Currently, there is massive negativity surrounding gold and silver and in particular, gold and silver mining stocks. At times like this, when gold and silver have taken a fairly brutal hit in a condensed period of time thanks to low daily trading volumes both in PM futures and PM stock markets that make it very easy for the banking cartel to manipulate them, it can be difficult not to sell out of everything and run for the hills if one allows emotions to dictate one’s decisions (always a bad move). Especially at a time when fundamentals mean virtually nothing and speculators like JP Morgan and Goldman Sachs are constantly rigging markets and gaming the system through their High Frequency Trading (HFT) programs, it is difficult not to become emotional with your investment decisions. Thus it is important to take a step back from the here and now, and to look at the big picture to re-gain a better grasp of where asset prices will be heading in the future and to re-establish the proper perspective with which to evaluate your decisions. At various times this year, based upon global risk factors and fundamentals, when gold and silver should have been rising, both of these precious metals were falling, and sometimes dramatically. Other times, when risk factors of global banks were elevated and financial stocks should have been falling, they instead, were rising in price.
Such movements that are the result of market rigging and the absence of free markets can be incredibly trying at times and an environment in which it is incredibly difficult to stick to one’s guns. In fact price movements of assets have been so rigged this year that such inexplicable, bizarre price movements finally prompted Mr. Joseph Saluzzi, co-founder of the brokerage firm Themis Trading, to state, in response to a soaring Bank of America stock price in the face of woeful fundamentals this past February: “The movement of Bank of America stock on most days has nothing to do with Bank of America.” Likewise, intra-day movements in gold and silver price on most days have nothing to do with gold and silver as well but merely are the direct result of HFT programs meddling in the futures markets. If the price of gold and silver were actually set in free markets, we would be staring at gold and silver prices today that would both respectively be at a minimum, 100% higher than their current prices right now.
As I wholly understood the Wall Street and banking cartel rigging game, on January 3, 2012, in preparation for the coming year, I informed my clients at that time to be prepared for “massive volatility” in gold and silver this year. I stated at the very beginning of this year in my client newsletter: “Volatility in gold and silver assets will likely be fierce once again in 2012 because of the fact that the criminal banking cartel will fight with every tactic at their disposal to suppress gold and silver prices as their empire crumbles, much like a cornered wild animal would react to a top predator that wishes to kill and eat it. It will do anything to survive. As we inch closer to the death of one, or both the Euro and the USD, a fate that I believe is inevitable and that we WILL experience in our lifetimes, unfortunately, the volatility that we experienced in 2011 will be repeated in 2012, with one significant caveat. Even though I expect a wild ride in gold and silver assets in 2012, I expect the end of the year prices to make a much larger jump higher in gold and silver this year as opposed to 2011, and I expect the probability for mining stocks to have a strongly positive year in 2012 to be much higher than last year. Thus I expect to see huge rapid movements higher in gold and silver at times, countered with wild swings down at times by panicked banker counter-responses. We’ve already seen that the elite banking cartel has zero morals when cornered and that they will resort to outright theft to protect their empire if necessary.”
Though it may seem like a remote possibility to many at the current time that gold and silver rise much higher by the end of this year than their prices at the start this year, I still support this premise. For one, it should be clearly apparent, as I very well predicted massive volatility in gold and silver for 2012 as the norm, that such rapid and extreme price suppression schemes executed against gold and silver by the banking cartel is a direct reflection of how close we are to total systemic failure of the global financial system. Of course, the most massive volatility in gold and silver that we experienced thus far occurred in 2008, which coincidentally marked the worst stock market plunges we have experienced during this crisis thus far. The fact that the banking cartel has attacked gold and silver so strongly again this year merely indicates that the global financial system is in much much worse shape than the propaganda that they are distributing through the mass media that everything is okay, and that they are selling to the masses today.
