1. Print Friendly
  2. Bio


Monday May 14, 2012 11:04

It was a decent down-week early on but then things stalled Thursday before it was announced that JP Morgan had a small trading loss.  This small loss forced an unexpected conference call which is odd.

If it’s a small loss then who cares?

I have a feeling we are in for a major revelation that will rock the markets to their foundations very soon.

I’m positioned quite heavily short as a result and hope to do well.

I can’t put my finger on anything specific but the feeling I’m getting during trading and looking at hundreds and hundreds of charts everyday has my feelers up in a big way.  Cracks are widening.

What’s even more odd is the absolute drubbing taking place in the gold and silver markets at the moment for no apparent fundamental nor technical reason.  I know GATA talks about manipulation and I agree with them for the most part but this is different at the moment.

It seems as if the powers that be know that what is coming soon, whatever it is, will set gold and silver afire so they are getting them to a lower starting gate.

I hope I’m wrong, it’s just what I’m seeing and feeling now.

I don’t know if it will be a flash crash or a 1987 type of event but I think it could be worse than both.  Again, I hope I’m wrong.

Let’s check out the precious metals chart, but I’m warning you, if you’re queasy at all, skip this section because it ain’t pretty.

Metals review

Gold was hit for another 3.69% on the week. 

Yes it feels pretty desperate at the moment but you have to ask yourself, does that gold coin give you more confidence or that pile of $1,575 in paper currency?

The chart above looks like we’re heading to the $1,550 area at least and really it’s no big deal in the scheme of things.

Sure it hurts if you look too much and can’t handle some pain, and it certainly hurts writers like myself as there is really not that much interest sadly at the moment.

Unfortunately it’s the opposite of as it should be.  People should be clamouring in to find the best bargains in the best companies right now while things are so very depressed.  But sadly, many of these great mining companies will be many multiples of today’s prices before they see an influx of investors and then it will be quite late to the party.

Central banks are buying physical gold by the tonne as noted here recently and they are the smart money, at least the ones accumulating gold such as Vietnam, China, Mexico, South Korea and the latest central bank to add to their reserves is Kazakhstan as they bought $115 million recently to up their gold ratio to 9.5% of reserves.

The smart money is buying now I assure you. 

I’ll be looking for gold to hit $1,550 this week and then I will take another look at a much longer-term chart (not shown) and see what I see although I do have to say it’s quite shocking to see gold continuing to be hit as a major US bank is announcing losses and likely there are much more to come.

The markets and many stocks just aren't acting right to me lately and it feels like they’re on the edge of a large cliff these days with a strong wind heading their way ready to blow them over the edge.

I can’t say anything for sure because I have no inside information but things just seem ready for a major swift downside event and I’m positioned for that.  I do hope I’m wrong though.

If we do get a major event I expect gold to not be immune, at least initially, as everything will be liquidated regardless, although for the metals it will only be futures contracts. 

I assure you anyone with a gold coin in hand won’t be rushing out to sell it in the face of a major market event.  Think about that last thought for a minute. 

How do you store your gold?

Both the GLD ETF and gold futures saw heavy volume as the price was pushed lower and then lighter volume as we’re bouncing at the current area a tad.  We are heading lower yet for now, but I am NOT a gold bear, just a realist who reads charts and they tell me we’re going a bit lower over the short-term.

Silver dropped 4.47% for the week and also looks to have some more downside in its near-term future as with gold.

The $28.50 area has some support and so far it’s held on a closing basis but the strong volume is on the downside for the moment and that tells me we’re heading lower still, likely to $28 and quite possibly $27.

I never thought I’d see this deep of a correction but that’s why I try not to think too much, I try and only react to markets.  Thinking and predicting are a fools game with rare great results but reading pattern and getting a feel for charts and markets can be quite rewarding after years of study.

Strong consistent volume in the SLV ETF and the futures says step aside.  If you’re looking to buy some more physical gold and silver, hang off another week or so, if you’re looking to sell your physical metals I’d say hang of a month and see where we are then, I doubt you’ll want to sell it anymore.

