Chris Vermeulen – www.GoldAndOilGuy.com
A few weeks ago I wrote about how gold was starting to top and that everyone should expect a very sharp drop to the low $1600 area. How I came to this conclusion was though the use of inter-market analysis combining price patterns, gold futures volume, the dollar index and market sentiment. This allowed me to understand what the majority of other traders/investors were thinking and feeling. By knowing each of these market variables and crowd behavior I can accurately see into the future a few days with a high probability of success and most importantly with low downside risk.
You can view part-1 on how I properly forecasted that gold would fall sharply in August here: http://www.thegoldandoilguy.com/articles/dollar%E2%80%99s-on-the-verge-of-a-relief-rally-look-out/
At the time when I forecasted gold to reach the low $1600 area gold was still building the top pattern so I could not say how long a recovering would likely take nor did I know exactly when to re-enter a long position. But now that we have seen how gold arrived at my target price I can form a new forecast.
Spot Gold Price Forecast – Daily Chart:
The gold chart below clearly shows rising volatility along with my topping pattern of three surges to new highs. It was August 31st when I warned subscribers and my followers that gold was about to top and that everyone should be taking profits or at least tightening their stops to lock in gains. Only three days later gold topped and it has not stopped falling since.
On August 8th gold had a large opening gap to the upside. This means the price opened the next day much higher from where it closed the previous session. It’s important to note that gaps especially for gold almost always get filled within a couple months. Seeing this gave me a solid reason to think that gold should pullback to this level during the next big correction in price.
Also during the month of August gold had to pullbacks only to continue to make the third and final high. This told me that when the top is put in place was a very high probability that we see the price of gold drop below both of Augusts’ lows and that would trigger stop orders sending the market sharply lower.
Now that we are seeing the stops being flushed out of the market it means the majority of speculative traders have exited their positions. So speculative traders who caused the large surge in gold to take place are now out. Once all the speculative traders have exited which should take place in the coming weeks or two we can expect some type of bounce or rally. I will keep a close eye on the intraday charts for subscribers as we near a potentially major trade setup.
Where are we in this gold bull market?
Well I feel gold is more fairly priced between $1632- $1660 area. Currently gold is trading at $1660 but if things play out like I have seen in the past we just may get one more dip this week to the $1600 area before gold truly puts in a bottom. Because gold went from a new high all the way down to Friday’s panic selling washout instead of a controlled ABC correction I feel a bottom will be more of a one day event. This type of bottom carries more risk and is more difficult to time and trade. So scaling in with a small position at this level and adding on a drop to $1630 then $1600 could prove to be the safest way into a gold position.
Forward looking I see gold bottoming over the next week or two then a nice relief rally to the $1775 area. Depending on how gold arrives there will alter my next gold forecast so let’s wait and see how things unfold.
Spot Silver Price Forecast – Weekly Chart:
Silver I call the Un-Safe haven because to me it’s not a safe haven in the way everyone’s believes it be. I hear and see everyone including friends and family selling all their stocks and putting their money into silver. To me buying large amounts of silver with your retirement money is just ridiculous. I m sure my statement here will trigger an inbox of silver-perma-bulls (silver bugs) to send me hate mail but that’s fine as my assistant filters my emails so I don’t have to keep being reminded how rude some humans can be over an simple opinion…
Investments that can lose 25% in value within 2 days or lose 40% of it’s value in 5 months should not be traded nor invested in with large portions of anyone’s life savings, especially if you are over the age of 50 and have not proven to be a constantly profitable trader. No one can stomach losing that much of their nest egg.
That being said I do feel silver is in a similar situation as gold. I do feel a bottom is near. Silver has formed an ABC correction and the price and volume patterns seem to be in line with a typical bottoming pattern. After Friday’s massive selloff I feel silver may slide a little lower yet before putting in a bottom.
One thing to keep in mind with silver is that it is very thinly traded; there are a lot of speculative traders involved which push and pull the price to extreme levels on a regular basis. So if the broad stock market continues to sell off sharply then I expect silver to follow suit.
Pre-Week Precious Metals Trend Analysis Trading Conclusion:
The price action we have seen this year for both gold and silver indicate were are just warming up for something really big to happen. It could be a massive parabolic rally to ridiculous new highs in 2012 or it could be a large unwinding of the safe havens as countries sort out their issues and the big money starts moving out of metals and into currencies and stocks.
