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Expect Vicious Bullion Selloff to Be Short-Lived

By Rick Ackerman Posted on May 5, 2011, 1:41 am EDT Last Updated May 5, 2011, 12:53 pm EDT

Although some technicians we respect think bullion’s correction will stretch into summer, we think it will be over within a week. In our experience, powerful bull markets recoup violent selloffs with rallies that are just as violent. Silver’s correction has been violent indeed, savaging quotes by 25 percent in just a few days. The catalyst for this brazen shakedown was news Sunday night of Osama bin Laden’s death.  Who needs bullion when the world is about to become an oasis of peace, right? Yeah, sure. When the revelers return to their senses the world will still be a dangerous place, the central banks will still be printing money by the trainload, and nothing will have changed to diminish the defensive appeal of precious metals.

Under the circumstances, we doubt that Silver will need much base-building to launch an assault on the supposed $50 “barrier.” We view that number not as impenetrable supply, but rather, as a fat carcass waiting to be picked clean by voracious buyers.  Let J.P. Morgan and their ilk try to hold the line at $50. They’re going to be dead meat eventually, so why not now? In our years of experience on the trading floor, huge supply tends to coax forth huge demand.  As traders like to say, opportunity moves to size.  And while the bad guys may have deep pockets and the ability to create tons of “paper bullion” at will, any suspicion that they are trying to cap Silver at $50 is going transform otherwise docile, go-along buyers into aggressive opportunists.  This will prove to be equally true for Gold, we are certain.  The Chinese government, for one, has given its blessing to any citizen who wants to buy the stuff. Want to stand in their way?

Precise Numbers

From a technical standpoint, July Silver, currently selling for about 39.260, looks like it still has a ways to fall. To be precise, we see a turn from exactly 37.165, a “Hidden Pivot” support identified by our proprietary method of technical analysis.  (Click here for detailed information.)  However, if that support is breached on a closing basis, we’d infer that still more weakness awaits to as low as 35.390.  Whatever the case, we’ll be speculative buyers at either number, using the “camouflage” entry technique that hundreds of Rick’s Picks subscribers have learned by taking the Hidden Pivot Webinar.  With regard to Gold, look for the June Comex contract, currently at 1518.20, to turn decisively from exactly 1491.80. If the rally out of the hole is as strong as we expect, you’re going to see bears diving for cover by week’s end or early next.

(If you’d like to have Rick’s Picks commentary delivered free each day to your e-mail box, click here.)

  • L. Kyda May 17, 2011, 9:06 am

    How short is short-lived? ‘Cause it sure ain’t looking all that fantastic at this juncture. This has been a nasty trend reversal, and for no good reason I can fathom.

  • ter May 6, 2011, 8:50 pm

    “Benocchio” is preferable sobriquet for bewhiskered, bothered, and bewildered Ben. “Conspiracy” is le mot juste for the orchestrated pummeling of innocent silver this week. JPM raised its conductor’s baton Sunday at 6:15 EDT with a selling burst into a bids empty market, driving the semi-preciousss down $4 in an instant. Following that downbeat, the cognoscenti horde, egged on by unprecedented Comex margin boosts–nearly doubling the initial putdown by the fifth increase– tarnished the shiny metal to a pallid shadow of its former brilliance.

    Hope you’re right–as usual– Rick, about a violent bounce. Your wise counsel is very much appreciated.

  • Agent047 May 6, 2011, 7:28 pm

    Rib
    My cell is pay as I go. No name . No contract. No credit card. Bills in someone elses name. No car. I use a taxi or friends hook me up. Never give my personal info to retailers. I do pay my taxes of course. No bank account. Don’t trust the Feds. Even my iPad I’m posting this with is in another name on the account. I can go on and on. Life is full of choices. I choose to be a ghost. I can live my life as I choose to live it. You will not monitor me unless I let you. Same goes for you guys. Stand up for yourself and choose not to be coerced or manipulated. Don’t buy what they are selling on CNN. It’s a pack of lies. Keep stacking metals and say No to fiat money.

  • Chris T. May 6, 2011, 12:25 am

    Gary L.:
    “The political will to cut spending is already here.”

    I wish that were true. Where IS that will? Even with binoculars it can’t be found.
    Paul Ryan’s 6trillion-over-ten year deficit REDUCTION?
    Any of that out more than the next fiscal year (or maybe 2) is simply hot air, pie in the sky.
    [No budget has ever been nailed down by one congress and observed by the next.
    And why should they? If they did, they could just stay home. In fact a Congressional holiday of 24 months (no new laws at all) would be a great thing.
    After all, what could be so dire in need of a legal implementation or fix, that it couldn’t wait? Its ALL already been done, and can stay that way for 2 years.
    War? Marque-and-reprisal?
    Even that requires no Congress as King Barry O’ has just demonstrated with resp. to Libya and OBL, but I digress]
    So, that 6T in 10 is at most 600B in 1 year.
    WOW!
    600B out of 3700B, amazing, unthinkable, wonder of the world, a lousy 16% (or about 34% of the deficit if you will).

