The U.S. has two alternatives to solve our National debt problem: 1) issue our own currency and pay off the debt or 2) repudiate (default) on the debt. [5]
Either alternative will end the reign of the dollar as the reserve currency of the world and launch the Precious Metals to the Moon. The only vehicle for a store of value is Gold and Silver, not a cryptic currency.
The recent rally, that the Gold and Silver Bulls have been predicting for the last 20 years, was the start of something really big and then on Thursday both Silver and Gold took a dive.
I knew something was wrong before the crash/correction because I got a text from a Dow Joneser, and a Never Precious Metaler, "Congratulations, I see that Silver is up over 27/ounce I am very happy for you."
I did some research and then was convinced the rally had to end when I saw that the New York Times published Gold Goes Mainstream, on July 30
New Gold Rush Pushes Price to Record Highs, something shiny and bright is beckoning investors accustomed to the gloomy days of 2020: gold. The pandemic has pushed the global economy into one of the sharpest downturns on record. The International Monetary Fund predicts that this year, the world economy will shrink by nearly 5 percent. The plunge prompted central banks everywhere, most importantly the Federal Reserve, to pump hundreds of billions of dollars into financial markets, with the goal of propping up flailing economies.
But those billions aren't coming from a storehouse; rather, central banks are creating fresh currency. The increase in money supply lowers interest rates and raises the amount of a particular currency, such as the dollar, in circulation. And over time, these moves can both increase inflation (lower interest rates typically spur economic activity) and weaken the value of a currency. Right now, investors are taking all of that into account and determining that buying gold - which is traditionally considered an investment that holds its value over time - is the best thing they can do to shield themselves from inflation and weakening of so-called fiat, or paper, currencies. As a result, money flows into gold investments have surged in recent months as central banks have stepped up their fight against the downturn.
Ney's first law of financial markets
You don't need a degree from an Austrian school of economics to predict the crash correction of Gold and Silver and the solid rebound of the U.S. dollar index from its two-year low, all you need to know Ney's first law of financial markets:
Richard Ney wrote two best-selling books published in 1973. Making it in the Market and The Wall Street Jungle, Ney's first law of financial markets: A stock, or in this case, gold and silver do not move up or down in price because you buy or sell; You buy or sell because the price of gold or silver moves up or down.
In other words greed motivates people to buy on the euphoria of the price of gold and silver rising and panic causes them to sell. In the case of silver the low price discourages an investment in silver.
Jim Wyckoff's article, August 07, 2020 at Kitco News, Gold price loses altitude on profit taking headline into the weekend summarizes the situation without Richard Ney or my belief that everything changed in 2015.
(Kitco News) - Remember that bigger upside price moves in up-trending markets tend to see bigger downside corrections. Price corrections in uptrends are actually healthy for the extension of the uptrends. A markets that goes "parabolic" in trading terms (nearly straight up) tends to see the price uptrend in its very late stages, and then a market top is formed. The fact that gold and silver are seeing price corrections in their strong uptrends is healthy for the continuation of the price uptrends. Of course, it's natural for the bulls to get a bit queasy when the big downside corrections occur. What is important is that any big downside price corrections do not violate and negate the price uptrend on the chart.Everything changed in 2015 Ted Butler, one of the foremost experts on Silver had this to say about the last quarter of 2015:
- August 2015 - Market bubbles are rare events, occurring once in a generation. True financial bubbles were the dot-com stock bubble that peaked in 2000, the U.S. housing market in 2005-2006 and today's stock market in China. Based upon what has transpired in silver over the past four years, I believe that what has been created is a reverse price bubble - the opposite and mirror image of a financial bubble.
- December 30, 2015 -It's natural to look both back and ahead as the year draws to an end and since I haven't done a formal year-end review in some time, I'll do so today for silver and gold. The only difference for this review is that because this year's price performance and its cause are indistinguishable from silver and gold price performance for the past few years, it is more appropriate to consider this a multi-year review.
- December 23, 2015 - Past and Future - Butler Research Not for a minute am I suggesting that the complete price history of gold and silver dates from 2011; but since the period of time since did represent about the worst price decline ever, it cries out for a full explanation. After all, in many ways the epic decline seemed most unusual given all the circumstances.[Appendix A]
- Silver price could top out at any point between $18.50 and $20, maybe reach $19.30 before weakening and correcting.
- Silver tends to underperform Gold during most of the precious metal bull markets, and tends to outperform towards the end of powerful bull runs when retail investors start waking up and jumping on board, hence expected a series of spikes higher through resistance levels over the coming years, but not this year.
Their conclusion would have been correct if not for what happened in 2015 that turned the World upside down, and it wasn't the 2016 election of "The Donald." Put another way if they had concluded that it was the year of the spikes, then I would be sure I was wrong about 2015. Stay tuned and if Silver continues without a correction under $21 then I will tell you what happened in 2015 that changed the precious metals and mankind's destiny.
Disclaimer: The preceding was my opinion and was not intended as investment advice. I am not selling my Silver no matter what happens next week, but again I don't know anything about bulls, bears, cycles, resistance, daily, weekly, monthly charting, micro or macro fundamentals and especially indicators like the EROI.
Footnotes
[1] Nixon Ends Convertibility of US Dollars to Gold and Announces Wage/Price Controls August 1971. With inflation on the rise and a gold run looming, President Richard Nixon's team enacted a plan that ended dollar convertibility to gold and implemented wage and price controls, which soon brought an end to the Bretton Woods System.
[2] The U.S. National Debt in 2010 at 13,561,623,030,891.79 was mathematically impossible to pay off, at the end of March 2020 the debt is $23.7 trillion.
[3] But working behind the scenes, it is much more than that. BlackRock has been called "the most powerful institution in the financial system," "the most powerful company in the world" and the "secret power." It is the world's largest asset manager and "shadow bank," larger than the world's largest bank (which is in China), with over $7 trillion in assets under direct management and another $20 trillion managed through its Aladdin risk-monitoring software. BlackRock has also been called "the fourth branch of government" and "almost a shadow government", but no part of it actually belongs to the government. Despite its size and global power, BlackRock is not even regulated as a "Systemically Important Financial Institution" under the Dodd-Frank Act, thanks to pressure from its CEO Larry Fink, who has long had "cozy" relationships with government officials. https://www.sott.net/article/436963-Meet-BlackRock-The-New-Great-Vampire-Squid Net inflows of money were strong, at about $129 billion for the quarter and $429 billion for the year. BlackRock's fourth-quarter earnings per share rose 43% to an unadjusted $8.29, much higher than the $7.75 analysts had expected, from revenue of $3.98 billion. For the full year, BlackRock earned net income of $4.5 billion, or $28.43 a share, for a 7% gain in EPS from 2018.
[4] https://www.tse-fr.eu/publications/do-hedge-funds-manipulate-stock-prices We find evidence of significant price manipulation at the stock level by hedge funds on critical reporting dates. Stocks in the top quartile by hedge fund holdings exhibit abnormal returns of 30 basis points in the last day of the month and a reversal of 25 basis points in the following day. Using intraday data, we show that a significant part of the return is earned during the last minutes of the last day of the month, at an increasing rate towards the closing bell. This evidence is consistent with hedge funds' incentive to inflate their monthly performance by buying stocks that they hold in their portfolios. Higher manipulations occur with funds that have higher incentives to improve their ranking relative to their peers and a lower cost of doing so.
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