These last few weeks have been a little humbling for someone who’s been in the precious metals industry for 40 years, and who people look to for advice and counsel.
Normal market corrections are to be expected, especially after 12 years of consecutive gains. What we have just experienced in gold and silver was NOT a normal, free-market correction. Bluntly put, this was a ‘Bear Raid’, the kind of action outlawed in the stock market in the 1930s.
Sensing a lull in a thinly traded market, a ‘consortium’ of like-minded bullion banks and speculators ‘dumped’ contracts to sell gold at the opening of trading on April 12th. In three hours an amount of gold equal to 15% of a year’s mining output was sold, ON PAPER anyway.
Monday the 15th was a repeat, taking gold down a total of $200 for both days, again ON PAPER. Then the short covering ensued over the next 10 days, bringing the price back up to $1480. Billions of dollars of profits were made. The establishment media got to crow about, “loss of luster”, “lack of a safe haven”, “a poor hedge against a falling dollar”. Gold shares and ETF’s were hammered, to be sure.
What we are experiencing now in the physical market is a complete disconnect from paper futures trading. Mints around the world are unable to keep up with the demand for real, physical precious metals. Delivery times are being stretched out. We are seeing little retail liquidations and buying is in record quantities.
The unintended consequence of the massive selling raised awareness that the actual underlying metal does not exist and cannot be delivered. It’s too soon to say how long these conditions will last, since there is no precedent. All I know is that this is a rare and unpredictable event and an opportunity to try to acquire metals at 2 year old fire sale prices. That is just what the Central Banks (governments) are now doing. Do they know something we should know?