    That is no will at all, at most a kowtow to necessity.
    If there were ANY political will, then you would have Republicans talking about cutting the DOD budget in half, getting out NOW from IrAfPac, closing 300 foreing bases, cutting TSA, etc.
    And you would have Democrates talking about cutting HUD, DeptEd, welfare handouts, Medicaid etc in half, and so on.
    Hear any of that at all, outside of the 14th Congressional district in Texas?

    Mikey:

    “ANYONE can point me to an Ebay seller that is offering silver products at anywhere NEAR the current spot price.”

    While I agree with the overall sentiment you post, here is the somewhat strange constellation:
    at APMEX, the junk bags have gone from -0.10/0 to +0.35/+0.45 rel to spot ($1000/$100 nominal), which is a definite change over the last 2-3 days, but not huge at all.
    That is a swing in abs. terms of only 1.3% (using their quoted ask, always about 0.15 above Kitco spot).

    Situation not comp. for new 1 tr.oz. bullion of course, but at least APMEX is sticking closely to the “official paper COMEX” quote.
    If that obtains still at $30 one may have to do more than just look at APMEX’s site…

  • R. Jacob Benzaquen May 5, 2011, 11:50 pm

    conspiracy? from marc salvo
    Fellow Americans, everything you do is being monitored.

    What You Do Online Is No Secret: As you sit in the perceived privacy of your own home reading this article, a log of your surfing habits and preferred reading or video viewing subjects is being created. Your IP address, that unique identifier the points specifically to the broadband line connected to your home modem, is time stamped with every web site you visit. Everything you watch at video web sites, everything you download online, and even your search queries are logged. You don’t even have to have an account with a major online service provider – your IP is sufficient – but that user account you create is used to further improve your personal profile and characteristics.
    We can see you. We can hear you. Not only are your actions logged, but if you were deemed a person of interest for whatever reason, that little camera staring back at you on top of your monitor or that microphone built directly into your PC can be flipped on for remote surveillance at any time. While Aaron’s furniture or the local school district may need to install special software to remotely view what you’re doing in your bedroom, public sector intelligence groups operating on equipment that is technologically advanced compared to the consumer products of today is perfectly capable of entering your ‘secure’ home network and turning on those video and audio features – and you’d have absolutely no clue it’s going on.
    Your cell phone is a mobile monitoring device. Much like your computer, all modern day cell phones come with cameras. And they all have a microphone. It is no secret that law enforcement agencies have the ability to easily tap these devices and listen and watch anything that’s going on. This capability is essentially hard-wired right into the phone. In fact, it has been reported that even if your cell phone is turned completely off, the microphone can still be remotely activated. The only known solution is to remove the battery if you want to ensure complete privacy. Sounds pretty far-fetched doesn’t it? Up until two weeks, so did the notion that Apple and Android phones could track and log everywhere you go. We now know that this is exactly what’s happening, and literally, every movement you make is tracked within inches of your location. A log of everywhere you have been has been logged if your cell phone was in your pocket.
    Phone Conversation and Email Analysis. If you haven’t guess yet, phones can be dangerous to your personal privacy. In the 1990′s, the few alternative media web sites on the internet often discussed a little know operation in Europe called Echelon. It was hard core tin foil conspiracy type stuff. You know, the kind where intelligence agencies were plugged into the entire phone, fax and email grids and had computers analyzing conversations in multiple languages looking for keywords and keyword strings. If you said a specific word, your conversation was immediately red-flagged and distributed to appropriate intel desks. As sci-fi as this may sound, it turns out that the ‘conspiracy theorists’ were 100% correct about Echelon. Its existence has been confirmed by the US government. Of course, no such system could possibly exist here domestically.
    Your pictures are not private. When you snap those photos of the kids in the front yard and subsequently post those pictures on your favorite social network, guess what? That’s right, an inquiring viewer on your social networking account can track exactly where that picture was taken. Remember that location logging thing with your cell phone? It turns out that every single picture you take with most newer model cell phones will be tagged with specific GPS coordinates. When you upload that picture anywhere online, that location information becomes publicly available. So anyone who wants to know can now track down exactly where it is your kids were when the picture was taken, or, where exactly you were if you happened to engage in an activity that may be deemed illegal.
    The social network. For many, it’s fun to spend every waking hour updating the rest of the world on what we’re doing. We publish our thoughts. We upload our pictures. We even click a like button at the end of articles like this one to let people know what we’re into and what they should be reading. As social networking becomes bigger, connecting hundreds of millions of people across the world, so to does the profiling of members of these networks. Have you agreed with what a certain person has said in a recent post? If they’re a person-of-interest for whatever reason, then guess what? You’ve just become one too. Did your friend recently take a picture of you at a party getting rowdy? Once that hits the social network, facial recognition technology will identify you and publish your name for all the world to see, including current or future employers. It’s a social network, and its purpose is to learn everything about you. Perhaps this is why key U.S. intelligence agencies made no effort to hide their $5 billion investment in the largest network in the world recently. Social networking is a critical tool in the struggle to categorize every person on earth.
