Friday the 12th and Monday the 15th of April were memorable days. It is clear that both silver and gold paper markets were taken down via a devastating attack of naked short selling that triggered margin calls that accelerated the decline. Gold and silver investors panicked, and some sold into the lows.
We have been there before. Using SLV prices (slightly lower than spot silver), a high near $21 was reached in March of 2008. Markets crashed, both stocks and metals investors were seriously hurt, and the banksters received a bailout – TARP. Ancient history – but the point is that, in 2008, silver dropped about 55% from its high price, while gold lost about a third from its high price.
This smash-down, so far, has also seen silver lose about 55% from its high price, while gold has lost about 30% from its high price.
So how is it done? Chris Martenson explained it in simple terms. Link. He stated:
“So the timeline here is easy to follow. The bullion banks:
- Amass a huge short position early in the game
- Begin telling everyone to go short (wink, wink) to get things moving along in the right direction by sowing doubt in the minds of the longs
- Begin testing the late night markets for depth by initiating mini raids (that also serves to let experienced traders know that there’s an elephant or two in the room)
- Wait for the right moment and then open the floodgates to dump such an overwhelming amount of paper gold and silver into the market that lower prices are the only possible result
- Close their positions for massive gains and then act as if they had made a really prescient market call
- Await their big bonus checks and wash, rinse, repeat at a later date.”
David Franklin (Link) offered these comments:
“The gold market has seen this before. Think back to 2008. At that time we were told that there was no reason to own gold anymore, it was no longer a safer haven and that its bull run was over. Sound familiar? … Gold subsequently bounced back from this selloff and went on to new highs.”
John Hathaway had this to say (Link)”
“Gold bullion prices have been subjected to a cleverly orchestrated bear raid in our opinion. Selling of paper Comex contracts on Friday, April 12th, and Monday, April 15th, totaled 1 million contracts, exceeding global annual gold production by 12%. The attack succeeded when the technical support in the low $1500’s/oz. easily gave way and led to waves of forced selling. The volume is without precedent and has all the characteristics of a panic liquidation driven by naked short selling.”
- The big traders (JP Morgan and others) booked huge profits, and many gold and silver investors lost money and probably sleep. If investors were forced out near the bottom, they locked in losses. But, if they waited and if prices rise in the bull market that many of us believe must continue, then gold and silver prices will make new highs and no lasting harm has been done.
- It will happen again, and again until naked short selling is no longer allowed.
- The big traders are well capitalized and have motive, means, and opportunity to crash the paper silver and gold markets. After the crash, they cover their shorts, book profits, and then buy more pushing the market up to new highs, booking profits along the way. If you own physical metal, their paper raid has no affect upon you.
What Now for Gold and Silver Investors?
- Has anything changed? All of the reasons to own gold are still valid.
- Have central banks decided to cut back on printing money? Clearly not – think Japan’s announcement of a massive new money printing scheme to create inflation.
- Are the “too big to fail” banks safe, solvent, and secure in their derivative positions, or are they still over-leveraged and vulnerable?
- Do you want and need some physical “insurance” that is safely outside the banking system?
- Do you trust the analysis, experience, and wisdom of Jim Sinclair and Richard Russell? They think gold is going much higher.
- So, keep your physical gold and silver, wait, realize that all is not well in the financial world and that manufactured crashes occur. In fact, knowing more paper asset crashes are coming is, in itself, a solid reason to own physical gold and silver.
Detlev Schlichter made a commentary that I think is an excellent conclusion. Link.
“The reason for why I own gold and why I recommended it as an essential self-defense asset is not the chart pattern of the gold price, the opinion of Goldman Sachs, or the Indian wedding season but the diagnosis that the global fiat money economy has check-mated itself. After 40-years of relentless paper money expansion and in particular after 25 years of Fed-led global bubble finance, the dislocations in the global financial system are so massive that nobody in power dares to turn off the monetary spigot and allow market forces to do their work, that is to price credit and to price risk according to the available pool of real savings and the potential for real income generation rather than according to the wishes of our master monetary central planners.”
Buy physical gold and silver at these low prices, and appreciate the insurance and safety that comes from owning physical metals stored outside the banking system and in a secure depository!
aka Deviant Investor
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