself those two questions.

Look, never forget that the point of of this entire endeavor is "preparation for the end of the Great Keynesian Experiment". Part of that preparation is the accumulation of physical precious metal. Gold to protect your worth and wealth. Silver to protect you ability to acquire everyday necessities.

Do you believe that the current global financial system is now so malignantly flawed that it will not survive? Do you believe that beacuase the U.S. government is so overwhelmed with debt, current and future, the U.S. dollar is doomed as a global reserve currency? Are you fearful that global governments, in their futile attempts to maintain power will stop at nothing, economically and militarily, to avoid collapse and that these efforts will ultimately lead to war, insurrection, massive price inflation and civil unrest? If you answered "YES" to any of these three questions (and I suppose you did), then you should continue to BUY precious metal. Selling metal and converting it back into fiat is simply out of the question. Most of all:

If you answered "YES" to any or all of the questions above, why in the world do you care right now if gold is $1610 and silver is $29.50?

I ask this with all sincerity. Again...why do you care? You should be rejoicing at the opportunity to add metal at these prices. Last spring, it took nearly $5000 to buy just 100 ounces of silver. Today, that same $5000 will buy you 170 ounces. Hooray! How fortunate are we?!? The absolute sham of the current Comex/LBMA system has allowed everyone this extra time to buy/add metal. Please don't waste this opportunity! Also, please take delivery and store your metal somewhere safe.

Please indulge me to state this as clearly and unequivocally as possible:


I provide technical analysis of the gold and silver markets solely to draw attention and readers to this site so that I might warn as many as possible. I will continue to do so, regardless of the criticism of TA in general. Though the current precious metals markets seem to have been fundamentally changed by the MFGlobal disaster, underlying demand for physical metal will continue to make TA a useful tool. To that end, I present today these two charts only. In gold, the long-term trend is still intact and, as you know, I'm a big believer in the long-term trend. In silver, you can plainly see that the "right shoulder" is being carved in a pattern similar to the "left shoulder" last fall.

Now, before you leave my site today, I want you to read this extremely important piece of analysis and then come back:

You should also read the latest from Jim Quinn:

And this nugget from Mike Krieger:

I'm going to stop here. After being out all day yesterday, much stuff has piled up on my desk and demands my immediate attention. I'm sure I'll be adding thoughts to the comments all day so please be sure to check them from time to time. Hang in there. Keep the faith and go add to your stack. TF

About the Author

turd [at] tfmetalsreport [dot] com ()


May 8, 2012 - 10:16am


Have a good one Turd!!!

May 8, 2012 - 10:18am

I'll tell you why

Because some of us have lost our jobs and trying to hang on to the wealth we have left and live. Been killed in PM shares and now I have to sell at the worst of time.

It just is thank you Blythe and the dark forces.

Fr. Bill
May 8, 2012 - 10:18am

Thurd Turdlet

Thurd Turdlet

Edit: Oh well. Just doo doo I guess.

May 8, 2012 - 10:20am
May 8, 2012 - 10:22am


Why am I always third? (I just want to scratch off 'Furst' on my bucket list for once!)

Anyway, this is what it feels like in the wide world of PMs, today:

"Sgt. Elias, end of the movie, Platoon"

May 8, 2012 - 10:23am

We will win

Do not be disheartened. We will win and the sociopathic vampire squid bankers will lose!! Long live the shiny!

Good Stuff.


May 8, 2012 - 10:24am

Rallying call

Excellent writing.

If I had the money, I would be buying.

Rejoice not weep when you see sub 1600/30!

May 8, 2012 - 10:24am

Spot on

Totally agree, let them smash paper to as low as they can, there's no way I'd sell physical & all they're doing is helping us with time to prepare more. Thank you BM xxx

May 8, 2012 - 10:25am

Everything is going down, BTW

It's not just gold - everything is being sold.

Paper price will "matter" until it doesn't and then the paper price won't matter at all. Conversely, the physical price won't matter until it does and then it'll be the only price that will matter.

And the way things are going, the paper markets will probably close on a Friday and then on Monday, they won't matter.

They're buffering up and delaying everything to be dumped out in one big ginormous packet, most like over some weekend.

Until then, be patient and wait for the bear interlude to end. These bear interludes last as long as they want to, and it's not obvious until several weeks after they've ended that they've actually ended.

