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The following article was published in our article directory on April 19, 2013.
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Gold and Silver Rates - Been Here Before However This Time Is Different

Article Category: Advice

Author Name: Dr. Jeffrey Lewis

The precious metals have actually seen impressive sell-offs in the past, although the primary difference between previous silver and gold decreases and the recent drop is the existing scarcity of physical metal.

It is likewise worth considering how well the commercial bullion traders are positioned for a rally after these previous 2 days of greatly dropping rates, especially when the most recent price drop came on top of a physical market indicating tightness all along.

The Developing Physical Scarcity and Goldman's Selloff Signal

Large dealers in North America and the EU seem to be out of physical gold and silver stock almost across the board. This physical scarcity had been developing for some time, in contrast to the 2008 drop.

In terms of the supply fundamentals, the loss of Kennecott's Bingham Canyon mine last week, in addition to further postponements for Barrick Gold's big Pascua Lama Project were as bullish as can be.

Goldman was likewise freely indicating the rest of the market by significantly modifying their gold price forecast much lower simply ahead of the big down step, followed by more giant banks revising their price forecasts lower.

Price and Positions

Precious metal prices have actually now been falling overall or range bound for virtually 2 years. Contrast the current scenario with the historical September 2010 to April 2011 period, when 30 percent down steps occurred after a short covering rally as a speculative pile-on occurred.

This time, physical demand had been surging simply prior to paper price declines led by the manipulated futures market. Also, hedge funds have actually also been piling in to short the marketplace to a historic degree based upon the adverse technical set-up.

In contrast, J. P. Morgan Chase et al have been slowly exiting or reducing their noteworthy precious metal short position over the last month without a drop in the market's open interest. Generally, heavy downside direction in price has the tendency to be accompanied by a reduction in open interest.

Honestly, the most recent selloff looks like just an orchestrated opportunity for the big shorts to cover.

The Economic Background

Record highs in equities have actually been seen just recently, despite persistently soft economic data misses one week after another basically across the board. Complacency and universal bullishness seem to prevail, regardless of information indicating that little if any genuine financial recovery is really in progress.

An additional significant occurrence has actually been the persistent referencing of CPI and employment numbers by authorities and the mainstream media, despite the apparent separation of this data from the reality faced by the majority of individuals.

The straw that broke the camel's back was the outright very early leak of FOMC Meeting Minutes so that the marketplaces might respond when silver and gold sentiment was currently awful. According to the most recent FOMC Minutes, money creation through asset investments by the Fed seems likely to subside later on this year. In addition, London seems to be expecting that Mark Carney's arrival at the Bank of England will see a more activist financial policy stance occur in the UK too.

Nonetheless, the world's stock of fiat money is not contracting-- quite the contrary, in fact. Japan has just introduced an additional round of monetary stimulus on steroids, which will see the developed world's most indebted economic system create a proposed $1.4 trillion in Yen in a bid to break the nation free from depression and the regarded risk of deflation.

Rate Patterns and Crucial Retracement Levels

Once again, the exact same price pattern appears to be emerging. A huge dump in early over night trading, followed by a margin increase pulls the rug out from under silver and gold support as the marketplace approaches vital technical levels.

The panic feeds upon itself as stops are triggered. The marketplace moves much further down than statistical or historical norms would suggest appears possible. This latest sharp decline, led by the Asian session, led to the greatest 2 day decline in the price of gold seen over the past thirty years.

From a technical perspective, the sharp move down seen a few days ago broke below the 38.2 percent retracement degree of the huge post-2008 gold rally from 681.40 to 1920.75, prompting traders to shoot for the HALF retracement level at 1301.07.

This 50 percent Fibo level now appears to provide the market both a target and a rallying point to buy gold. The considerable bounce already seen from the current 1321.09 reduced simply ahead of this objective indicates that the market's desire to sell may well already have actually been satisfied.

Interestingly, it frequently seems to be the case that when market sentiment is evidently beyond repair, the seeds for a brand-new rally are quietly being sown.

Keywords: gold silver, gold and silver, gold and silver prices, gold silver price

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