-- Posted Monday, 6 May 2013 | | Disqus
By Vin Maru
Lately there has been a lot more news on how the physical demand for precious metals is off the charts. It seem like the physical off-take of bullion from dealers has only accelerated during this recent price drop in the metals. Inventory shortages are now a common occurrence at many dealers and premiums are rising until more supply comes to market.
Hopefully all pf this demand and buying of physical metals has put a bottom in the price of gold and silver. There is a lot of controversy on whether or not bullion banks control or manipulate the price of precious metals. Of course this is something we will never truly know because there is very little transparency in the gold market. If they do manipulate the price to their advantage, maybe the bullion banks will now get the hint that if they slam the gold and silver prices down, demand for physical will only pick up. I am sure their motive was to break support and run the stops, thus creating the psychology to stay away from gold as a safe haven. For now, maybe they feel comfortable knowing they won this round in the paper market, but the game of ownership for physical is far from over. It seems like the demand for the physical will only grow from here if prices continue to drop. This gives me hope that maybe the worst is behind us in lower precious metals prices—let’s hope so.
Corruption runs rampant in the Western financial world, all we need to do is look at the paper gold market; the paper shorts easily sold over one year’s mine supply in the last two weeks. I don’t believe there is any other commodity or sector in the world where bankers are allowed to sell something they do not have and have no realistic means of acquiring the physical bullion to cover their short position. The rules of the game have changed and they will never deliver on their promises for providing the product they have sold, physical precious metals. This paper take down is how the bullion banks who are naked short the market will try to cover as much paper as they can, during down drafts like this. They own the casino and make the rules, if you play their game in the “paper gold markets”, expect to lose.
The good news is when we look towards the physical gold market; it’s a little more honest than the paper casino created by the Western financial criminals. In the physical market, buying has been amazing, premiums are rising and more people are interested in buying physical metal now more than ever. Moving forward, I believe that the price for physical will command a significant premium vs. the paper gold price, which could still remain weak as liquidations in paper gold continues. Once the market clears the paper gold price out of the system and the naked shorts have covered most of their position, then we may see a normalized gold price based on supply and demand for the physical. The system is moving away from paper gold and toward physical gold as the true and honest pricing mechanism.
This transition period for the gold market to move away from paper gold and into physical will be volatile with wild price swings. It has been estimated that the paper gold market trading is 100 times bigger than the physical market, so there will be further liquidation of paper gold in the futures market and paper ETFs. This still may continue to put pressure on the price of gold during this transition period. However, the physical price of gold should start to adjust such that it will reflect real world demand and supply pricing; the paper price eventually becomes irrelevant.
If you own physical at bullion banks depositories even in allocated form, you may not get your gold. Recently, a person with significant deposits of bullion at one primary Swiss bank, in allocated gold, wanted to remove his gold and was refused on the basis of directives from the central bank. I think theft of gold by Western central planners is going to be more common going forward, especially if you own paper gold. Imagine all those people who think they own gold in the Western financial system, they now have to settle with paper gold and hope to buy physical if they can get it. The rule of law has been totally thrown out the window by the Western central planners, so we suggest you do what you can to protect your precious metals and get it out of the banksters hands. There is an old saying, possession is 9/10th of the law; we hope you heed this advice or risk losing it all. You may want to get a copy of our report “Getting Your Gold out of Dodge” and look at options for protecting your metals and getting them out of the financial system. In the next few weeks, we will be updating the report to offer a few more storage solutions in private vaults located in the US. We will also be including an exciting new option for storing your wealth and on the very first precious metals backed debit card program available to US citizens.
As the panic out of paper gold continues, it may put pressure on keeping the price of the metals contained within a trading range, but this only builds a new floor price for physical. I am sure there will be some time in the future where we see a strong panic into gold and a parabolic rise, however we need a catalyst for this to happen. One possible triggering event could be as a result of some induced currency and/or bond bubble popping event. That is more like a trigger for a spike move higher than the printing of money via QE. The printing of money and the QE card has most likely already been played out and doesn’t seem to have an effect on the gold price as much as it used to. Maybe once the market is concerned about rising price inflation we may then see the precious metals trend towards higher prices and break above long term overhead resistance.
Could we be on a cusp of some major financial and social turmoil going forward—anything is possible. Maybe this gold market crash/takedown is the canary in the coal mine for bigger problems to come for the rest of the markets? An analyst from Société Générale recently warned that stocks may crash taking the S&P to 450 and gold could top $10,000 an ounce. I recall back in mid 2008 that Société Générale (maybe not the same person), warned of a stock market crash. They were right then and they very well could be right this time around. In 2008, gold crashed from a high of over $1000 right alongside the S&P. This time gold has already taken an initial hit, while the S&P is up. If the broader markets do start crashing this summer, could gold also sink further? Sure, anything is possible if there is a need for liquidity, gold may sell off too. But there is a possibility that gold may not crash like last time and actually trade inversely to the S&P over the coming years; this is something to watch for. Back in March, we suggested that the Dow to gold ratio would reach 10 to 1, which is where we are at right now. Over the coming decade, we still believe that a lower Dow and a much higher gold price is in the offering; the ratio should start reversing soon and head back towards at least 5 to 1 or lower.
With all that is going on in the financial world, maybe now more than ever has there been a need to get out of paper everything and into hard assets including physical gold and silver. Another way to own precious metals is in “Cold Storage” (gold in the ground) by owning the gold miners or juniors with proven deposits working towards production. At TDVGoldenTrader, we look at holding and trading mining stocks which are extremely undervalued. These are the companies who produce the very same product we suggest owning to protect your wealth, precious metals.
Vin Maru, TDV Golden Trader Chief Editor, graduated from Brock University in 1995 with an Honours in Business Administration in Finance. As a self taught private investor and analyst with over 15 years of experience, he first focused on technology but in 2004 he started investigating the investment case for gold and the causes for its sudden rise in price over the prior few years. This led him down the path to understanding Austrian economics and the Austrian business cycle theory (ABC). Over seven years ago he decided to focus and become an expert on precious metals and has never looked back since he was "discovered" trading his accounts from the beach in southern Mexico by Jeff Berwick.
-- Posted Monday, 6 May 2013 | Digg This Article | Source: GoldSeek.com