    Toll tags and license plates. Even if you’ve given up the cell phone and prefer to go without for privacy reasons, when you drive around town you may have noticed those little intersection cameras – at least four of them – on every major (or more regularly now, minor) intersection. While most of them may not be tied to the computer processing systems yet, some, and especially those in sensitive areas and toll booths can automatically read your license plate. Like your cell phone, your position can be logged on a regular basis with either your toll tag or simply, your license plate. Impossible? Not really. Especially when you consider that the information required to track your personal movements are nothing but a few data bytes. All anyone really needs to keep extensive records is a bigger hard drive.
    We know your underwear size. Admittedly, we sometimes have a hard time remembering what size pants or shirts we need to purchase. But while our memory may be failing, private data aggregators have plenty of it, and the processing power to boot. Everything you have ever bought with a credit card or membership club card is sent off for processing and aggregation to centralized data centers. While you may use a Visa card at one store, a Mastercard at another, and pay cash with a grocery membership card somewhere else, it’s as easy as finding your name and cross referencing that on your cards – and your entire shopping profile can be created. The purpose, we’re told, is to better improve our shopping experience and provide market data to companies so that they can improve their advertising. We can only guess at who else has access to this information, which happens to be very easily accessible and widely available for a small fee.
    Radio Frequency Identification. Say you’ve decided to scrap cell phones, internet surfing and electronic payment or membership cards. And, you choose to walk everywhere you go. Not a problem for enterprising surveillance technologists. Large retail distributors have already begun implementing RFID technologies into every major product on store shelves. For now, most of the RFID tracking is limited to transportation and inventory control and is designed to track products on the pallet level. Tracking capabilities are improving, however, and are quickly being implemented on the individual product level. That means when you buy a soda at your local grocery store, an RFID monitoring station will be capable of tracking that soda across the entire city, with the goal eventually being whether or not you put that aluminum can in a trashcan or a recycle bin once you were finished drinking it. One day, you may be issued a ticket by a law enforcement computer autmatically for failing to dispose of your trash properly. Again, it’s simply an issue of hard drive space and processing power – and technology will soon get over that hurdle. All electronics, clothing, food packaging, and just about everything else will soon contain a passive RFID chip.
    Ripping Data Off Your Private, Secure, chip-enhanced personal identification cards. Passports, driver’s licenses, credit cards, cell phones – they all store data. Personal data like banking information, birth date, social security numbers, pictures, phone books – basically everything you’ve ever wanted to keep private. As storage technology further integrates into our daily lives, and everything from our passports to our health insurance cards contains a digital chip that stores our private information, it will become much easier to rip that data from your purse or wallet without ever touching you. A recent report indicated that local law enforcement officials now have devices that, when you’re pulled over, can remotely pull all of the data on your cell phone. This demonstrates how simple it is for anyone, be it law enforcement or criminals, to gain access to everything about you – including you personal travel habits.
    Eye in the sky. We’ve previously reported about domestic drone programs in Houston and Miami. Local and state law enforcement agencies are increasingly adding Federal and military technologies to their surveillance arsenals. Drones have the capability of flying quietly and at high altitude, while monitoring multiple targets simultaneously. It’s been reported that domestic drones can not only monitor in the visible light spectrum, but night vision and infrared. That means they can ‘see’ what you’re doing in your home behind closed doors. Incidentally, there have been reports of roaming ground patrols with similar infrared technology, capable of seeing right through your walls. This is not science fiction – this is reality right now. Combine this with real-time spy agency satellites and interested parties have the ability to see and hear you, even when you’re locked indoors with computers and cell phones disabled.
    Security cameras. We’ve already discussed traffic cams. But cameras are not limited to just the government. Residences, retailers and even day cares are now interconnecting camera security systems with online web browsing. And, as we pointed out earlier, these are easily subject to unauthorized access. Certain cities in the US are now allowing residents to register their personal or business camera systems with the city to allow for local police monitoring. The government doesn’t need to push the technology on us. The people willingly accept the technology en masse in exchange for a sense of being more secure.
    I See Something! When all else fails, the last bastion of surveillance is human intel. It’s been used by oppressive regimes for millennia. The Nazis used it. The Communists used it (and do to this day). It was very effective. And now, we’re using it. Remember, if you See Something, Say Something. Even if what someone sees is not accurately represented because of mis-perception, you can be assured that when they say something rapid response units will be on the scene to diffuse the situation.