May 8, 2012 - 10:26am

I am holding lots of physical

I am holding lots of physical and shorting paper. Is there anything wrong in that ideologically?

May 8, 2012 - 10:29am
The Death Ceiling
May 8, 2012 - 10:34am

3 Charts for Rainy Days

Try not to trouble yourself with the day to day fiat price. If you haven't seen them before, here are 3 charts for a clearer perspective, from

Dr G
May 8, 2012 - 10:34am



And Turd is absolutely correct. A great place to really add to the stack here.

He is also correct regarding mentality. Holding silver or gold as a store of wealth or a hedge against inflation is the only play that makes any sense. And if you believe that, then silver at 29.50 and below shouldn't bother you. You should be overjoyed that you can purchase something you love at a lower price.

It would only bother you if you are holding it as a way to become wealthy. If you believe silver will go to $500 and you'll be able to buy a boat with it, then you should probably be depressed. When silver is $500 you won't want to buy a boat. You'll want to buy guns and ammo.

The higher the prices of the metals go and worse our living conditions become. That's a sobering thought. I think everybody wishing for sky-high silver should ponder that. 

I hope many of us aren't wishing for it, but see it as inevitable and are preparing for it.

May 8, 2012 - 10:34am

This is interesting

Gold Melt: PAMP Suisse and American Eagle HD
Dr G Jasper16
May 8, 2012 - 10:36am

@jasper, sorry to hear that

@jasper, sorry to hear that times are tough for you. PM shares are NOT PMs, however. They are part of the casino that is out to rob and strip you of your heard-earned money. Too many are making that mistake.

@worldend666, smart move. You've taken this volatility and downdraft and learned how to make money from it. That is what it is all about. 

May 8, 2012 - 10:38am
May 8, 2012 - 10:40am

Why do I care about the fiat price?

Why do I care about the fiat price? Good question. I ask myself that question a lot. You see I do believe that the flawed system will fail.. so why do the price falls in silver still cause my stomach to clench in horror? I guess I have three reasons...

1) Timeline

2) Personal circumstance

3) Brokerage held vrs true physical

Timeline-- if you had asked me in the beginning of 2008 if the system would still be holding together half-way through 2012, I would have said no way. Yet here we are 4 years later and the banks have a stronger hold than ever. Yes, I believe the system will fail and yes I think it will fail soon. But I've thought it was going to fail soon for 4 years now and currently there is no signs at all the silver price won't continue to fall unless everything fails. It is too completely controlled. So while we're waiting for the system to fail, I'm at the point now where I can forsee only additional losses until the endgame arrives. Meanwhile....

Personal circumstance-- I have 80% of my net worth in gold and silver. I don't own a house, my expenses are high and my income has recently become unstable. It is now not impossible that I will need some of my savings to live on in the next couple of years. If they drive the price down to $15 again by Christmas and the end game just isn't here yet, I might be forced to sell at those prices just to pay rent.

Brokerage vrs Physical -- In my brokerage account I have physical metal (PHYS, CEF, PSLV). I also have a bunch of big bars. I find it interesting from a psychological point of view that I never think about selling the bars, but watching the minute fluctuations of the fiat price in the brokerage account is what does me in.

Here's a question for the blog---can anyone see any reason for the price to go up again before the destruction of the entire system? It seems to me that they've drawn a line in the sand and decided to throw whatever fiat they need at it. They've broken the spirit of the bull--physical buying of coins is way down, the COMEX itself can never be broken because after MFG the big players don't try to take delivery there anymore, every technical indicator points down and QE3 will never be announced when they can just continue doing it under the table without the political flak an announcement would make.

May 8, 2012 - 10:40am

Turd, I ask this question with all sincerity...

If part of QEx is used to short the paper metal market (this is just my opinion), what good is TA? TPTB can print money to infinity and use that money to short paper metals to infinity or at least until there is no physical metal left. Then the system breaks. I have no idea how or when this happens or what it will look like if this happens.

PS. Don't stop, I love this site.

May 8, 2012 - 10:43am

Ivar's Chart

I am getting a very itchy trigger finger as the long term silver forecasting chart by Ivar has long predicted a major beat down at this time frame followed by an explosive surge to new highs over the next half year more or less. The beat down is a gift and all I can say is it is time for the bold to be bold.

