"Don’t Be Short"

Yesterday a colleague and I were talking and a technician he highly respects predicted gold would fall for the next week and test $1200 before making a big move to the upside.

This morning I was shaking my head, acknowledging that it appeared this technician was correct and my analysis was wrong. WRONG again.

Gold began to sink last night and kept on going, dropping to $1209. Silver was hit yet again, sinking to $17.74. Stock markets around the world were also under considerable pressure (the exception was the Chinese market) … as were commodity markets such as copper and oil.

Then, out of nowhere, silver began a furious and steady rally, going up on the day with gold still down something like $10. Meanwhile, the DOW was falling apart, eventually briefly taking out 10,000. Silver then began to soar, all the way up to key resistance at $18.50. Saying this was stunning, upside silver action is an enormous understatement. The norm is for silver to go into the weeds with the rest of the markets, making it easy for The Gold Cartel to bash the price. Not today. Seeing the extraordinary silver action, the gold traders began to bid the gold price up. Bing, Bang, Boom … suddenly gold was trading at $1236. The "Don’t Be Short" warning was looking better and better by the minute there at one point.

So what happened?

Dave from Denver sees it this way:

Tuesday, August 24, 2010

Boom Goes The Silver Dynamite

This morning Goldman released a research report which concluded that the Fed will be forced to implement "sizeable" QE. Of course, I forecasted this event several months ago. Wall Street sure has a knack for overstating the obvious (Harold Bloom described the fatuously verbose Polonius in "Hamlet" as being an "ass absolute" - Goldman is our ass absolute). Here's what the precious metals do when the a "print or die" comment hits the general media and the bullion banks are forced to cover their insanely large paper shorts:

Zerohedge broke the Goldman report to the mass media, which can be found here: QE to Infinity

And here is an article about how India is buying a lot of physical silver bullion this year and which somehow eluded widespread public media reporting: Comex silver shorts take heed

Everyone who has and does scrutinize the precious metals market on a daily basis is well aware that the physical supply of gold and silver is getting scarce, especially relative to the size of the massive paper short positions taken on by the big bullion banks here and in Europe. Silver as I write this is now pressing $18.40 - 20 cents higher than in the chart above. One of these days a big foreign buyer is going to attempt to take a large silver delivery from the Comex and the Comex will default. It will be "game over" then for our system and a devastating currency crisis will erupt, along with hyperinflation. Prepare accordingly.

Cheers,