The Cause

Falling Oil prices and a weakening Euro have been "headlined" as the main cause of the "crash" in Gold and Silver prices. Though certainly both have contributed to the mass exodus from the Precious Metals, their desired effect on Gold and Silver would not have been as overwhelmingly successful were it not for the concurrent fall in the Yen. The whole stew smells of a massive currency intervention intended to piggyback the fall in Oil prices.

Oil prices became clearly overbought at 124 in early March. As traders tried to short the "top" in Oil, they were squeezed by those that believed the Goldman Sachs Oil 150 call. It would be safe to say that the final $25 in the recent run up in Oil was the result of a long short squeeze, and not "speculators" in the futures markets as the government would have you believe. RSI Bearish Divergence exposes the lack of "real" buying in Oil as prices surpassed 124. Had this been real buying, RSI would have printed a higher high as prices hit 147.90. This "peak" in Oil prices happened to coincide with the seasonal "lull" in Oil prices that occurs annually in July and August. The media would have you believe that Oil prices have crashed because of "demand destruction" going forward because of a slowing world economy. I suggest that nothing could be further from the truth. Oil prices have certainly been helped lower by the rising Dollar, and I would suggest that this currency intervention was timed to coincide with the seasonal drop in Oil prices to give the "perception" that the "Oil Bubble Has Burst" and the threat of Inflation was destroyed with it. Again, I suggest that nothing could be further from the truth. Oil prices have pure and simply reacted "technically" to a severe overbought condition that has brought Oil back to it's trendline prior to it's next explosive run up. The rise in the Dollar has only acted to speed up Oil's decline back to it's trendline. Demand Destruction IS NOT the cause of the recent correction in Oil prices. As you can see clearly on the chart, Oil prices corrected back to the trendline last July and August, and again in February of this year. BOTH pullbacks offered excellent and profitable buy opportunities not only in Oil, but in Gold and Silver as well. Today's return to the trendline should result in the same profitable buy opportunity.

The Plunge Protection Team has orchestrated a "perfect storm" falling Oil prices and currency intervention in an effort to hammer Gold and Silver prices in an effort to "diminish" the Inflation fears that threaten the destruction of the bond market. And it is the bond market that the Fed is most keen to protect. Nothing will destroy the bond market quicker that rampant inflation fears. It should never be forgotten that the bond market dwarfs all other markets, and it is the bond market that is the backbone of our credit based financial system. If the bond market falls, the entire financial system goes up in smoke...and Gold and Silver go to the outer reaches of the universe.

Currency intervention has NEVER succeeded in the long term, and never will. Currency intervention can buy time for those behind the intervention, but it can never reverse the course of a falling currency. Recall that on July 13 Hanky Panky Paulson sought relief from Congress for Fannie Mae and Freddie Mac. On July 15 the Dollar closed at 71.79...it has been higher ever since. How could this happen without the aid of joint currency intervention by global Central banks? The Dollar should still be going down following the call for the Twin Mortgage bailout.

The crushing fall in Gold and Silver prices are a gift from the clowns running the US economy. Many of us who have lost thousands in the carnage due to margin calls may not feel so gifted today, but those who get back on the horse will feel enriched by the time Christmas rolls around. We have all invested and/or speculated in Gold and Silver for the soundest of Fundamental reasons too numerous to count here. We all know what they are. The criminals have stolen billions in Gold and Silver from us for one simple reason: They want our Gold and Silver because they know better than any of us the fundamentals surrounding these Precious Metals, and they intend to profit from their rise to "infinity and beyond" and they'll make every effort to see to it that they are the ONLY beneficiaries of the coming explosion in the prices of the Precious Metals.

Tomorrow: The Effect