May 8, 2012 - 10:43am

The Conversion Price Doesn't Matter

Except of course if you're Ben Shalom Bernanke and wake up every morning and check the /gc and /si. Oh man, I bet those guys would get ROCK HARD if we see a 15 handle on gold. Will it happen? I don't know but I do tend to believe the Easterners have a ton of cash they need to dispose of, and $1600 is a really nice entry point...

Just my humble opinion.

-Bernank Shmuelle Rockwell (not related to Ben Shalom Bernanke)

On another note, look at the amount of PUT VOLUMES on the Front Month SLV contract. 11,418 traded already at 28, 10,523 traded at 27... we're talking PUT/CALL ratio of about 10:1 so far today.... if that isnt capitulation... well, let's see what happens by end of trading today....

May 8, 2012 - 10:45am

6000 gold contracts sold at opening

My RJObrien said 6000 gold contracts were sold RIGHT at the opening of trading. That's nice

May 8, 2012 - 10:46am

When prices are low

I don´t sell. I buy. Otherwise it would be pretty backwards.

May 8, 2012 - 10:50am

Be Bold

There seems to be a real divergence starting between gold price and equities. Gold as the safe haven is coming back, dollar up gold up for awhile, then when the dollar starts to collapse again, it will soar. I for one went in large here at the fringes of 1600.

May 8, 2012 - 10:51am

As requested TF- Hope Mrs. F gets a smile out of it

"...then, on the 329th day of operations, TFMR suffered a small setback"

BTW folks- we joke around quite a bit, but the fact of the matter is that we choose to play in the deep end of the pool. This is investing, this is the metals- days like today. And if you think we cannot go lower in silver, having just gone from a 37 handle to a 29 handle, I present to you exhibit A: everyone like me who fearlessly BTFD after the May massacre and got in around 42. Stack judiciously, use this to lower your cost basis but also husband your resources in case we go lower... and if it is really getting to you, step away from the monitor and go for a nice walk. This, too, shall pass. 

May 8, 2012 - 10:52am

Bankia boss resigns as rescue looms

The executive chairman of Spain's Bankia has resigned as it emerged that the government will use public money to clean up bad loans at the bank.

The bank's boss Rodrigo Rato, a former head of the International Monetary Fund, said he had decided "to pass the baton to a new manager to decide what is best for this entity".

TRANSLATION ... "In keeping with Rato Ethics & Tradition, I've finished milking this cow for all I can, so I'm getting the Flock Off the ship before it sinks completely" devil

May 8, 2012 - 10:52am

Yes, Andy saw this, too

Gee, I wonder who was the seller???

On the bright side, he seems to think that today is a washout bottom and he's looking for a reliable entry point for the establishment of a long position.

May 8, 2012 - 10:54am


This market had a feeling of a possible computer "flash crash".

ClinkinKY TF
May 8, 2012 - 10:54am

This is interesting

Charlie Munger video preparing to sew his gold into his clothing?


“… [G]old is a great thing to sew onto your garments if you’re a Jewish family in Vienna in 1939 but civilized people don’t buy gold – they invest in productive businesses.”— Charlie Munger.

May 8, 2012 - 10:55am

Long term trend

Ok, so gold has finally broken out of the pennant to the downside this morning. This should not be a surprise to everyone as these formations do not necessarily imply a sharp move to the upside, just a sharp move in one direction or the other. In addition, gold has been trading below both it's 50d and 200d MA's for weeks now with the 50d itself dropping below the longer term 200d MA in mid April. The last time the latter occurred was in Sept 2008 just weeks before all hell broke loose in the financial markets. Yikes. Given this, it is not totally unreasonable to think that gold may retest (if not breach) the lows made in Dec 2011 as the market wakes up to the fact that Uncle Benny may not be willing (and able) to come to the rescue until both the S&P crosses the max pain threshold and TPTB in the US can successfully sell it's own people on the story that it may need to intervene on a situation that was no fault of their own.

For now, stay buckled up and keep those motion sickness bags nearby. Perhaps in the coming months we will get the opportunity of a lifetime.


May 8, 2012 - 10:56am

EURO-USD cross rates

Also watching this closely. Rickards said you know when QE3 is close. Euro @1.29. I think he said in this area or lower would be a sign of QE. That's if you believe his thesis of Feds want weaker USD to help with exports.

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