    What is the purpose ? It depends who you ask.

    Local law enforcement will tell you it’s to protect the safety of the public. Federal law enforcement and intelligence agencies say it’s to prevent terrorism. Apple and Android tells us it’s so that they can produce better mobile products and services. Retailers want more customer data so they can improve advertising and marketing.

    Whatever the case, it’s clear that almost everything we do, whether it’s in the privacy of our own homes or on public streets, can be tracked, monitored, and logged.

    As technology improves and the internet interconnects even more nodes, the information collected by the public, private and personal sectors will be further aggregrated, cross referenced and analyzed. Your personal profile will become more detailed, including your shopping habits, hobbies, likes, dislikes, political affiliation, reading preferences, friends, and potentially your psychological and emotional status.

    All of this information will eventually be fused into one large database. In fact, the government has already setup well over fifty fusion centers around the nation. What goes on in these centers is kept strictly confidential, and there doesn’t seem to be any agency in charge of them,

    • Chris T. May 6, 2011, 12:44 am

      good post
      a) most of the post is not brand new information, but pulling it together in the context is a great idea.

      b) did you post via counter-surveillance methods?
      🙂

      c) “Residences, retailers and even day cares are now interconnecting camera security systems with online web browsing…”
      But they always seem to fail at the most inopportune moments:
      the gas station camera which didn’t record the plane hitting the Pentagon
      the camero that broke just a little while before a synagoge in Germany was defaced, etc

      d) RFID: you forgot to include the nano-RFID tags being developed for MEDICATION.
      Soon they will be inside the body as well.

  • Mathis May 5, 2011, 11:20 pm

    OK, and thanks – we will soon know for sure…;-)

  • Mathis May 5, 2011, 11:09 pm

    Whould a weak rally take out any highs? And when – late this summer or already (as Rick predicts) within a week or so?

    • gary leibowitz May 5, 2011, 11:18 pm

      Weak rally implies less participation.

      My timetable has always been early. If ‘my’ scenario plays out we could have a rally starting tomorrow and lasting 2 weeks or so. If not, I still expect the middle of June to be the outside extension for the last hurrah.

  • gary leibowitz May 5, 2011, 11:01 pm

    Dollar surged, commodities got clobbered, and equities broke below some technical levels. Safe haven was once again the dollar. Goldman Sachs “investigation” story broke yesterdays. Coincidence? Looks like there is mounting evidence that the economy is slowing. QE round two just around the corner. Not sure this is “THE” start of a crash but suspect it is close at hand. Hoping for one more weak rally that might even take out the recent highs.

    Debt, Deflation, Depression has been my very worn out mantra for years. Lets see if the Fed can pull another magic trick to keep this from happening.

    • Robert May 5, 2011, 11:55 pm

      That can only be true if there is an equally valid inverse condition, ie; that parabolic moves downward will BOUNCE just as hard.

      Or, do you assume that the energy to move markets is somehow biased to drive things down more easily than it drives things up?

    • Robert May 5, 2011, 11:56 pm

      sorry- my reply is supposed to be to Carol’s post above

  • Mathis May 5, 2011, 10:36 pm

    Now it’s at the low 34’s – and still no ‘strong rally’. Still the same conclusion or is something different this time? It could easily close in the mid/low 34 – quite a bit lower than the expected 37’s. Is Rick wrong for once? And is something else in play this time?

  • Agent047 May 5, 2011, 9:18 pm

    I am a first time investor. FNG. I got in the game late with physical at 35 and watched silver almost hit 50 in just less than a month. I am hooked. I have rounds, bars, eagles etc. My buddy tried to get me to buy in two years ago. I would not listen. Anyway, I can hardly wait to buy more! I tell my friends about silver any chance I get. I really believe that silver is way under valued and will sky rocket one day. I’m stacking.

  • Cabernet May 5, 2011, 9:13 pm

    Well, it did not take long. We blew through $37.165 this morning and are now on top of $35.39. I see the low of the day so far is $35.275, with a current quote of 35.43, according to barchart.com. This makes one wonder if silver will ever stop falling.

    • Cam Fitzgerald May 5, 2011, 10:13 pm

      Pay attention to oil and the dollar. I can see we dropped below the psychological level at 100 just an hour ago. Dollar is up sharply. This is not a positive sign for PM’s tomorrow.

  • Mikey May 5, 2011, 8:57 pm

    So…if I went long on a 1-lot of Silver futures…and held it to expiration….do you think it will get delivered?

  • Carol May 5, 2011, 8:21 pm

    Anything that goes parabolic is going to fall hard!

  • cosmo May 5, 2011, 7:47 pm

    Appears your targets have been exceeded fairly quickly…So I suppose the “correction” has further to go on one of those impulse legs down?