Only time will tell and that is why I analyze the market multiple times per week to stay on top of both long term and short term trends. So if you want to keep up with current trends and trades for gold, silver, oil, bonds and the stocks market check out TGAOG at: http://www.thegoldandoilguy.com/trade-money-emotions.php
David A. Banister- www.MarketTrendForecast.com
I got a bit of hate e-mail over the last few weeks from the Gold Bugs who thought I didn’t know what I was talking about when I forecasted a multi-month consolidation and correction in Gold was imminent. I’ve written ad nauseum about crowd behavioral patterns as they related to both stock markets and precious metals. It should not come as a surprise that Gold is continuing to drop after a 34 Fibonacci month rally from $681 to $1910 per ounce. That rally came in five clear Elliott Waves and ended with a parabolic race to the top. I consistently warned my subscribers and readers of my articles about not being caught holding the bag and to take defensive measures.
My most recent update was to simply try to figure out whether the continuing correction in Gold would take the form of an ABC pattern or an ABCDE Triangle Pattern. It is becoming more clear that the official pattern is ABC. In English it means that the first leg down from 1910 to 1702 was the “A” Wave, the rally back up to 1920 was the “B” wave. The C wave is continuing underway and one of my longstanding targets is $1643, which is a Fibonacci fractal relationship to the prior lows and highs, and also conveniently fills in a “Gap” in the Gold chart in the 1650’s.
During these 4th wave consolidation periods, it reduces sentiment back down to normal levels and lets the economics of the move in Gold catch up with the price action that was extended. The first area to watch is the re-test of $1702 spot pricing for a C wave low, but the evidence is for a further drop to $1643 before I would get too interested in trying to game Gold to the upside.
Here is the chart I sent out 9 days ago with Gold at $1837 forecasting a possible C wave continuing lower
I’ve stayed away from either shorting Gold or going long gold while I watch and confirm the 4th wave pattern. It’s simply the smart way to go knowing that upside will be difficult to obtain and downside risks are high. It does now appear that I am eliminating the Triangle pattern and sticking with the ABC Correction with the C wave still working its way lower. If $1702 breaks, then you should expect to see 1620-1643 as next pivot low ranges.
If you’d like to stay ahead of the SP 500, Silver, and Gold trends, check out TMTF at www.MarketTrendForecast.com and take advantage of our free occasional reports or a 33% 48 hour coupon to sign up for 5-7 updates a week.
The Federal Reserve is holding a two-day meeting Tuesday and Wednesday of this week. Market participants are expecting the Federal Reserve to prop up financial markets yet again with some grand new plan. The fact is the Federal Reserve is running out of bullets.
Interest rates cannot move much lower in terms of the Federal Funds rate, additional quantitative easing seems redundant since Treasury yields are close to all-time lows, and finally a twisting of maturities will do little to alter the current economic conditions. The Federal Reserve is just repeating practices which have proven over a long term do little to create jobs or get the economy moving in the right direction. A stock market rally does not help a person looking for a job!
It is possible that even if the Federal Reserve proposes additional stimulus the market could sell off. I have been trading less in this environment and have been focusing on looking for trade setups that could work regardless of price action. For now I am sitting predominantly in cash waiting to see how price action reacts to the news flow tomorrow.
If I had to guess, I continue to believe that the S&P 500 will get back to test the key 1,250 – 1,280 price level. While this resistance level is apparent, Mr. Market will be able to tear up traders if price jams into that resistance zone. Mr. Market loves nothing more than to shake people out of positions. If price works higher I would expect the 1,250 – 1,280 price range to offer just enough risk / reward to get investors and traders involved in a choppy trading environment. The key upside levels on the S&P 500 are shown below on the daily chart of the S&P 500 Index ($SPX):
The flip side of that argument would see the S&P 500 jamming into recent resistance around the 1,230 price level. If prices rolled over and momentum picked up, a test of the recent August lows would likely transpire and could produce a breakdown and a lower low.
