Whose staying the course?

Recently a chap I know returned to SA from a year and some change stint in London. We did the usual catchup, ask what he liked and didnt and then he looked at me (note this was post a couple drinks) and said “So Skinny hows Gold and Silver working out for you” trying to contain his laughter. Recognizing the bait for what it was I chuckled and replied dead seriously. “For the past 18 months since you left its done pretty much nothing with silver going down” So he asked what I was going todo and I said I was going to carry on doing exactly what I was already doing. “Dollar cost averaging in each month” He then proceeded to tell me about a friend he had made who worked at a trading desk for goldman sachs who wouldnt touch the metals and had made good money in the past 2 year period. 

This is one example but Ive been asked by more than a few people recently why it is that the metals are doing nothing. Last year was a US election which seems to coincide with lower prices but thats long since over and the US has faced the “sequestration crisis” As I write this cyprus’s banks have been closed over a week and a half and yet gold is under 1600 and silver just a hair over 28. So what gives?

My take is this. The powers that be cant afford to let the metals rise in the face of the currency wars and euro crisis thats currently attempting to unfold. If they do more people will simply leave the banking system and move into things (things being real assets including metal) So there is fierce propaganda about how the crisis is contained how the US is growing and the EU really isnt in such a bad state. People are still buying into this.

Lets look a bit deeper tho. Yes the prices of metals is set on the comex but thats a lot of highly leveraged paper. If one is to look at the physical market we see a different picture entirely. Not only are people buying coins and small bars but country central banks bought 17% more gold in 2012 than in 2011 and 2011 was a record year. My point, follow what they doing not what they saying.

I dont think the bottom is in yet and a retest of 1570 and 27/28 in silver seems highly probable but the gold market seems to be getting into a tighter and tighter range. Sometime (I predict in the next  months) the breakout will occur to the up or downside. I believe its going to be to the upside. If you have to ask why then clearly you’re new to this and ill put it simply. Would you rather have paper money in the bank backed by nothing or chunk of gold whose value has never gone to zero in the 4000 years of recorded history? Put another way, gold is the only asset that isnt simultaneously someone else’s liability!

Dont come crying when your government steals your paper assets 🙂

– P