What still shocks and surprises me today is the massive negative sentiment and fear that the banking cartel is able to generate among gold and silver investors every time they artificially manufacture one of their take downs in gold and silver. How quickly we forget that such take downs in gold and silver happen every year, and that in response, the Chicken Littles employed by the banking cartel always climb on top of their soapboxes and scream that they sky is falling in regard to gold and silver markets? Yet every year when this happens, I hear gold and silver investors despair. Granted this current gold and silver correction has been more brutal than in past years though not as brutal as in 2008. However, if we remove ourselves from thoughts of the “here and now” only, step back, and take a look at the big picture, we will realize that that the banking cartel ALWAYS FAILS long-term in their mission of suppressing gold and silver prices. So to understand that there is nothing wrong with gold and silver today other than the fact that the banking cartel has manipulated prices lower by selling the world the empty pipe-dream that we are in “risk-off” mode now, and that two of the riskiest assets in the world — the US dollar and US Treasury bonds — are the two safest havens now, let us look at a few charts of gold and silver performance since this gold/silver bull started over 11-years ago to firm up our continued positive outlook regarding gold and silver. For those that have developed tunnel vision due to the banker propaganda disseminated through the mass media and that have been focusing on the USD’s significant short-term rally over the past 30 days, let me widen that tunnel vision and present the 11-year chart for the USD below.
Now let’s take a look at some long-term gold and silver charts. To smooth out the daily volatility of all the charts I have presented in this article, I have used weekly charts of all assets. If we look at the weekly chart for gold, we can see that only ONE time in this 11-year bull have the charts been more battered from a technical perspective, and that was during the massive drop in 2008. During March to October, 2008, gold fell 34.13% from intra-day high to intra-day low. A similar drop today would take gold down to about $1,267 an ounce, yet sentiment about gold today already feels the same as sentiment during the 2008 low even though gold is still well above $1,267 an ounce. As you can see, only one time in the last 11-years has the Moving Average Convergence/Divergence (MACD) level been lower than it is right now. If we look at the 11-year weekly silver chart, we will also see that the MACD level for silver has only been lower than its current level two times in the past 11 years, and that if silver were to undergo the same percentage correction as it did during its massive 2008 sell-off that the price of silver would have to drop to about $19.51 an ounce. For the record, I believe that we are much closer to the bottom of this gold and silver correction right now than we are to a repeat of the same correction percentages from 2008 regarding this current gold and silver correction. Many people will say that silver experienced a massive parabolic-like spike from about $18 a troy oz to $50 a troy oz from late 2010 to early 2011 and that now silver is crashing, much like NASDAQ did after excessive speculation drove the dot com sector from 1,477.19 in September of 1998 to over 5,132 in March of 2000. However, comparing the silver spot price from 2010-2011 to the NASDAQ market from 1998-2000 is like comparing if a duck or a shark is a faster swimmer? The dot com market from back then and the silver market are entirely two different creatures and are incomparable for that reason.
What do I mean? In 1998, bankers slashed interest rates by 1.25% from 1995 to 1998 (back when a 1.25% interest rate cut actually meant something) and caused a massive amount of excess investment dollars to chase too few solid dot com stocks and hundreds more dot com shell companies that had not yet even declared a single penny of earnings. The wild speculation in the dot com stock market caused the entire sector to rise, regardless if the fundamentals of the company supported a massive increase in share price or not. The severe distortion of dot com companies’ share prices to the upside was unsustainable and eventually ended up playing out in the only possible conclusion — a massive collapse. Though banker shills point out that silver’s meteoric rise from $18 to $50 an oz mimics the dot com parabolic rise, this argument is clearly untenable for one important distinction between the dot com bull and the silver bull. Anyone that knows anything about the silver futures and spot markets knows that this is a market in which the price is set by the banking cartel manipulated supply and demand for paper contracts of non-existent paper ounces of silver, not by the actual supply and demand for physical ounces of silver. Furthermore, anyone that has ever looked at data provided by the CME for longer than a New York minute knows that bullion banks, and in particular, JP Morgan, are employed by the US Federal Reserve, to maintain massive short positions against silver continuously to suppress free market prices. And even though speculation may have helped pushed prices of silver higher during the last leg of its rise from $18 to $50 an ounce, silver has been under a state of constant suppression during the entire 11-years of this current silver bull that has kept silver severely undervalued, even during its various peaks. During the dot com bubble, bankers deliberately inflated prices higher and goaded investors into investing into dot com shares even after they were highly overvalued. Thus, these two situations can not be compared at all if one is attempting to use such a comparison to claim that a silver bubble formed and is now deflating as did the dot com bubble.