When looking at recent price action, the S&P 500 Index has put in a series of higher lows which is a bullish signal, however the S&P 500 has a long road ahead to break out above the 2011 highs. If the S&P 500 carves out a lower high on the S&P 500 Index at 1,230, 1,250, or even 1,280 and subsequently takes out the August lows then the secular bear will be back. The weekly chart of the S&P 500 Index ($SPX) shown below illustrates key support levels:
For now I am just going to sit in cash and wait for Mr. Market to provide me with some better clues. The trading range is pretty wide going from around 1,100 to 1,280. What I will be watching for is a strong move supported with volume that pushes price out of this range. As of the close today, price action was trading around the middle of this range but depending on how price action reacts to the news that comes out Wednesday it is possible that in coming days we could see a breakout in either direction.
Dow Jones Industrial Average
It will likely surprise long time readers that I am actually going to comment on the Dow. I will keep this brief, but I wanted to point it out to readers as I have not heard much mention of this pattern in the main stream financial media.
Over the weekend I was looking at some longer term charts and I accidentally stumbled across this head and shoulders pattern on a weekly chart of the Dow Jones Industrial Average. I rarely pay much attention to the Dow as I monitor the S&P 500 closely. However, I could not ignore what I was seeing. I also noted that a similar pattern also exists on the S&P 500.
I am generally not the kind of trader who tries to predict where price action will arrive in the distant future. However, I am not going to ignore clear chart patterns that I recognize regardless of the time frame I am looking at.
For those not familiar with a head and shoulders pattern, it is a very ominous signal. Head and shoulders patterns are generally topping formations that if triggered result in violent selloffs. On this chart the pattern is obvious and if the pattern were triggered the forthcoming price action would be decisively negative for domestic equities.
The long term monthly chart of the Dow is shown below:
If the pattern is triggered on an undercut of the March 2009 lows, the head and shoulders formation would produce selling pressure that would target the 3,800 – 4,000 level on the Dow. Yes, you read that right! I want readers to recognize that this pattern is not a given and it could play out over a long period of time. The pattern would suggest that a test of the 2009 lows is possible, but I will leave the likelihood of that test up to Mr. Market.
I view this pattern as a potential warning signal for long term equity positions. Consequently, it is far too early to jump into a plethora of short positions or sell every equity position owned simply because of this pattern. While I do not know where price goes from here or if this pattern will ever trigger, I think market participants should be aware of its existence.
It would take the perfect concatenation of events to push prices down to the March 2009 lows, but unfortunately the condition of social mood paired with all of the risks facing financial markets is notable. The recent selloff in August came on the heels of a head and shoulders pattern that was triggered. We all know how August played out, but this pattern on the Dow Jones Industrial Average has a long way to go before it can even trigger. Time will tell, but readers should at the very least put this chart pattern on your radar!
U.S. Dollar Index
The U.S. Dollar Index has ripped higher by more than 5% since August 29th. The strength in the Dollar has likely been precipitated by fear based on the European sovereign debt and banking crisis. While the Dollar certainly has long term flaws, it may simply be the best of the worst.
If the situation in Europe begins to break down further based on any number of events it could likely push the U.S. Dollar Index considerably higher. My trading partner Chris Vermeulen has been riding this strong impulse wave with his subscribers Swing trading the UUP etf and thinks there is big potential still if Euro-Land fears continue to rise.
The daily chart of the Dollar Index futures is shown below:
Wednesday will be filled with a variety of news and headlines. The Greek government is meeting and a news release regarding the conference will likely come out around the time domestic markets in the United States open. The news has the potential to move markets considerably.
In addition, the Federal Reserve is set to end its September meeting and market participants will be sitting on the edge of their seats waiting to hear from the Federal Reserve about any stimulus the central bank may provide.
Overall, the news and headlines on Wednesday will certainly impact the current conditions of financial markets. Right now I am pleased to be sitting primarily in cash. I have a few positions open, but for the most part the trades are not directional and are profitable based on time decay.
The one directional trade I have on presently is a remaining sliver of a position I have already taken profits from and stops are in place. While I have been risk averse the past few trading sessions, I am flush with cash and ready to accept new risk if high probability setups emerge.
However, the best trade can sometimes be no trade at all and I intend to remain patient. Risk is extremely high!
Subscribers had over 100% return in August and already up over 50+% for September!
Review my track record and join now at http://www.optionstradingsignals.com/specials/index.php and receive a 24 hour 66% off coupon.
This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only.
