When it comes to Gold. Talking heads of the Wall Street media, and paid flunkies of cable TV business investment shows... Have for the last 13 years, told the investment public repeatedly that the Gold’s Bull market was over. That the market was failing. Now they ran this scam, as Gold moved up from 300 to over 1900. During the greatest precious metals rally in the history of man.
So when the gold market moved into a interim correction phase, the cable new media and wall street new sources reported the end of the world for gold and all precious metals and commodities. Well the net result is propaganda, is that a great many people have gotten “naked short” gold. But not at the top, but rather a bottom!
Yes, you heard me right....your friends in the media and wall street have suckered the public to “sell” the lows! Now for those who have been following my work over the last decade know that over and over we have advise when to sell options or futures contracts to lock in profits on major corrections. So that means you still own physical gold from the same low levels dating back over a decade. So you still have your purchase prices of, 300, 400, 500, 600 and so on. You locked in your profits and have rolled out of your hedging positions, booked profits and are just licking your chops over the acceleration of the gold market as it move back through the 1400 level very soon.
Now what matters the most in the gold market now is how high gold will go in the next 30-60-90 days or even the next couple of years. What matters is that the gold exchange markets and the brokerage firms are naked short. They will have to make delivery of physical gold to cover any open short position....guess what they wont be able to do so. This very much like what happened in the silver market also. Chicago Brokers and Exchanges were trapped by their own short positions....also their clients.
To try and rescue themselves the Exchanges employed the ultimate dirty trick...they raised the margins on Silver four times in less than 5 days. The margin requirements is the amount of equity cash to hold a futures or options contracts. The longs were owned by John Q Public, not the brokerage firms. So now Gold is going through a similar situation which means the Short Squeeze is only starting to happen.
This new Short Squeeze in Gold will be much larger and on a more global level. The amount of physical GOLD that is being delivered to the marketplace has been shrinking now for over several years. The last 3 years the gap in supply and gold physicals for delivery in even greater. So in many cases Gold mining stocks are being valued on the expected gold in the ground.....still not even mined or delivered.
These stocks of physical gold are many time already spoken for and will never, repeat never going to show up at any exchange. That means that “shorts” will not be able to buy gold to cover open shorts. Even if the Exchanges raise the margins, as a method to force holders of Gold long positions in futures and options....it will not effect the shrinking or lack of physical gold supply in or coming to market.
Also, if I were sitting on top of any major “mining” client who had gold physicals coming out of the ground. I would now cut or stop offering to sell or deliver physical gold stock to the open market. Only selling to industrial clients for industrial contracts.
The gold speculation market is about experience a level of pain they have not seen in many years. If the exchange raise the margins to the roof....who will care as if you are long.....you will want or demand that you get physical deliver of our gold. There could be a historical crisis in that if owners of gold futures or options can not get good delivery of the gold they are promised any major commodity’s exchange could fail as a result of investors seeking payment.
So the actual long term bull market for precious metals like gold and silver is only stronger because of what is now in process. Watch and wait for the first margin increases.... and keep buying the dips. If you are already invested at lower levels, which is what we hope. You can just sit back and watch the show. Or take our advice and add new longs and cost average.
Now late this week, it was very rewarding to see CEO of Euro Pacific Capital come out and publicly raise this same issue. Peter Schiff the CEO of Euro Pacific Capital came out and stated that he sees the current market as one of the best buying opportunities. Mr. Schiff stated that “in fact, I think this may be the best buying opportunity yet."
Peter Schiff is a long-standing and loud critic for the Federal Reserve policy as ensuring what we also see as runaway inflation. Creating a worthless US Dollar.
Peter Schiff also pointed out, “So the problem is, physical gold is disappearing and ultimately the short sellers have to be able to deliver the commodity they are shorting and they are not going to be able to do that”. So he is predicting the same situation we have outlined also. Schiff went on to point out that the real demand for physical gold has been increasing the entire time the market has been correcting.
Mr. Schiff thinks like we do that gold is not for sale at any price. We are telling people that the owners of large physical gold stocks are in strong hands. Schiff does not see any fundamentals that would support an end to the bull market.
So once again the correction in gold only created the largest number of shorts at a major correction bottom ever seen in history. The American investors just do not seem to get it, that the world demand for gold is expanding at a rate never seen in history. Why? 20-30 or even 40 years ago none of the current countries like India, China and may other did not want or care about gold. Consumers in the third world could not afford or want anything made from gold. The reserve banks of these countries did not want or need gold reserves. We it’s a brand new world and the USA does not have or control the supply or demand for gold.
Just on a purely and very basic technical level the gold has broken the major declining tops. That was the last rally top at 1794 in October of 2012. Which is the second stage of the correction phase. The Sept 2011 volatility cycle that started the week of 9/9/11 finished and kicked of the june 2012 rally to the next full correction cycle that ended june 28, 2013. The Gold market has a basic price range of $700 in width.
It is no surprise, except to the bone heads on Cable Business and Wall Street that the all of the major lows during the 2011 to 2012 distribution pattern. We predicting the recent low price support levels of 2013. So now the volatility will offer lots of opportunity for day traders. But the 1525 to 1566 band of resistance is the near term fence to be scaled. As the gold market reacts to the problems with the US Dollar and the physical gold shortage condition. The gold market will slap many traders with wider patterns of price action.
It is also worth noting that exchanges must raise margins to force small futures traders out of long positions, in order to help stop the bleeding from bad shorts at the lows of this year. I have already written on the effect of the US Treasury Bond market on the US Dollar and Stocks. Not to mention the economy. Also that Crude Oil in terms of US Dollars will keep going higher. Some months ago my declaration of the return of Stagflation....and danger levels on gasoline prices at the pumps. These are all waring flares as to the explosion of pain coming to the US consumer and US Economy. Expect expanding levels of denial and false economic “BS” from the White House during the remaining months of 2013. However there will be a new Bull Market of denial from all corners of the federal government. But Gold, Silver and other precious metals will just keep getting stronger.
The world is full of opportunity.....so either TRADE or DIE