  • Robert May 5, 2011, 7:15 pm

    Where is the CFTC? Vacation? Swimming with the fishes in the East River in their concrete shoes?

    Wait, what about those commodity position limits that the CFTC was yammering about back in March?

    Don’t exchanges have to clear ALL margin increases with their regulators?

    This thing stinks to high-Heaven.

    I’ve seen a couple of posts above about the “conspiracy theories” in the PM markets… I assume these posts are directed toward the analyses and theories of GATA, Ted Butler and others…

    I’ll only counter the “conspiracy” labels with this- Conspiracy theories are only conspiratorial if the premise is undounded in fact.

    If a UFO landed on the white house lawn a whole lot of conspiracy theories would be laid to rest, yes?

    Well, Ted Butler’s whole premise is that the CFTC would either step in and start regulating the Silver market, or there would end up being a short squeeze of epic proportion. The CFTC has indeed done nothing, and the price of silver has risen amazingly, and STILL there are gigantic banks out there selling COMEX silver contracts in volumes that exceed annual world production by 100’s of percent. The COMEX daily volume is there- go look at it yourself. The volume (in ounces) of “silver” that is being traded on a daily basis is so out of touch with real physical mine production that the only way this market is going to settle itself is when investors start dis-hoarding; and only the weakest investors in physical Bullion EVER sell for less than they paid. I know this, because my own silver bullion collection was started by some Morgan dollars that were passed to me by my grandfather before he passed away, and these coins were purchased in (drum roll)….. 1980.

    Let the paper pushers play their game. I’ll buy the argument that silver is in a legitimate correction when ANYONE can point me to an Ebay seller that is offering silver products at anywhere NEAR the current spot price.

    There is no conspiracy. The facts are:

    1) There are very few, very large banks that have short sold BILLIONS of ounces of Silver in the paper markets.
    2) The Exchanges are raising margins feverishly. Ask yourself WHY.
    3) The physical bullion sellers are getting cleaned out of product.

    These are FACTs, not conspiracy theories. Ted Butler is being vindicated, and the fact that the COMEX volume is going insane this week says that the bull is merely shaking some of the weight off his back. As Rick says- once he is lean, he will probably run farther, and faster than before.

    This is a paper driven correction, and the only “losers” are the hedge fund managers barfing up their speculative paper positions.

    Every transaction has a seller AND a buyer… so who is buying all these contracts on the way down?

    Dumb money? Really, do you think so?

    • fallingman May 5, 2011, 7:49 pm

      Thank you. Amen.

  • Mikey May 5, 2011, 6:37 pm

    I am watching silver…like everyone. I am trying to have a better understanding the the Silver and Gold Market. I like Rick’s Hidden Pivot. And as part of my education… I read commentaries. The following link is an older link and appears to make sense…how true is this? http://news.coinupdate.com/gold-and-silver-prices-drop-why-0626/

  • gary leibowitz May 5, 2011, 6:31 pm

    The consensus on this board suggests the trashing of the dollar is going to continue. I wonder where the terminal point is expected to be. The problem with most views is that once reality coincides with your view it is almost impossible to change direction. In fact the more the dollar falls and gold rises the more entrenched your position becomes.

    I bring this up because the dollar has had a long run on the downside. The obvious result of all this is a 2 year high in equities and commodities. Is this really sustainable?

    The dollar has no intrinsic value. It must be compared against other currencies. Is the world leading currencies going to outperform the dollar going forward? The stronger currencies today are a direct result of high commodity prices. What happens if we have hit a top and they reverse?

    The political will to cut spending is already here. China hasn’t yet experience the type of growth pain it is sure to encounter. We were the first country to be hit by the debt debacle and will likely be the first to recover. The other thing to consider is that every time equities here get taken down hard our currency rallies. Flight seems to still go into the dollar during hard times.

    I am a diehard deflationist and still see strong evidence to suggest that the Fed’s Quantitative Easing is only a rest stop for the inevitable. Inflating our way out when credit has already replaced cash is something we have never tested. The amount of cash needed to break the deflation trend is exponentially high.

    Gold/Silver has no special formula to suggest hard timed ahead is a given it stays high. The amount of speculative investment in these metals will be revealed when equites crash. Until then I would suspect they do stay near their respective tops.

    • Robert May 5, 2011, 7:20 pm

      Cogent analysis Gary… I concur

      Someone asked me the other day if this was a replay of fall of 2008, since equities, oil and commodities are all taking the hit at the same time; and I stated emphatically… NO. This is not a repeat of 2008. The reason?

      The Dollar. In 08 everyone ran to the dollar. This time… not so much.

      In the back of my mind, in the darkest corner of my “doom and gloom” prognostications, I feel that this is the week that the US Federal Reserve Note is pursing its lips and preparing to blow the bugle of its final surrender.