Several articles have appeared in the mainstream press over the past several months discussing some alternative to the U.S. dollar as the reserve currency of the world. Special Drawing Rights (SDR) sponsored by the International Monetary Fund (IMF) has been mentioned. Some time ago, an article on Reuters indicated a United Nations panel has decided much of the world would like to move away from the American currency as the world’s reserve currency. This panel wanted to look into a “basket of currencies” or perhaps another entirely different, new currency to replace the U.S. dollar. Additionally, both the Russians and Chinese have indicated similar concerns.
Action has been taken to move in this direction, for example Russia and China have agreed to do some trading using each others respective currencies bypassing the need to move into U.S. dollars. There have been rumors over the years that some of the North African nations, and Middle Eastern nations were wishing to settle the oil trade in Euro’s rather than dollars.
These events and postulates don’t surprise me in the least. If we go back a few years, it was only the Austrian school thinkers that stepped forward and said the U.S. dollar, or any fiat currency, was eventually doomed. Now other nations and the U.N. are saying they really don’t trust the U.S. dollar, which is what this amounts to. I wrote about something similar happening many times and one currency that I spoke about years ago was the golden Yuan (renminbi). There was a meeting in Southeast Asia years ago, about a gold-backed Yuan. I believe any basket of currencies may be tried it will most likely fail, because none of these currencies are tied to real value.
At some point the world monetary system will probably go back to some sort of a gold standard, but in my view it will not be a true gold standard but some kind of pseudo gold standard. No one really knows the future, and I’ll be the first to admit it, but what we are seeing now is what we see at the end of all great inflations and that’s a distrust of the fiat money system and/or a distrust of the leading currency. Russia and many nation states are raising their hand and asking, “Why should anyone trust the U.S. to get it financial house in order?”
There are so many U.S. dollars in the financial system. In my view it is collapsing, and it may never collapse to absolute zero but as things unwind further it is almost certain that the monetary authorities will provide “solutions” to the problem. Right now the velocity of money is low even though a great deal of stimulus has been forced into the system via QE1 and QE2 not to mention some “off book” digital entries into the banking system globally. Yet is because the U.S.’s trading partners, such as China and Japan, and others are holding on to dollars (low velocity) that we have not seen more inflation. Simply stated they’re not putting them into circulation, but once that happens or they get scared or try to exchange too many of those U.S. dollars for real goods or services, it could ignite more than an inflation — it could start a currency crisis.
Most of us know that there is manipulation going on in currency markets and in the financial system as a whole. The Working Group of Financial Markets (WGFM, also known as the Plunge Protection Team) was established after the crash of 1987 and was developed to prevent another crash. I must say again, “Great job, gentlemen.” It does not work on a long-term basis. Just take a look at the stock market averages; the very idea that any group is bigger than the market is ludicrous.
Many have asked where this will lead. If you review history and what happened to the Great British Empire when America started coming to the fore, you get a pretty clear picture of where the U.S. is going to go. The pound sterling was the settlement currency on an international basis. It had all the power, all the financial clout; but then here comes America, the up and comer, and they have CAPITAL — which, in the Austrian school of economic thinking, is the means of production. So when the waning of the United Kingdom was going on and the buildup of America began, it was a transition, meaning it was harsh but it was achievable.
That same scenario is taking place right now, except it’s the U.S. dollar that isn’t being trusted instead of the pound sterling, and Asia is the “capitalistic” society because they have a great deal of the means of production. The Asian countries are producing almost everything. And I think you’re going to see them continue to produce over the next decade or so, and you’ll see a continual decline of the U.S. Empire. It doesn’t mean America is going away but it certainly is not going to be the number one productive nation in the world. It’s going to be the Asian countries, primarily China.
Yes, China has problems and in my view primarily because they have too many make work projects and built many massive cities that are empty. There are issues all over China and look for some short term slow down in Asia overall.
However, I’m still bullish on America in some aspects. One is food; the U.S. can certainly get high yields out of the farmland it farms, although nutritional value is another matter and outside this discussion. Second is ingenuity; I think it’s almost built in to the gene pool that the American spirit is pretty much entrepreneurial. They are out looking for good ideas. How to build a better mousetrap, think outside the box, etc. And the third is education; when you look at it objectively, China is sending all their best students to American universities and there’s a reason for that. They still get the best education in math/engineering and science in the USA. America has a poor record during the mid to high school ages, but from the university level on up, America probably still has one of the best educational systems around.