Right now you’d be selling at the lows and there is no point in that.

Platinum moved lower by 3.30% this past week and through the Fibonacci levels I mentioned last week and expected to act as support, which they didn’t.

I see no reason at all why we aren’t heading lower still here to test the $1,440 level this coming week.

The PPLT ETF didn’t see much volume for the week really but it was definitely selling volume while the futures market saw quite a strong volume also to push this white metal lower.

No need to consider buying the physical or a trading position in this at the moment.

Palladium was absolutely hammered lower to the tune of 7.63% for the week.  Last week I thought that platinum and palladium were heading lower still but I didn’t expect palladium to be hit this hard.

Now it looks like we can easily move to test the support area under $570.

Volume in the PALL ETF and futures are indicating we’re heading lower still for the moment.

The metals may be leading the markets at the moment as they are being held up at key levels by the powers that be, but they are on the brink of a breakdown like palladium has just had.

If another bank comes out and announces more losses then we will almost certainly see a vacuum appear in the markets which will suck them much lower.

I think we’re in for an interesting week.

Fundamental Review   

The Bank of England halted stimulus bond purchases this past week as a threat of inflation exceeded the threat of recession.  This is a conundrum indeed as they are now stuck between a rock and a hard place.  Either way, gold wins.  If the currency devalues further due to inflation, gold wins.  If debt increases further, gold also wins.

Gold has had its knocks over the past decade to be sure, but it’s winning the war by a long-shot.

As far as I can see the only choice Greece, Spain, Portugal and others have is to default on their debt and leave the Euro.  It’s been my view for a long time now and I do not see any other alternative.  Similar situations have occurred many other times throughout history and will repeat many times again.  The question is just how deep do they go before jumping ship.

The sooner they leave the better.  The damage will be severe to large institutional banks and central banks and the IMF along with the BIS, but the problem will be much worse if it’s let go any longer.

It’s like a growth on your body.  The sooner you have it attended to the better and less likely it will be fatal.

The powers that be all know this as they aren’t stupid.  No really, they aren’t stupid...

In the meantime, though Greece is set to receive 4.2 billion Euros in part of another bailout effort.  It’s amazing.  The drain in the bathtub is getting larger and larger and there are no plugs large enough to fill it and the water being lost is dollars.

There is no way this money will be spent right or last long.  Greece will be back at the trough in short order begging for more money. 

Sounds like a teenager without a job!

Interestingly, three state-owned Chinese banks are being allowed to expand their operations within the US.  I wonder if they actually were allowed or if they told the US they were going to do it, so make it so!

The Chinese are the world superpower now although they have some more hurdles to overcome in order for that to become obvious to everyone.

The US likes to put on a brave face and talk tough in public but I assure you behind closed doors they do a lot of listening.

There is a nice video interview with a long-term favourite of mine, David Rosenberg.  He discusses some monetary issues and feels that gold will rise to $3,000 before this cycle is over.  I personally think we’re going much higher than that level but either way, gold is a bargain here and could be even cheaper in the days ahead.

Another favorite of mine, Eric Sprott, had a great appearance on CNBC this past week and it’s well worth the watch.  It’s always fun listening to Eric and doubly so when it’s on the big US financial network.

Heres is an intriguing article on the old Brink’s-Mat bullion robbery.  I can only imagine how good the book will be if your into these types of non-fiction tales.

I feel like I’m forgetting a few things this week but that happens.

Don’t sweat your positions at the moment, rather consider adding to the great companies you already own or would like to own soon.  It’s also soon going to be time to buy the rest of your physical gold and silver hoard.

Don’t worry, the secular bull market in precious metals is far from over ...  Far from over.

Have a superb weekend and thank you so much for reading.

Warren Bevan

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Precious Metal Charts

Click to see this Precious Metal chart
  1. 24h
  2. 30D
  3. 60D
  4. 6M
  5. 1Y

Interactive Chart