A Note of Caution to Our Silver Camp

by Tom Goehle,

by Tom Goehle,

If there is one thing that can be said about our silver community it’s that we sure take things in stride. It’s almost comical watching us, like an army, declaring victory after victory, as we get our collective noses bloodied by the cartel which has now smashed the silver price down below $25.

It’s been exactly two years since the Big Smash when silver got pounded from $49.78 down to the $32-$33 range in a couple of days. You may recall that Mr. King over at KWN lined up a parade of guests who all in lock-step said they would be buyers at that level.

Moreover, after just a few days, the “bottom” was in. Victory was declared. See, look how cheap we can buy this stuff now. It’s only onward and upward from here.

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Um, not so fast my friend. The patient stacker could have saved himself some FRNs had he or she waited until a few weeks ago rather than a few days after the Big Smash. We keep pretending the metals are always on the cusp of rocketing upward when in fact they have been moving downwards for some time now. (I know, that’s only the paper price, we’ve really got them where we want them now in the physical department. Or so the narrative goes.)

That is why it is so agonizing to see Sinclair (0 for 2 for those keeping score at home), Sprott, Norcini, and others call the bottom so soon in gold. If the bottom in silver was miscalled two years ago by virtually everyone, and then in gold a few weeks ago (Sinclair), you would think that with everyone hanging on to your every word that you may want to exercise a little reticence this time around when calling bottoms.

Nope. Not in our camp.

Victory must always be pulled out of the jaws of defeat right this minute.

Remember how we heard a few years ago when silver started its move towards $50 that the shorts were “trapped?” How about when Leeb said silver would hit $100 by the end of 2011.

Or when Turk said last year that as soon as we got through $35 we would get to $60-$70 in a few months. Now he is calling for a short squeeze. Does this stuff never end? There is no patience in this camp. The metals MUST start moving up NOW. After all, we own them. (Like a conclusion drawn logically from its premise.)

 

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Thus the continuing narrative, which is reaching a crescendo as I write, is that the divergence between physical and paper is nearing its “event horizon” of which there will be no escape. This may be true. It really may be.

But I have a couple of honest questions which are not meant to be a challenge to those holding to the “imminent failure to deliver” crowd which seems to be the ubiquitous position in our camp right now.

1) First, why are the paper metal prices rebounding so vigorously if paper and physical are diverging?

2) Second, the divergence between physical and paper was much worse in 2008.

Eagles, if you could even get them, for example, were selling for over $20 when spot paper silver was $8.45. If the COMEX/LBMA didn’t default when the divergence was far more acute, then why would they default now?

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Another foundation of our silver narrative is the notion that the paper price doesn’t matter. This is accepted as gospel. I have never seen this proposition challenged so let me take a stab at this non sequitur. If the paper price doesn’t matter, then why does everyone get bent out of shape when the price gets slammed?

Of course the paper price matters! I am working on another project (a book) and therefore I am now only working part-time. In order to pay bills while my income is diminished, I unfortunately had to sell nearly 20% of my stack about 4-6 weeks ago. I know I risk being excommunicated from this camp for admitting I had to sell.

It’s anathema to do that in our camp. (Please don’t throw holy water at me.) At any rate, do you think the paper price didn’t matter to me? Based on fundamentals, I think everyone in this camp could make a good argument for physical silver being priced around $130. I had to sell because I thought silver looked weak (on the chart) and I didn’t want to get stuck selling even lower in case it crashed.

It did. Until we go to a physical cash market by way of a COMEX/LBMA default, yes the paper price does matter. Unless you can wait it out. I couldn’t.

My point here is that while I agree that the metals in the long run provide the best chance to reserve purchasing power, we seem to continually underestimate TPTB’s (The Powers That Be) ability to extend this fairytale economy.

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The constant calls for the dollar’s demise and the imminent collapse of the economy have proved wrong over and over again. The simple fact of the matter is, we have to get through the entire Eurozone explosions first. The dollar will be the last to fall.

Thus, entities run to the dollar, not silver and gold until their normalcy bias does not provide safe haven. Again, contrary to popular opinion, I see this at least 2-3 years away. I know, I know, it can’t last that long. That was the same argument made 3 or 4 years ago. That’s the point. Everything should have come apart. But guess what? It didn’t. They “fixed” it.

Yes, all the markets are “fixed” now, if you get my meaning.

The only thing that will stop this fairytale economy is when people, governments, banks, and other entities stop accepting paper like its money with value. Otherwise this insanity goes on and on.

I made up a little saying- “Paper = power for those that are in charge.”

Read #5 In The Above List.

Paper is what keeps all the global elites and their glorious banks going (with their nefarious intentions). This is why it is ill-advised to underestimate the lengths these liars and cheaters will go to hold on to their paper schemes.

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I hope the COMEX/LBMA go bust. But I am not so sure that time is now. I am expecting a US debt downgrade sometime between Memorial Day (which would provide good cover) and Thanksgiving. This should give the metals a boost which ever way they are being priced. Also war, or the imminent threat of war, would likewise do the same.

Top 20 Silver Producing Countries in 2012

(millions of ounces)

1. Mexico 162.22.
2. China 117.03.
3. Peru 111.34.
4. Australia 56.95.
5. Russia 45.06.
6. Poland 41.27.
7. Bolivia 39.78.
8. Chile 37.09.
9. United States 32.610.
10. Argentina 24.111.
11. Canada 21.312.
12. Kazakhstan 17.513.
13. India 12.714.
14. Sweden 9.815.
15. Turkey 7.616.
16. Morocco 7.417.
17. Guatemala 6.618.
18. Indonesia 4.419.
19. Islamic Rep. of Iran 3.220.
20. South Africa 2.9

The Silver Institute

Of course a bust of the COMEX/LBMA would be the jackpot. I think in the long run the metal prices will move to new record highs but don’t expect them to go to the moon priced in dollars, because we may not be talking about “dollars” then.

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The other problem with the “shoot to the moon” assertion is that you are once again underestimating TPTB.

The government will be ready, willing, and able to tax you to death on your new found gains. Something that no one seems to want to talk about.

In conclusion, we look upon the sheeple with supercilious scorn as they go about their daily lives blinded to the reality that is fairly soon to come upon all of us.

Our camp knows better.

We are awake.

But then we should know not to underestimate the opposition. Therefore, I will not be surprised if the paper prices of gold and silver go back down – silver to $21 which is a 61.8% fib retrace of the entire move from $3.50 to $49.78, and gold I have no idea where it goes, if it goes down, but as long as it stays above $1285 which is a 38.1% fib retrace of the entire move from $250 to $1921, that would be very healthy in a secular bull market.

Folks, gold has been up EVERY year in this latest bull market. It needs a breather O.K.?

Not saying the metals necessarily will go back down, but I won’t be surprised if they do.

Keeping this in mind, I just pray for everyone in our camp along with Pete Townsend- “We don’t get fooled again.”