Most Americans have gotten politically lazy and they’re going to pay for that in the future. They don’t read enough, they’re undereducated, and they refuse to get involved in the political system. They basically don’t have the American spirit that once prevailed. They’ve just become dulled down, but I believe — because of this economic “rearrangement,” if you will — that is going to reverse. So I’m very positive in the longer run that the American populace is not only going to wake up but shape up and move forward. It will be a leaner, meaner, and much more aware American in the next five years. And it’s going to be a tough transition for some and almost impossible for others.
Do gold and silver fit into this picture? Yes! To make the transition as painless as possible, everyone needs some gold and silver. The precious metals can be traded for any currency anywhere on the planet. Regardless of hearing more deflation talk in the news or inflation around the corner, the metals are a crisis hedge, a sure thing in a world of growing uncertainty.
His reply was both profound and accurate. “David,” he said, “The smart money is moving into gold, but the SMARTEST money is moving into silver!”
Investing in silver is a great way to make money, especially if you are looking to secure your future or your retirement. But of course, just like any type of investing, there are no guarantees. You need to know what you are doing and what the silver market is all about before you can get too involved. This is the only way to make sure that you give yourself every possible advantage to benefit from silver investing.
7 Silver Investing Tips That Will Help You Make More Money
1. Take a close look at the market before you decide that silver investing is right for you. Investing in silver is different than investing in stocks and bonds. Silver moves both up and down and sometimes rapidly having a plan of action and sticking to it can help overcome this fact about silver.
2. Educate yourself. If you are not sure how investing in silver works, touch base with a professional who can help you with the buying and selling process.
3. Complete effective online research. Be careful of the information you find. There’s so much information online about silver investing, but a lot of it is misinformation. You want to learn from experts who are in the trenches tracking the silver market and making investments every day. For example, the information that you will find on http://www.silver-investor.com is based on my experiences and knowledge from following the silver market daily for more than thirty years.
4. Get familiar with the many different ways that you can invest in silver. You can invest in silver mining companies, silver ETFs, silver futures, silver bullion and silver coins. The sure-fire way to invest in silver without the worry is to invest in bullion or coins. This is the place to start — real metal for your future. You don’t have to pay for a mining company’s energy costs. And you don’t have to buy 1000 to 5000 ounces in a futures contract that carries too much risk for a beginning silver investor.
5. If you are looking to invest in silver coins and silver bars then you need to know this trick – Find sellers who are selling as close to the spot price of silver as possible (spot plus a reasonable fee). A general rule is that the more silver you are buying the less percentage of fees you should be expected to pay. When buying coins to invest in their silver content be certain you are not buying coins for their numismatic value (the value to a collector of rare coins).
6. Before you invest in silver, make sure you calculate how much you can invest between your IRA rollover funds, cash on hand and other assets that you wish to turn into silver. Be sure to keep your emergency fund mostly in cash for unforeseen expenses. You don’t want to bite off (invest) more than you can chew (afford).
7. Stay on top of the market. There are times to buy. And, there are times to sell. Yes, at some point, it may be better to sell some or perhaps even all of your silver holdings for currency, depending on the bull market and your personal investment goals. But the only way you know when to buy or sell is if you have current silver market investing information at your fingertips.
Here’s a Bonus Silver Investing Tip For You…
Get started now. The time to invest in silver is today!
What are you waiting for?
Put my tips into action and start investing in silver right away.
David A Banister- www.MarketTrendTorecast.com
In my most recent few forecasts for subscribers and public articles I’ve discussed a major correction in Gold, and it dropped $208 within 3 days of that forecast several weeks ago as Gold traders will recall. Last week I wrote about further consolidation being required in what I’m seeing as a either 4th wave likely “Triangle Pattern” that will consolidate the 34 month run from $681 to $1910 into August of this year, or a 3 wave “A B C” pattern. We are right now in some form of C wave, it’s just a matter now of confirming if we are going to get a “D and E” wave to follow, or the C wave drops lower before we bottom.
A Triangle pattern serves to let the “economics of the security” catch up with the prior large movement upwards in price. In essence, the crowd behavior pushed the price of Gold a bit too high too fast, and this consolidation pattern lets the fundamentals catch up to price action. We had a parabolic move I discussed many weeks ago, and those always end badly to the downside. The $208 drop in three days is a typical reaction to a spike run like that. At the end of the day though, I had been forecasting what I call a “Wave 3” top and was looking for a multi week or multi month consolidation pattern before Gold could move higher.