Lastly, let’s look at the valuation of the Philadelphia Gold & Silver Index in terms of the price of spot gold. As you can clearly see, relative to the price of gold, there has only been one other time during this 11-year PM bull run that PM mining stocks have been more undervalued than at the current time right now. I would interpret this as a sign that a major bottom is imminent rather than sign that the gold and silver bull are finished. When this same scenario happened in 2008, I instructed my clients to double their allocation to Silver Wheaton at $3.45 a share because it was so massively undervalued. Silver Wheaton then went on to return more than a 950% gain on my instructions over the next 18 months. Thus at a time when panic and frustration is so incredibly high regarding gold, silver and PM mining stocks, one needs to necessarily remove oneself from the minutiae of day to day banker-manipulated price movements in the gold and silver markets and evaluate the larger picture. If one removes himself or herself from the propaganda machine of the banking cartel that constantly reinforces, at every opportunity, a negative outlook for gold and silver, one may instead realize that instead, one is on the verge of one of the best opportunities in the past 11 years to buy massively undervalued gold and silver mining stocks at once-in-eleven-year- prices and that the upside in continuing to stack more physical gold and physical silver is massively greater than any continued downside at this point.
If you check Bank of America’s stock price now after the unsustainable pump by the banking cartel to about $10 a share this past March, you should understand that no matter how many rigging, gaming, and manipulation games the banking cartel institutes on a daily basis, that assets will eventually abide by the laws of physics and eventually move to their state of natural equilibrium. For most financial stocks, and even major global stock markets, that have been rigged much higher against non-existent fundamentals, their prices will eventually be much lower in real value (not necessarily nominal value depending upon whether the banking cartel’s game plan is Option 1, more extend and pretend at this point, or Option 2, a deliberate crashing of the system to try to serve up a global currency to the world, in which case their prices in real AND nominal value will collapse). For gold and silver assets, their state of natural equilibrium will eventually be much higher than their present state, in both nominal and real value, as both these assets are among the most risk-free and undervalued assets in the world right now, despite the opposite beliefs about these assets that the banking cartel, TPTB, and men like Warren Buffet, Bill Gates and Charlie Munger, desire you believe. To understand when gold and silver assets will experience a reversal, one needs to track banking cartel movements in these markets daily. Given the massive risk of assets such as the USD, Euro, Pound, Yen, US stock markets, et al that represent the global financial Ponzi scheme, the insurance that gold and silver offer against the very real and increasing risk of global systemic collapse, and the highly undervalued nature of gold and silver assets today compared to the past 11 – years, it should be very tempting for those that understand the underlying fundamental risk-reward scenario of gold and silver to consider purchasing these two asset classes now despite any risk of further declines in gold and silver.
What is rapidly growing unsustainable at the current time is banker manipulation of gold and silver assets to the downside. Though it is impossible to predict the durations of these events and exact bottoms when they happen, these manipulation events actually weaken the cartel’s hand for future manipulations. Due to much better understanding of this manipulation game from Eastern/Asian countries that are seeking to protect the wealth of their nations from being dragged down by the Western banking cartel currency devaluation race to the bottom, countries such as China realize that the volatility of gold and silver prices is a paper game that is entirely executed in paper markets now with almost no input from physical markets. Thus, many emerging powers realize that ownership and accumulation of physical gold and physical silver and ownership of gold and silver producing mines, even in the face of falling paper gold and paper silver prices, is now the intelligent move, not tracking the massive daily fluctuations in the paper gold and paper silver markets. In fact, many Asian nations have been using the cartel’s take down in paper prices against the cartel, using massively distorted prices to the downside in the paper markets to accumulate more physical gold and silver at artificially low prices. Thus, it is only a matter of time before the global banking cartel manipulation games of gold and silver assets to the downside fail and those that are patient will be rewarded with a massive reversal in the price of gold and silver. The obvious question one must ask oneself is if US Treasuries and the US dollar are stronger assets today than they were 11 years ago? If you conclude that the answer to this question is a resounding “no” as I have, then you can only conclude that gold and silver assets today, are in an even stronger position to continue higher in their respective bull markets than they were 11 years ago, despite the temporary widespread negative sentiment.
About the author: JS Kim is the Founder & Chief Investment Officer of maalamalama. Learn to invest in gold and invest in silver as insurance during the second phase of this global monetary crisis and global currency race to the bottom. Follow us on Twitter at @skwealthacademy and Like Us on Facebook. Article may not be republished on other websites unless reproduced exactly as is, with all text, links and author acknowledgements intact in their original state.