-- Published: Thursday, 7 August 2014 | Print | Disqus
By Bill Holter
I have heard, seen and read many accounts that make a mockery of the "to da' moon" gold and silver pundits. In some cases it is well warranted. For example, anyone who promotes gold or silver to "get obscenely rich" is simply wrong. They say that gold and silver are "going to da' moon" which in my opinion is highly likely in dollar terms but in reality they are completely wrong. An ounce of gold and silver will always "just be" an ounce of gold or silver, what will have changed is the value of the dollar or any other currency that you are using as a measurement. Actually, even that statement needs to be corrected because it is in fact gold and silver that do the "measuring". The "to da' mooners" are wrong because what will happen is that the dollar will plummet in value to the nether regions of hell which means even a simple cup of coffee is going to the moon.
There is however another scenario where the carnival barkers could be correct and we would still have a modest dose of "currency crisis" involved. Gold and silver could go "no offer". No offer" meaning there is none available for purchase. Impossible you say? If you go back to May of 2011 and April/May of 2013, silver became very difficult to buy. If you go back to 2008, Silver spent nearly 2 weeks in nearly "no offer" status.
What happened in 2008 is that silver went very quickly from well over $20 to under $9. The physical buyers came out of the woodwork and cleaned up the shelves much like shoppers before a hurricane do. There was NO silver available at the "market price" of $9. Dealers were paying huge premiums to coax silver back into their coffers and basically under $15 there was none to be had. I am pointing this out because we have already seen either "no offer" or very close to it on several occasions in just the last 6 years.
The spammers will be out in full force saying that there is plenty of silver and gold around and that I am just doing a little "barking" myself. To this I would say yes, there IS plenty of gold and silver and there could even be a surplus or an actual glut ...at the right price, but, not even close to the current prices. You see, if gold was trading at $5,000 an ounce or silver at $200, some, maybe even many would be enticed to "sell" some or all of their stacks. A higher price in effect would create a greater supply while a price that is too low creates a shortage.
There is also another twist to this equation and it's called human emotion. Booms and busts seem to be a part and parcel of how the human brain is wired. We have seen them throughout history and more so with recent history because we have the Fed and other central banks that continually promote booms. The current "boom" is based on and the fire fanned by money that is freely printed. Once the bust arrives, the "flight" mechanism of capital will take over and take on a life of its own. THIS will be the cause, the result will be the ultimate "no offer" in gold and silver.
What I can see happening is a cascade of failures which engulfs all derivatives, debt and currencies. This will create a panicked flight of capital into the safety of gold and silver which will create shortages. But, this will not even be a small fraction of the whole story. The real story is that the alleged gold and silver "out there" that is currently setting the prices does not even exist. Taking just one step back for a moment, I believe that a good figure to use is that only 1 or 2 out of 100 Americans own either gold or silver as "investment". I also believe (because Jeff Christian spilled the beans and told us our math was correct) that there are 100 ounces of "paper gold" for every 1 real ounce in existence. (Digressing a bit and doing the math we come up with a number that only 1 person in 5,000 or 10,000 really have physical gold or silver!).
OK, so where am I going with this? Knowing the above math and in the panic situation that mathematically is inevitably coming, how could gold and silver NOT go "no offer"? Follow this through. A panic begins somewhere and starts to spread, rapidly and widely. Stocks, bonds, currencies and of course derivatives are all involved. This happens during a big gold or silver delivery month on the COMEX for either gold or silver and the longs can't be "bought off" with any fiat bribes of premium. Inventory gets drawn down, maybe even depleted and a stampede into metal begins. But, before capital can arrive for the purchase of gold or silver ...suddenly "offers" start to be withdrawn.
Let me explain the "suddenly offers start to be withdrawn" part. Thinking about this from YOUR OWN point of view, what would you do? If you saw the paper markets and the banks in turmoil, and the prices of gold and silver jumping wildly for several days in a row would you be itching to sell? Even if you were fully invested in gold and silver, human emotion says that in this scenario even those fully invested would want "more". You see, fear is a greater, far greater emotion than greed. It will be "fear" that causes many potential sellers to withdraw their offers. Fear of what you say? Fear that whatever you trade your metal for will become worthless...and I must say that in today's world this is a very valid fear.
Before finishing I would like to talk about "fear". There all kinds of different "fears". Fears of loss, fears of being "left behind", fear of failure, even fear of success. I believe that before this is all over, the "98 or 99 out of 100" who currently "think" that they own gold and silver but instead only own paper receipts to nonexistent gold and silver will experience a different sort of fear. These people will experience the fear of loss, being left behind and failure all at the same time. This group by the way will be another source of demand that currently doesn't exist or was thought to have already been satisfied.
The "no offer" scenario in my opinion has a very high probability of happening. Owners of gold and silver "own" the metals for a reason. They want something that is real and I would suggest that this group by and large will not part with it unless they know that they will get something real in return. What I am saying is that gold could go to $5,000 per ounce and once the "traders" get cleaned out, there just won't be any for sale because "fear" will send many holders into hiding. I believe that once the panic begins, many holders of gold will not part with any metal at ANY price until they have confidence that what they are trading for "really" has value. In other words, some sort of "confidence" in the currency (or a new currency) is a MUST before metal will be offered again for sale. This is what is meant whenever you hear the theory that gold and silver will "go into hiding".
As for the "to da' mooners", in my opinion they will end up being correct but maybe for incorrect reasons.
Regards, Bill Holter
http://blog.milesfranklin.com/
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-- Published: Thursday, 7 August 2014 | E-Mail | Print | Source: GoldSeek.com