Let’s examine what that triangle projection may look like. They take the form of 5 waves, or what we can call ABCDE in a pattern. The biggest drop is always the “A” wave, and that was 1910 to 1702 in 3 days or less. The next biggest drop is the “C” Wave, and that was 1920 to 1793, noting it was a Fibonacci 61.8% drop relative to the A wave. In other words, each successive wave down in the 5 wave triangle is smaller. This is due to the sentiment finally shifting and the trading patterns moving from people chasing the hot sector or stock or metal, to the long term investors accumulating the dips.
If we end up consolidating in a “Triangle”, then Gold should end up looking something like the below pattern I drew, with a target of $2,350 per ounce many months out:
The other pattern we are watching for at TMTF is the ABC Correction pattern. We had the A wave down to 1702, which corrected 50% of the move from 1480-1910 in 3 days. Rarely do you get a major move down like that and not get some type of “re-test” of that low, but because the fundamentals for Gold are strong and getting stronger, we are favoring the Triangle pattern still as most likely. With that said, there is a fat and juicy “Gap” sitting in the chart around 1660 on Gold and dropping down there is what a lot of traders are watching. If that were to fulfill, then we will see an ABC correction ending around $1643, and then Gold will begin another multi month rally to new highs:
At TheMarketTrendForecast.com I teach people my crowd behavioral methodologies and give them reliable forecasts in advance so they can be prepared with their investments. Consider working with us and following the SP 500, Silver, and Gold by going to www.MarketTrendForecast.com You can take advantage of a 33% discount over the next 48 hours as well.
There are many reasons why pension fund managers, private investors and even governments are beginning to add bullion to their portfolios. Perhaps the most important reason for this shift is that bullion provides superior insurance in times of financial uncertainty such as we are facing today.
Until governments solve their debt problems and no longer need to debase their currencies through unbridled money creation, a fully diversified portfolio should include gold, silver and platinum both for wealth protection and growth.
Read the rest of article here…
Over the last several years I have been asked about my thoughts on the Barclay’s iShares Silver Trust and this is something that has been discussed in our reports as well as many of the interviews that I have done. In 2009 Jim Puplava of www.FinancialSense.com and I discussed was that Barclays changed the words in the original prospectus from “Silver Bullion” to just “Silver,” which reading as a lawyer would, begs the question Why? To me it implies there might be other silver investments that count but are not necessarily bullion.
One benefit I stated early on is that the silver ETF eliminates two major problems of purchasing large quantities of silver.
- Where do I store it once I have bought it?
- How can I buy a large quantity at once in the “physical” market?
But I never will consider it to be a primary silver investment. Knowing that the SLV is ALWAYS cash settled should raise an eyebrow or two. Certainly the SLV was set up primarily for larger institutional types to participate in the silver market. The tax consequences are also something any investor would be smart to determine before making an investment.
On balance it does bring attention to the silver market, has provided much more participation into the metals market, and has a fairly low risk if all you want to achieve is a paper gain. But under no circumstances do I consider it to be a silver investment. SLV, as with a mining stock, futures or options contract, or anything else that you do not hold in your own hand, is a derivative!
There are other ways to buy silver that involve what I consider to be better alternatives, such as the Sprott Physical Silver Trust which allows the investor to take delivery of the real silver. Also, the Central Fund of Canada (CEF) does have the real silver and gold they report, but in this case you cannot take the metal you must settle in cash. James Turk and others have also addressed the unanswered questions about these ETFs in earlier interviews. In fact, when it finally was introduced into the investment arena a few years ago, I asked James to help me with some of the finer points on the SLV.
As many others and I have pointed out numerous times, there are bar lists and the bars are likely real and do exist. During the interview with Jim Puplava, I gave one of numerous possibilities that could put bars into “inventory” and yet still have several claims against them. Again, the issue with them is whether the ETF really owns them free and clear or they are encumbered or otherwise compromised.
Another point is, the SLV can be “shorted” and this silver does not have to exist in inventory.
