Gold & Silver Digest: 1/7/13
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1/7/13 US close metals price quotes from Finviz
Gold dropped on Monday as uncertainty about the duration of the Federal Reserve's economic stimulus program decreased bullion's appeal as a hedge against inflation.
The metal remained under pressure after two top Fed officials on Friday suggested the U.S. central bank may halt its bullion-friendly asset purchases by the end of 2013 due to a better economic outlook.
So the sharp shakeout late last week, in a panicky response supposedly due to the Fed freaking out investors, looks to have thrown up another opportunity to accumulate more PM sector holdings ahead of the next uptrend and as we will now see, there is strong evidence that Friday’s intraday plunge marked the end of the correction in force from early October.
As we can see on our 6-month chart for gold below, Friday’s steep intraday drop brought the price down exactly to the bottom of our earlier delineated channel and just look what happened there – it bounced strongly on robust volume to close little changed on the day, leaving a fine large “bull hammer” on its chart, and it is no coincidence that silver did likewise. This large bull hammer is a sign that the downtrend has now run its course, and that a reversal is occurring. Notice how the C-wave decline of the 3-wave A-B-C correction matches the A-wave in magnitude, approx. $120. This looks like the final low and gold should now ascend from here.
The Western central banks have for sure been supplying the gold, and they are probably in a jam. In fact, I almost look at those minutes that came out as recognition of the real problem they are facing, that the demand for physical gold is just overwhelming them. And they have to keep this volatility in the market so that there isn’t a groundswell of interest in terms of buying it. But I have no doubt the physical story will win the day, ultimately, and it’s not very far away.
But we have these forces at work in the paper market that want to make us think there’s no upside here. I can assure you there will be plenty of upside. We’ve gone up 12 years in a row, and with a weak year last year, I suspect we’ll have a way better year this year. And some day it will break (massively to the upside). You see all of the concerns, whether it’s the people in Australia, Austria, Germany, ‘Where the hell is our gold?’ We’ll find out that the gold is not there. I don’t think they (central planners) know where their (other countries) gold is. It’s probably been sold would be my guess. Our analysis says that gold was leased and sold into the market. And someday, when some country goes to repatriate it, they are going to find out it’s not there.
If there's one thing we're certain of, it's that the current path of debt accumulation, deficit spending, and money printing will continue to devalue dollars and other unbacked currencies – and probably at an accelerating speed in the not-too-distant future. That makes gold a must-own asset despite its 500+% advance since 2001. I've read some analysts claim that these things are already factored into the gold price. That's debatable, but even if they're right, what's not priced in are the delayed and indirect consequences from all those actions…
The public is realizing that there’s not going to be a recession. People were uncertain about the health care bill’s impact and the slowdown in the US, but lately every announcement is about asset purchases and debt monetization. The Fed is up to $85 billion a month, and Japan’s new leader seems to want the same thing. So the government isn’t shutting down and the can is being kicked down the road. All the pieces are in place for an up-leg in precious metals.
If and when the Comex silver market implodes, so should the paper market for silver. Nevertheless, can this happen and will it happen?
Also, if a Comex default does occur, what are the likely scenarios and aftermath that will impact silver traders and the price of silver? The following sections explore the increasingly likely possibility of a Comex default in further detail.
Technical analysis should be ignored in favour of fundamental analysis given that there are strong grounds for suspecting that the gold and silver markets are subject to manipulation by certain banks in the same way that interest rates were in the LIBOR manipulation.
The move down is overdone and the smart money will again see the over reactive sell off, manipulative or not, as a nice gift to start the New Year and will again accumulate on the dip.
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