Gold and Silver Pullback May Have Ended

A sharp rally off the lows in gold and silver is a clear indication that short-sellers have once again failed in their attempt in holding gold and silver prices down for an extended period of time. A break above $29 for silver and $1,370 in gold is the first indication that the pullbacks in gold and silver has ended.

With no end in sight for the US Federal Reserve's money printing activities (quantitative easing), which has caused massive inflation worldwide, the factors that has led to revolution and uprising in Tunisia, Egypt, Yemen, Jordan, which can quickly spread globally, gold and silver's prices is poised to explode. A sustained break above the above-mentioned price levels could trigger massive short-covering rally that could quickly rocket silver price up to $50 and gold to $2,150.

 .

Silver is still in a Pullback Mode

Silver, just like gold, is in a pullback mode. Supports are $25, then if that does not hold, next support below is $20.

Once the current pullback, a shakeout of the weak hands,  is completed,  Silver should rocket up, as it is in backwardation all the way up to 12 months forward.

Gold is still in a Pullback Mode

Gold price is still declining, and based on the current declining momentum, price may have to go down much further before stabilizing.

My Technical Supports are 1). $1,330, then if that does not hold, next support below is 2). $1,260 - $1,270, then 3). $1,230.

For now the Key Resistance Level is $1,390.

Silver in Backwardation: Price Ready to Rocket

Very important development in the Silver and Gold Market was reported by King World News:

“Silver is in backwardation not just in the short-term, this time it is extending twelve months forward!  

The last time this happened Eric was in January of 2009.  Over the next few weeks silver rose from about $10.50 to $14.50, a roughly a 40% move higher.  The key to understanding backwardation is that the price must rise to entice holders of physical metal to sell and accept a national currency in return.  I think we can expect a similar event to repeat over the next few weeks.  

A similar type of move would clearly put silver well above its previous high.  What this backwardation shows is that there is a disconnect between the physical and the paper markets in silver.  As I said previously, the silver shorts simply cannot hold the paper price down here any longer without seriously discrediting the paper silver market as a price discovery mechanism.

Gold is not in backwardation, nevertheless the demand for physical gold is extremely intense.  With the sentiment indicators at very low levels, it suggests we are about to see a stunning short covering rally in gold.”

Gold and Silver in Consolidation

Gold and Silver are currently in a pullback / consolidation mode, a setup for the next major move to the upside.

Japan's First Gold Vending Machine

Bloomberg News: "Makishi Rokugawa says he’s installing the first gold vending machines in central Tokyo so Japanese consumers can invest in “something real.”


A model displays Japan's first auto vending machine for gold and silver coins at the Imperial Hotel in Tokyo. 


Silver Shortages 

• Reuters reported shortages of 1 kilo gold bars in Asia last week. 
• Sprott Asset Management reported that it was experiencing difficulty sourcing 1,000 oz silver bars.
• Zero Hedge reported that Bullion Vault, the digital gold provider, had run out physical silver inventories in Germany (and possibly elsewhere) and was advising clients to buy silver from other sources. 
• Zero Hedge also reported yesterday that some smaller bullion dealers in the UK were having difficulty sourcing all silver bars and had delayed delivery of silver bars (including 1 kilo silver bars) until February.

Hedge And Profit From the Coming Monetary Collapse

As the history of the 1929 Great Depression repeats itself and the resultant predictable yet foolish scramble by Central Bankers around the world to print money into oblivion in their erroneous belief that it will avert the eventual monetary collapse, we must prepare ourselves for the eventuality. Because of the unpredictability of human nature, that eventuality is impossible to forecast, hence we must be prepared way before the the proverbial "#@*&" hit the fan.

We are already witnessing history in the making, one that our current generation has not experienced, the collapse of western nations, one after another, under the weight of their own debt as a result of their consumption binge over the last twenty years, starting with the collapse of Iceland which then spread to Greece and Ireland, and now Portugal which should then be followed closely by Italy, Spain, Britain and then eventually the United States of America.

We must be proactive in out preparation for the eventuality. When countries are not able to pay off their debt they always resort to printing money out of thin air hence debasing their currency. This is not a new phenomena as the great Roman Empire did it just before it collapse. The endgame is always the same, monetary collapse and hyperinflation.

Fortunately, for those with great foresight, there are many ways to protect our wealth from the collapsing paper money.  One of the easiest ways is to convert their paper currency into real assets such as gold and silver. Gold and silver is the asset class that has been tested throughout human history.

For a general guideline as to the "Timing" of the various dynamically interconnecting unfolding events, the visual diagrammatic presentation below by Gordon T Long is a good one.

E-micro Gold Futures Contract - Symbol MGC

A recently introduced micro gold futures contract offers small individual investors easy access to the COMEX gold market.

The contract is based on 10 ounces of gold, one-tenth the size of regular futures contract. As such they offer individual investors a less capital-intensive way for individual investor to participate in the world gold market than trading the standard gold futures contract.

China First Gold Fund Raised Target $500 Million

Here is another bullish news for the Gold market. Today, Reuters reported that China's first Gold Fund, which was launched just last month, successfully raised $500 million target goal for the fund.