Let us think about the paper precious metals markets; in my case obviously it would be focused on silver. I imagine myself standing in a large football stadium—something like the Rose Bowl would do nicely—and all participants with silver holdings (metal or paper) of one thousand ounces or greater fill the stadium. I draw a line at the fifty-yard line. I take all the silver on paper and place it on one side of the fifty-yard line; all the physical silver we place on the other side of the fifty-yard line. Then I calculate the value of each side.
Guess what! The dollar amounts of the two sides will not match—not even close—I guarantee it! There is far more paper silver than physical silver. This can easily be proven and has, by some of my earlier articles and by numerous other writers in this space. In fact some of the best known in the precious metals space have told the CFTC that the ratio of paper silver to physical silver is about 100 to 1.
The controversy surrounding the gold and silver ETFs continues and there are proponents both for and against the GLD and SLV. In an effort to remain consistent personally, my original “take” on the silver ETF remains, which is to state that any “investment” involving silver would have an overall positive effect because it would draw more and more attention to both professional and private investors that indeed silver is not only a worthwhile investment but also has all the monetary qualities of gold and has an industrial component that will remain, under any economic conditions.
For a good presentation of differing viewpoints, I suggest reading A Problem with GLD and SLV ETFs, by Trace Mayer, whose interview I conducted in Phoenix at the Silver Summit.
The bottom line is you can trust silver in your hand that you own. As far as Silver Trust’s are concerned not all of them are created equally. Be careful and due your own investigation, saving a little money to get a better deal may end up being a raw deal.
I hope everyone had a fantastic Labor Day weekend. I truly enjoyed myself and was able to have some creativity with my 18 month daughter. I got some new office chairs last week and I finally had time to assemble them during the rainy and windy black Monday here in Canada… Just like a child on their birthday, I tossed the chair parts aside and played with the large boxes with Mirabelle.
With the black clouds rolling overhead, waves pounding the shoreline, rain gushing off the roof, and a pirate book sitting on the coffee table. It was only an hour later which Mirabelle was riding a huge cardboard pirate ship across the room AArrrr’n everything… So I truly enjoyed my day off with the family to say the least
Ok back to the market…
So after I built the Brown Pearl I jumped on the computer so see what the futures market was up to. The good news was that our short trade on the equities market was up 10% from our entry point last week. The bad news was that the stock market overseas was selling off big and so were US stocks. It was a black Monday in both the sky and on the screen…
I’m not really sure how many people watch the futures market but I do know the majority of people do not. So Tuesday morning there will be a lot of people in a panic when they see stocks gap down sharply.
Taking a look at the 4 hour charts you can see the recent price action which unfolded today. We have been anticipating this from early last week. So none of this should be a surprise.
Dollar Index 4 Hour Chart:
The dollar index broke out of it falling pattern and has made a run up to the first resistance level of 75.40. I feel we could see it go a little higher on Tuesday but overall it looks ready for a pause or pullback here.
SP500 Futures 4 Hour Chart:
The equities market has fallen sharply in the past week and the green circle is where we shorted the market using the SDS etf. We did take partial profits last week to lock in 7.4% profit in a couple days, but we still hold the balance of the position which is currently up over 10% using today’s futures price.
The SP500 looks to be getting oversold here and is now entering the previous low set a few weeks back. I will be looking to tighten stops and or exit the position early this week before a sharp rebound takes place.
Bond Futures 4 Hour Chart:
Bonds are a safe haven for investors when fear is running high. The past couple trading session’s the price of bonds have shot up. This tells me panic selling in the stocks market has starting and that generally means we are nearing and tradable bottom for stocks…
Gold Futures 4 Hour Chart:
Gold is the other safe haven. Here again we see money flow into gold at a very quick pace… We will need to see some resolutions in Euro-land before gold will trade lower or sideways, but until then I think scared money is going to keep rolling into gold.
Crude Oil Futures 4 Hour Chart:
Oil has drifted its way up into a resistance level as of late last week only to find overhead supply. Once the selling started oil slid lower at a steady rate all the way back down to a short term support zone. Now we are waiting to see if it will make a double bottom at $79 or bounce here
Weekend Trading Conclusion:
In short, Tuesday will be a volatile session judging from today’s sharp price action. Fear is driving prices at the moment and until everyone panics out of stock positions and dumps their money into the save havens we will not see a bottom form. Generally this takes 2-5 days to play out but time will tell.