    • Robert May 5, 2011, 7:22 pm

      Oh, and that’s why I’m locking Gold prices with my local dealer at these levels…

    • Cam Fitzgerald May 5, 2011, 7:43 pm

      The Dollar is rising today Robert.

    • Robert May 5, 2011, 11:45 pm

      I see the charts Cam-

      The DXY’s move today is not nearly adequate enough to even offset the move in the Yen, let alone WTI, Brent, Silver, Gold, the Yen, and the rest of the CCI…

      Looks like that huge currency intervention by the BOJ in the weeks after the earthquake/tsunami has officially gone for naught… I’m sure the Japanese taxpayers are thrilled about all the new debt they took on for ZERO effect.

      Sorry, I’m not buying it (the dollar story). Here’s what I see:

      1) Borrowed funds (margin), borrowed by idiots, and lent by big banks is used to jack up Commodity markets- prices rise correspondingly.

      2) Exchanges (that just HAPPEN to be owned/funded by consortiums of the same big banks) start cranking up margin and maintenance requirements.

      3) Tsunami of short selling in a very thinly traded market on a day when the greatest international demand sources (counterparties) are on holiday- triggered by the SAME big banks that own the short side of the trade (and own the exchanges- let’s not forget that.)

      4) Margin calls (by the banks) against leveraged longs

      5) Further Long side liquidation in order to meet margins fires up like the perpetual motion machine. (this is where we are now)

      6) The shorts (the same banks who fund the exchanges, credit the longs, and own the shorts) buy back the contracts steadily cheaper, and on steadily increasing volume.

      The COT reports tomorrow and next Friday will either confirm, or invalidate my thesis.

      Regardless, here is the one factor that is also running (in the background) like another pertpetual motion machine:

      7) Non-leveraged long side players continue using the price slide to secure the underlying commodities in increasing volumes in the cash market.

      When everyone is selling, I must force myself to buy. Falling knife analogy aside- downward cost averaging is a beautiful thing…

    • Cam Fitzgerald May 6, 2011, 3:48 am

      Actually, that was pretty good Robert and I really enjoyed your post. I will admit you have a fascinating mind and a talent for fleshing away some of the really juicy bits. You could be right in your assessment. We will have to wait and see. For now, I am sticking with my own theory though as it has been working well and every one of my predictions made over the past month have now been realized. Hell, had you followed my advice you could have used my material as a road-map of the markets these past few days. I nailed the precious metals, commodities blow-off and oils drop to within just a few days and now await a final verdict on my calls on the dollar.

      I will be vindicated. The dollar will rise. More to come.

  • C.C. May 5, 2011, 6:04 pm

    These are the times when you pour a stiff one, lock the doors, reach into that safe place and pull out a tube of Eagles or Maple Leafs, a sheet of Buffalo’s or Panda’s.

    Feel the weight in your hand. It actually has substance.

    In a world growing more surreal by the day, it ‘pays’ to perform this ritual from time to time. If for nothing else but to be reminded the hard way, that real money has weight – and that the Earth had to be worked, men had to sweat and mine owners lost sleep at night with the ever-present fear of risk. That’s what real money is all about – there’s something Behind it.

    Owning bullion tends to keep one grounded in reality – on many levels, not simply the lust for money.

    It’s a good thing.

    • Marc Authier May 5, 2011, 6:55 pm

      C.C. Very good therapy. Jewels work real well also. It’s evident that the paper game is going on.

  • Marc Authier May 5, 2011, 5:51 pm

    Hummm. Can’t get enough of these Bernanke toilet paper funny money, specially that the employment news is so wonderful and fantastic. I presume the US treasuries and the US dollar is about to go plus 100% when US unemployment reaches 100%.

  • mikeck May 5, 2011, 5:45 pm

    Andrew Gause recently stated on, The Real World of Money, that JPM would, at most, be responsible for one billion of losses from their takeover of Bear Sterns. I seem to remember having heard about that way back when the takeover was news, but am not sure. Does anyone else remember anything similar or know it to be false? Since I tend to listen to all of the shows when Andy is on, I’m not sure when, exactly, i.e. which show he made that statement, but it could explain their lack of great concern about losses on the silver shorts.

  • fallingman May 5, 2011, 5:04 pm

    Happy to get the Morgan-engineered smackdown. As if we didn’t know it was coming sooner or later. I expected it a long time ago.

    I took some chips off “too early” and will likely be re-entering too early. So be it. Before this show is over, I expect mid-triple digit prices. If I’m right, a bit of short term loss won’t matter. If I’m wrong, I’d have pulled the trigger on the first batch a coupla dollar lower anyway, so what’s the big deal?

    Taking action when the timing felt right has always worked better for me than waiting to try to capture the absolute top or bottom.

