Five days ago, on my blog, I posted an article titled, “The Short-Term Outlook for Gold and Silver”, and posted the following prediction, “In the short term, I would not be surprised to see gold pull back to $1,480 an ounce and silver below $16.80 as bankers have a vested interest in pushing silver back below the $16.80 range. There are a lot of politics at play in the gold/silver price war between East and West, as the crux of the US- China trade war runs much deeper than that which meets the eye, and the ongoing currency war between these nations is the force that is truly driving the trade war.” At the time I posted this article on my blog, I noted that gold was trading at $1,506 an ounce and silver at $17.10 an ounce, so both predictions required decent short-term drops, constituting a $26 an ounce drop in gold and a greater than 1.75% drop in silver prices. Both of these events happened yesterday, with the low intraday gold price in New York hitting $1,479.30 and the low intraday silver price reaching $16.41 an ounce. Furthermore, these levels were $55 an ounce lower than the highs for gold and a whopping greater than 6% lower drop for highs in silver established earlier in the day in Asia. With my short-term price targets for gold and silver reached, What comes next?
I have been observing, analyzing and writing about these patterns in gold and silver prices in which gold and silver prices precipitously drop, either starting with the London PM price fix, or more frequently after New York gold futures trading opens, for well over a decade now. Consequently, I literally have observed dozens of gold and silver intraday price smashes in which the spread between high prices in Asia and low prices in New York exceeded 2% to 3%. In fact during the 2008 global financial crisis, gold prices consistently fell in rapid waterfall declines of 2%, 3%, and 4% on a regular basis from the highs established earlier the same day in Asian markets. Downward price volatility in silver was even worse back then, with silver prices sometimes slammed as much as 11% in just a few hours after market open in New York. And back then, when I demanded answers from the Commodities Futures Trading Commission regarding these obvious non free-market price behaviors in precious metal prices, I was only provided with responses that Chinese bankers were regularly manipulating prices of gold and silver higher in Asian markets but that zero evidence of any wrongdoing or interference by Western bankers in manipulating gold and silver prices lower in futures markets existed. This answer, we know by now, has been heavily discredited by numerous court documents, court testimony, and banker admissions to the contrary.
Still, the question is will the patterns of 2008 repeat themselves now that gold and silver are exhibiting strong bullish tendencies again? Yesterday was the first large raid on gold and silver prices in a while, with gold cratering within a matter of hours, on large futures volume, by more than $55 an ounce from highs in Asia, and silver likewise cratering by more than 6% from its highs in Asia yesterday, an event that was sure to elicit some cries of, “Here we go again.” Though there was a bounce in both gold and silver prices off of these lows, the real test will be to observe what happens in gold and silver prices after the New York market opens again today. Not only do I need to observe if there are large volumes of gold and silver futures contracts dumped on the market again today and for the rest of the week, but I need to observe the subsequent price behavior in Asia after such smashes (if further ones develop) and the levels at which gold and silver prices close at the end of this week. I actually have observed some promising developments beneath the surface, and though it’s too early to discuss them, I must admit that there is a reason to not yet concede, despite yesterday’s gold and silver price smash, “Here we go again”. At this point, even though I believe that gold and silver prices will remain under the most risk for a continued decline over the next three week period, if, on the contrary, we can make it through this period and gold can remain above, or at least regain, $1,500, and silver can do the same with the $17 level, then we could easily see more quick gains materialize next month. Until more data flows in, there is no sense in over-analyzing the price drop yesterday and extrapolating it into an extended gold and silver price smash until I observe how the rest of this week shapes up. I will provide more commentary after then.