I hope this quick Labor Day update helps get you back on track for trading this week.
Consider joining me at TheGoldAndOilGuy for ETF trade ideas on the SP500, Oil, Gold, and Silver with great accuracy. Check it out at
Many people have asked if there is any way to place precious metals away for retirement. The answer is obvious—Yes!
However, what has been determined is that many people in the USA have most of their funds in some type of retirement account and do not have the ability to invest outside of their already existing account.
Therefore this is directed primarily at those that wish to know how to establish a precious metals IRA. Individual Retirement Accounts (IRAs) can be funded with physical gold and silver, yet very few investors are aware of this fact. They are exempt from all capital gains taxes while in the IRA exactly like any other investment that is placed into an IRA account. Thus, if your investments perform well over a long period of time, it can result in huge savings. Of course upon distribution the appropriate tax consequences would be applied.
Diversifying your retirement portfolio with precious metals is fundamentally required if you properly understand asset allocation (see the Ibbotson study). Additionally precious metals normally rise during periods of unsettling events such as wars, terrorism, inflation, deflation, downturns in the stock market and the US dollar. Precious metals usually yield large profits in these circumstances.
What is unique about this plan is that you can take physical possession of the actual gold or silver when you make your withdrawals. That’s correct! You can cash out in real honest-to-goodness gold and silver instead of fiat dollars. This is the most important feature of all. Down the road, in this generational bull market in gold and silver, the odds are in your favor that you will want and need the physicals when it’s time to access your investment.
Once you decide that you want to include precious metals in your retirement planning, you need to determine how much you want to invest. How much depends on your annual contribution, your personal goals and your individual investment philosophy. Factors to consider are your age, total assets and risk tolerance.
Very few institutions are set up to handle the precious metals component of retirement plans. There are basically only three, Sterling Trust, Goldstar Trust, and Entrust.
Establishing a Precious Metals IRA
From the Midas Resources website…
“If you currently have an IRA or a qualified plan such as a 401(k), 403(b), etc most likely your plan does not allow you to own physical gold or silver in your account. If that is the case, there is a way to do it that is relatively easy and inexpensive. What follows is a step by step explanation of how to do it. The first step is to find a custodian that will allow such a transaction. There are several including Sterling Trust Company, Goldstar Trust Company and Entrust. There are many others. These three are the most experienced with holding metals. Once you select a custodian, you will need to open a self directed IRA. This involves a minimum amount of paperwork and a fee to set up the account.
Taking possession of your IRA is qualified as a distribution. Under that circumstance, the IRS requires that a possible penalty and the appropriate taxes be paid. To avoid the penalty and taxes you want to have your IRA gold stored with a custodian that handles precious metals self directed IRAs. Midas Resources’ brokers will work with you to select a custodian, and help you through the process of filing the required paperwork to start your self directed IRA.
Once your new account is funded, you can then direct your broker to purchase gold, silver, platinum and palladium for your account. Your broker will withdraw payment for the purchase and send the appropriate amount of metals to the custodian’s storage facility. The storage facility will report the receipt to your custodian and show the metals in your account.”
As you can tell setting up a precious metals IRA is not that difficult. I have discussed in some of my public appearances particularly at the Money Show throughout the U.S and Canada.
What Type of Gold and Silver Can Be Held In an IRA?
The United States government currently allows Gold American Eagles and Gold proof American Eagles in IRA’s. Gold American Eagles are mass produced bullion coins. The value of these gold bullion coins is tied to the gold price. The price of gold fluctuates moving up and down like a heart monitor. This fluctuation in the price is directly tied to investors that buy and sell in an attempt to take advantage of the price volatility.
Three Easy Steps…
1. Submit the paperwork.
2. Fund the account.
3. Direct your broker which precious metals to buy.
The metals are stored at approved metals depository, which at times can be the same used by COMEX and other major commodities exchanges. Annual storage fee vary but I would not base my entire decision on the storage costs alone.
Steps #1 and #2 involves completing the proper forms to transfer the funds to custodian. Again there are three choices as outlined above. Normally, the funds are transferred directly from an existing IRA or Qualified Retirement Plan.
In Step #3, the IRA investor directs a dealer which precious metals to buy.
For those wishing to send me an email for more information you can go to www.MyRealIRA.com