    FWIW…I’m initiating some debit spread trades and selling cash secured puts on the silver miners starting now and will continue as long as they want to pay me to buy shares ever more cheaply. I could be way early or just plain wrong, but I’m with Rick on this one. The game is on.

    Silver will be the big score of our lifetimes, but you have to be willing to take a few punches to stay in the ring. It’s impossible to duck them all.

  • nofear May 5, 2011, 4:22 pm

    Bonjour Marc , juste un coucou amical de nofear (ex crise mondiale), j’espère que tu viens nous voir sur le site de Marie et Sandro de temps en temps. Pour poster il te faudra postuler à devenir membre du forum… A+

    • Marc Authier May 5, 2011, 6:37 pm

      Ok. No problemo. Merci pour l’invitation.

  • Metcho May 5, 2011, 2:07 pm

    It’s not a bubble Mark.
    Just a little tiny bubble-like burst.

  • Jess May 5, 2011, 2:00 pm

    Great read Rick, I never thought it would drop this far this fast. JPM must have cried hard to the CME. I have not seen where CME came to stop a stock from getting too high before, have you? Especially when the stock is only at $50.00. My reason for it not falling this far, this fast, is that there would be someone to jump on it as soon as it goes down, maybe everyone is bottom fishing for the best price. The farther it goes the better the price, I guess. Will see what happens soon I think. Rick I believe you are spot on!!!

  • Bob Blackshear May 5, 2011, 1:46 pm

    Say, I am long GLD and SPY calls for May. Is there any hope for me?

    Bob

    • Marc Authier May 5, 2011, 6:35 pm

      Nope. No hope for your calls.. Obama Osama dope. World banana republic. Your calls are kaput. The more US economy goes down the drain, the higher the dollar goes and the more the clowns wants the toilet paper. You have to love the screwed logic.

  • Jack Silver May 5, 2011, 1:37 pm

    I have never seen silver fall so hard and fast in such a short period of time, but Rick’s probably right, I believe this silver boomerang will push inexorably for $50 again very soon.

  • Martin Snell May 5, 2011, 1:28 pm

    On the physical side in Canada … we have ScotiaMocotta (one of the big bullion dealers) sold out of 1, 10 and 100 oz silver bars … despite their being priced at 10% over spot.

  • swampy May 5, 2011, 12:58 pm

    I have NO DOUBT NOW that Max K., et al, have found the “soft white underbelly” of the beast, as they are most assuredly squealing like a stuck pig.

    • Marc Authier May 5, 2011, 1:14 pm

      What has the competition to offer. Minus 8% US treasury bonds ? Minus 8% japan bonds. Greek bonds ? Irish bonds ? We are still in a environnment of negative interest rates. Naturally you must be in Chipolte Restaurant, Netflix and Amazon. We are not in the 80’s. It’s not a bubble.

  • Marc Authier May 5, 2011, 12:23 pm

    Indian demand for silver expected to go up 30% in 2011. China same thing expected to go up 30% in 2011. Not bad it’s 50% of humanity wanting something else than US treasury bombs.

  • hoser May 5, 2011, 12:22 pm

    If you’re silly enough to sell your physical Silver, then I’m equally silly enough to buy it. SELL TO ME!

    • Robert May 5, 2011, 6:05 pm

      Me too.

      I deal with 3 local dealers… the people have been pouring into all 3 shops through a funnel all week.

      The paper tail is wagging as hard as it can, but the physical dog is still moving the other way.

      I’m throwing cash at the coin shop and the miners this week like the proverbial drunken sailor.

  • Cam Fitzgerald May 5, 2011, 11:33 am

    Not sure about Osama playing a role. I saw the PM correction coming on my radar though and told everyone here to get ready. My exact words on the 21st of April were: “Keep your ear to the ground and put your radar on max focus. There is a nice fat precious metals short on the horizon”. So how irritating is that?

    • Marc Authier May 5, 2011, 11:43 am

      Osama ? You mean Mister Osman, the CIA employee. It seems quite ridiculous to make a relation with the CIA Pentagon clown and silver. Come on. Anyways. You have to stay rational. In the 80’s precious metals represented 9% of assets. Today people have 0,80% of their assets. Not a bubble indeed. And besides that what has the competition to offer ? Greek bonds ? Phoney baloney fraudulous TIPS bonds. Minus 8% US tresury bonds ? In the 80’s you had competition. Today the competition has about no yield to offer.

    • Cam Fitzgerald May 5, 2011, 6:53 pm

      Actually Marc, my reference was to Ricks article where he wrote “The catalyst for this brazen shakedown was news Sunday night of Osama bin Laden’s death”. Certainly it was not criticism, I was only pointing out that the Silver slide was predictable and that I had already been expecting it, that just days earlier I went out on a limb and specifically stated my view. I also warned Ricks readers that an anticipated dollar bounce would see oil fall below 100 dollars. That now looks to be the case. On that point I will suggest that what might ordinarily be a sharp snap-back in Silver prices will not see an immediate return to the 50 dollar level. Not yet, that will come later. For the moment you may want to book some profits on some of the healthy gains made in commodities over the past months. I do expect the bull to continue after a corrective phase but for now we all know that money can be made both coming and going and it does not pay to be locked into one way of thinking where PM’s, oil etcetera are concerned.

