Once again we are being force fed rumours of an imminent default in the sovereign debt of several European nations just as the US Dollar is about to sink into a bottomless pit. Once again we are being told that the Chinese growth engine is going to be stopped dead in it's tracks. Once again Gold and Silver that do not exist are being sold illegally by banks to save their sorry asses from destruction because of the millions of non-existent bullion they have sold over the past 20 years as government regulators turned a blind eye to the fraud. Once again we are being told that the almighty George Soros sold some of his fraudulent GLD gold bullion ETF shares, and that the Gold market is the ultimate "Bubble".
And we are being told that a "group of Republican lawmakers" are opposed to the Fed's QE2 program. So what! The Fed has it's independence, and they can do what ever the hell they want...no matter what ANYBODY in Washington thinks about it. As Bumbling Ben Bernanke is so fond of reminding these lawmakers, "The Federal Reserve Act gives me the right." Unless and until the US Congress abolishes the Fed, they can go on printing as much damn funny money as they please.
Interest rates are rising, and this is the bugaboo that has the Precious Metals investors "shorts" in a bunch. This is historically a stupid reaction to rising interest rates. In 1979/80 rising interest rates were met by exponentially rising Gold and Silver markets. Recall also that in March of 2009 when the Fed announced their first round of QE, interest rates rose substantially before rolling over and hitting new all-time lows. The same thing will happen again. The Fed is not only determined to lower interest rates, they will stop at nothing to do it. If the Fed has to spend $300 BILLION a month to buy up the entire supply of treasury notes being sold into the bond market, they will do it. They have no other choice to prevent outright default by the Treasury on the USA's sovereign debt. And default is out of the question. As Jim Sinclair says, "QE to infinity."
Rising interest rates will be a boon for Gold and Silver. One of the greatest myths perpetrated on the Internet today is that rising interest rates equate to Falling Precious Metals prices. This is absolute poppycock as the chart below proves. Between 1976 and 1980, interest rates rose from 5% to 15%. Over that span the price of Gold rose from $100 an ounce to $880 an ounce, going parabolic into the top in interest rates in 1979.
And then there is the folly infesting the financial news media the past week. Asian inflation fears, and European debt fears. Are these not BOTH fundamentally supportive of higher Precious Metals prices? The Dollar is being printed into infinity, and investors are really going to sell Gold and Silver because of fears of Asian inflation and European debt default? What about US debt default, and US inflation fears? Does anybody recognize that rising Asian inflation is directly related to the printing of US Dollars? The Fed is engaged in exporting inflation to these countries to force them to raise interest rates and strengthen their currencies vs the US Dollar. It is a game of counterfeit and deceit that the Fed is playing. It is why the World collectively gave Obama and Geithner the finger at last weeks G20 meeting.
Nobody is selling Gold, and nobody is selling Silver...bullion. The only thing being sold on the CRIMEX and at the LBMA in London is more fraudulent paper Precious Metals substitutes. Proof of this is that the bulk of the prices take down over the past week has occurred in the "after hours market", when trading is thin and the crooks can roam freely as the CFTC sleeps.
What we are presently witnessing is the first wave of massive volatility swings in these Precious Metals markets as the central banks and their conies fight for their lives and that of their fiat currencies. What we have today is the makings of yet another massive bear trap very similar to the one we identified about a month ago with Silver hovering between $23 and $25, and Gold between $1315 and $1385.
Silver this morning is retesting the post election breakout at $25. Gold is retesting the post election lows this morning at $1325. Both, price points of interest, as they sprung the bear traps set for the Crooks of the CRIMEX on November 3, 2010. Expect a similar reaction here as the longer prices are kept down here, the more of a threat they become to the bears as physical buyers sense the bargain prices and begin to buy in volume once again forcing the shorts to run for cover.
A break back above $25.50 should spook the Silver bears. A break back above $1365 should spook the Gold bears.
Jim Sinclair nails the nonsense in today's currency and Precious Metals markets:
How many times have we gone through the standard operation for the international investment banks to profit on the short of the euro, as is occurring today?
The OTC derivative (credit default derivative prices moving higher) market turns against the Irish.
Media turns focus directly on both the OTC derivative action (credit default derivatives moving higher), and runs multiple stories of the dire circumstances.
The government in question opens negotiations on a form a rescue. Other euro states jump up and down saying why should we finance the country in question.
The media calls this a non-united euro zone. The euro declines into and during the event, consolidating rises thereafter.
The ECB camouflages a great deal of its Quantitative Easing in secretly being the buyer in the bond offering of the country in question. The media lauds the UNEXPECTED good buying in the euro. The euro moves back into the $1.40s where the international investment banks put out their short and do it all again against this time Spain and/or Portugal.
The bad news is that Europe is courting a business disaster by their actions on austerity while at the same time doing QE in the bailout and covert bond buying at auction.
Greece has 110 billion committed which is without any doubt covert QE.
The so called good news if that the perps continue to make a million per minute on the days of covering the euro short. How many times do you have to see this to know it is gold positive and deleterious to the entirety of the Western world’s finances.
The Bear Trap has been set. Traders prepare to buy at full throttle as these sale prices could vanish in minutes at anytime. Investors, continue to sit tight and be right. The risk is being out of this market. The bigger risk is being short these Precious Metals markets. There is every reason for these markets to continue moving higher, and only unchecked criminal trading to slow them down.