Price and Forecasting
By Dr. Jeffrey Lewis
Investors and observers
watching the drama unfold in the Ukraine should not be surprised at the short
price action of the precious metals, mainly gold and silver. Throughout the
crisis (and as matter of record with practically every other crisis) the metals
are driven down by a system that becomes more sophisticated each day.
The ramifications and consequences of
events in the Ukraine and Crimea are dire and easy to imagine. These
ramifications radiate and dovetail with the multitude of other potential and
current hot spots in other energy strategic areas of the world.
Conflict creates palpable fear. Fear
creates the need for security, confidence, and assets that are unencumbered by
the machinations of the various parties involved. The precious metals have
served as that anchor for the millennia.
What makes these events particularly unique
is that the conflict has arisen in the full embrace of the fiat age - and at the
end game of the financialization that came with it. The scale is unprecedented
in history. With the extinguishing of risk comes the exceedingly fragile state
in which we find ourselves, that overnight, a simple trigger could set ablaze a
paper derivative disaster that creates a world wide tsunami.
Nowhere is that fragility more central than
the instrument that underlies it, the dollar and the world’s reserve and energy
currency. In direct opposition are the precious metals. Therefore, the
motivation and incentive to quell prices is a given. That it is written into law
is merely a disfigured after effect. It is also the propaganda that prevents the
flow of awareness, in addition to a hideous nightmare about to be unleashed onto
a mass of unsuspecting investors as well as ordinary citizens (and otherwise
productive members of societies).
It is indeed one thing that the massive
credit buildup over decades, set in motion much further back than that, are
stifling for the normal organic growth of economies. But it is quite another in
its guaranteed destruction of what remains of it from the global, national, and
all the way down to the local level.
Therefore, there should be little surprise
about counterintuitive price action. Indeed, on the eve of the Crimean
referendum, a shadow of reality manifested in the GLOBEX market. This shadow
surfaced only to be squashed like so many times before by the sudden and
coordinated HFT-spoofing we've become so accustomed to.
The only surprise should be that
apologists, the dogmatic technical traders of painted tapes and tea leaves,
should not see the light from their darkened corners and leverage influence
instead of their portfolios. These are those who otherwise understand the
imbalances and the role of final payment assets in a world of paper promises.
Witness the price action leading up to the
vote. Silver needed a close above $22, a SOLID 3% move or a $0.64 move -
certainly not terribly significant given the magnitude of the situation. This
would have also put the price up and over another technical cross, thereby
paving the way to the next resistance point.
But the rule is: The higher the drama, the
more likely it is to see "non-intuitive" price action. Predictions are useless;
this applies to either direction of the move.
GATA Chairman Bill Murphy, via his daily
newsletter The LeMetropole Cafe, has spent years chronicling and predicting the
telegraphed precious metals price action.
Case in point: One of his long time
contributors, James McShirley, veteran lumber trader, has devised an elegant and
interrelated series for the last few years. This series can predict the
direction and magnitude of the price action on almost a daily basis, up or down.
It is both fascinating and tempting to game the system, but ultimately
illustrative of the sheer disjointedness and blatancy of price manipulation.
In an article written for GATA and Bill
Murphy's LeMetropole Cafe called "The Curious Case of the PM Fix vs. the AM
Fix", James McShirley outlines the details of his years of research. Here is an
"The most suspicious of all isn't even the
London Fix, but rather the "1% and 2% rule". As I have documented for over 10
years, nearly all gold rallies are capped at +1% basis the COMEX pit close,
which is the most widely reported price. A few, which I dub "expanded limit" are
capped at exactly +2%. So outrageous is this behavior that I have predicted
hundreds of daily gold rallies virtually to the exact tick. I have even
predicted in advance on more than one occasion a sequence of four consecutive
trading days within pennies of each day's close. To do this once, as you know,
would be extraordinary. To do it over and over is akin to winning a Powerball
lottery over and over.
Perhaps to be a truly successful trader in
these markets, it is best to dispense with traditional technical analysis and
instead employ the following as you watch the inevitable return to equilibrium
Aside from naked short selling, the mining
index has been a major signal for softer short term prices. Any serious
impending announcements by the U.S. Head of State or Federal Reserve Chairman
would very likely be bearish. A jobs report release of FOMC minutes (beige book
or as we saw, the threshold of war) would also bear watching for the downside.
James ends with:
"Anybody disputing manipulation should
first review all data, including the works of Adrian Douglas, Dmitri Speck, and
the GATA archives".
For more articles like this, including
thoughtful precious metals analysis beyond the mainstream propaganda and
basically everything you need to know about silver, short of outlandish fiat
price predictions, check out