  • Terry S May 5, 2011, 7:33 am

    Correction or takedown? Nahh… takedown. Appeal of PM’s goes on in Vegas and everwhere else (esp. the ELSE where it’s cheaper). Mexico cental bank buys 100 tons!

  • mario cavolo May 5, 2011, 3:18 am

    “The Chinese government, for one, has given its blessing to any citizen who wants to buy the stuff. Want to stand in their way?”

    Indeed, and let me supply a reminder to all.

    In a typical online bank savings account with ICBC, Bank of China, etc. the menu includes the ability to instantly buy or sell gold, silver, and now even platinum. With standard buy/sell spreads, the quotes are updated live 24 hours a day every 30 seconds. By the way, one can do the same with standard forex pairs.

    So, access is very easy and with a country of 300 million rising middle class, one can safely assume this will support PM prices. One can buy the paper ETF funds, or one can even opt to buy physical, and walk down to the bank to pick it up.

    Gold has been available with this easy access in China for about 3 years, silver since one year ago and platinum just recently.

    It is however, absolutely not the case that there is any type of encouraging marketing going on.

    Cheers all, Mario

    • Steve May 5, 2011, 5:37 am

      What is the average wage of that middle class there in China Mario ?

    • easyEE May 5, 2011, 7:06 am

      Steve i can’t answer the middle class wage question, but I can tell you this: I live in Vancouver. 70% of the real estate buyers for property over 500K is chinese. We had a 10% correction after 2008 and it has recovered and gone beyond, thanks to china. So even if the buyers are high end, there are a lot of them.

    • mario cavolo May 5, 2011, 4:29 pm

      Evening Steve,

      Let’s divide it up with some broad estimates:

      1. 800 million farmers – really low incomes, fortunately also low living expenses. As I’ve always said, its much easier and more comfortable to be “poor” in China than in the west.

      2. 200-300 million rising middle class – let’s say equivalent U.S. wages are $1500 to $7000/month. This also includes the group of China’s quite, plain people who have far more money and income than is known, in the cash economy. Also, keep something VERY important in mind, no matter how you slice it, this group has very low levels of debt.

      Let’s break this group down further, assuming that half fall above and below the median of USD $3000 per month.

      Let me further explain “equivalent” wages. In China, even with the inflation that has come, the monthly cost of living compared to the U.S. is 2 to 5 times lower. So a typical Chinese professional worker earning USD $700 per month can typically, believe it or not, still sock away $250 in the bank every month.

      Lastly, i am referring in all figures to net take home income.

      3. 50 million “wealthy” and 10 million super wealthy – This group owns multiple apartments mortgage free, earns gravy cash income as entrepreneurs with local government relationship favors, and within the massive multi-trillion gray economy that we can never count.

      Cheers, Mario

  • VegasBob May 5, 2011, 2:30 am

    Suppose Bernokio bows to political pressure over $4 gasoline, and actually stops the printing presses. Would that not dampen the appeal of PMs?

    Of course, I don’t think that Bernokio will actually stop printing. He appears to have no game plan other than to print until it all collapses.

    Still, Bernokio does need to get Obama re-elected so he can ride out the statute of limitations for the many crimes committed during his tenure as the Chairsatan.

    • John Jay May 5, 2011, 6:34 am

      VegasBob, I would bet that gasoline prices drop a bunch before the election without any help from Benny. The oil companies know when it is time to pull in their horns, but right now they have carte blanche to pick our pockets. As I’ve said before, you don’t see any huge margin increases for crude oil contracts do you? I think there is some Congressional committee looking into why gas prices are so high.
      LOL on that count. The PMs should be an interesting battle between actual worldwide supply and demand, and US government approved market rigging by the big players. Every day the market action gets more and more surreal, and Washington DC is more and more divorced from reality.

    • Jim N May 5, 2011, 5:28 pm

      MY thoughts exactly John ..regarding the battle between the US govt and the global market demand. Some say don’t fight the gov’t, but if the gov’t is fighting the world…then that will be an interesting sight! Seems like the US continues to think it can do anything it wants….and it could before…but now things have changed. US military can’t help on this one….

  • SD1 May 5, 2011, 2:14 am

    I was kind of hoping you’d leave the conspiracies to others and stick strictly with the technicals. The one thing, though, is that 80% of the money comes from 20% of the players, and that 20% not only doesn’t care about us, most of them are in bed with the same bunch most of us can’t stand.


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