It plans to invest in gold-backed Exchange Traded Funds (ETF) on the global market.

Reuters "Inflation worries and limited investment options have fueled demand for gold from the Chinese investors, especially as precious metals staged a stellar record-breaking rally in 2010"

Gold-For-Oil: India and Iran

A recent report in Economic Times, India, suggesting that India and Iran negotiating to settle their Oil and Gas transactions with Gold, for now.

"NEW DELHI: India is determined to ensure steady crude oil supplies from Iran and is even considering settling payments with gold in the short term before the two countries agree on a mutually accepted currency and a bank to clear the transactions".


read more... http://economictimes.indiatimes.com/news/news-by-industry/energy/oil--gas/india-iran-mull-over-gold-for-oil-for-now/articleshow/7238760.cms

Gold Price - Inflation Adjusted to CPI and to "Real" Inflation Rate.

In 1980 Gold reached a record high price of $850 per ounce. In order to know what the value of the 1980 $850 was in today's dollars we need to factor-in the accumulation rate to arrive at today's true value of the 1980 $850.

1. If we adjust the 1980 US dollar value using the government reported CPI (inflation) number, $850 in 1980 is equivalent to $2,382 today. Since the current price of Gold is only about $1,400 per ounce, in order to just match the government CPI inflation adjusted 1980 Gold price high, gold would have to go up another $982 per ounce.

• Note that the government CPI number is extremely flawed as it grossly understate the real world inflation rate.

2. For a real world situation, it is very important for us to use the real world "true" inflation rate, and the best place to get that number is from Shadow Stats. Using Shadow Stat's inflation number, which is the "real' number, Gold price high in 1980 at $850 per ounce is equivalent to $7,689 in today's inflation adjusted dollars value. 

Since the current price of Gold is only $1,400 per ounce, in order to just match the 1980 high price in gold, silver would have to go up another $6,289 per ounce..

*** Since Gold Bull market tends to go between 15 to 18 years, we still have another 5 to 8 years left in the current bull market. If past history repeats, which is normally the case, we would have between 5 to 8 years left for price to travel at least $6,289.00.

*** If the US dollar goes into hyperinflation, which is very likely the case, and the global financial system collapse as a result, gold price can go much much higher that $7,689 per ounce.

Silver Price - Inflation Adjusted to CPI and "Real" Inflation Rate

In 1980 Silver reached a record high price of $48 per ounce. In order to know what the value of the 1980 $48 was in today's dollars we need to factor-in the accumulation rate to arrive at today's true value of the 1980 $48.


1. If we adjust the 1980 US dollar value using the government reported CPI (inflation) number, $48 in 1980 is equivalent to $139 today. Since the current price of Silver is only $30 per ounce, in order to just match the government CPI inflation adjusted 1980 silver price, silver would have to go up another $109 per ounce.

• Note that the government CPI number is extremely flawed as it grossly understate the real world inflation rate.

2. For a real world situation, it is very important for us to use the real world "true" inflation rate, and the best place to get that number is from Shadow Stats. Using Shadow Stat's inflation number, which is the "real' number, Silver price high in 1980 at $48 per ounce is equivalent to $447 in today's inflation adjusted dollars value.

Since the current price of Silver is only $30 per ounce, in order to just match the 1980 high price in silver, silver would have to go up another $417 per ounce..


*** Since Silver Bull market tends to go between 15 to 18 years, we still have another 5 to 8 years left in the current bull market. If past history repeats, which is normally the case, we would have between 5 to 8 years left for price to travel at least $417.00.


*** If the US dollar goes into hyperinflation, which is very likely the case, and the global financial system collapse as a result, silver price can go much much higher that $447 per ounce.

Gold Standard Coming Said Federal Reserve Governor Hoenig

KANSAS CITY, Missouri (Reuters) - A gold standard that forces countries to back their currency reserves with bullion is a "legitimate" monetary system, though it would not prevent financial crises, Kansas City Federal Reserve President Thomas Hoenig said on Wednesday.

He is the second prominent figure in support of the Gold Standard Monetary System after the World Bank President Robert Zoellick.


If and when the Gold Standard is adopted, many estimates for where gold price should be ranges from $5,000 per ounce to $10,000 per ounce, with some estimate it to be a lot higher than $10,000.

Barron's: US will see Runs on Treasury's, Hyperinflation

Investors in U.S. debt around the world are worryingly near a "psychological breaking point" that could force a "run on the bank" against Treasurys.

If that happens, hyperinflation quickly follows and gold will soar much, much higher from its now record-setting levels, argues author and longtime trader Victor Sperandeo in the latest issue of Barron's. Sperandeo has traded for many top investors including George Soros.

If hyperinflation takes hold, expect gold to run quickly higher, Sperandeo writes. In hyperinflation, the metal can gain between 2,000 percent and 50,000 percent in value against a hyperinflated, collapsing currency.

2011 = Euro Zone Economic Collapse

My Economic Theme for the first 6 month of 2011 is the "Euro Zone Economic Collapse", followed by the United States Economics and Currency Collapse in the second half of 2011..

The above economic events is extremely bullish for Gold and Silver

Here is the picture of European Sovereign Debt yield from Mish's Blog