Silver and Gold Prices – Rangebound Before the Storm

empire revoltThe central bank driver world macro structure is in full can-kicking mode. The fuels that have built up are almost too numerous to mention, though some issues continue to be recycled as if they were needed to explain the latest potential spark.
Argentina has defaulted once again on its sovereign obligations, devalued its currency, and caused a painful split between the official and street value of its currency.
For precious metals investors, the lesson from the Argentinian currency discrepancy foreshadows the likely future of precious metals valuation as the physical or street value divorces from the official paper price.

2014 Silver Eagles As Low As $3.29 Over Spot at SDBullion!

 


By Dr. Jeffrey Lewis, Silver-Coin-Investor:

The New Boss Same as the Old Boss

Janet Yellen was on tap this week to lead her first official open market committee meeting as Fed Chairwoman. The perception of Fed confidence is crucial at this time in particular. In light of the recent policy tapering and the recent volatility in the emerging markets, her script will be watched carefully by all.

In terms of emerging or developing markets the volatility has been intense, to say the very least. Argentina has defaulted once again on its sovereign obligations, devalued its currency, and caused a painful split between the official and street value of its currency.

For precious metals investors, the lesson from the Argentinian currency discrepancy foreshadows the likely future of precious metals valuation as the physical or street value divorces from the official paper price.

Middle Eastern Europa

We have also seen massive undertakings in Forex, most notably the shock overnight in the revaluing of the Turkish Lira. While the Lira may be a small market relative to the U.S. dollar, it lies central, almost as a mini reserve active in the Middle East and, of course, immediately adjacent to Europe.

Not to mention the recent recommendation out of the Bundesbank that European peripheral sovereigns should be expected to bail in themselves on the backs of its citizens. The Cyprus bail in template is being applied in lieu of the politically unacceptable austerity tourniquet.

In the U.S.

The debt ceiling redux is back and will once again pit US policy makers up against the Federal Reserve. Although the two entities are connected politically, they must maintain the appearance that they are not. We should look for jawboning from the Fed, which in turn could offer some support to gauging confidence for the new Fed Chair.

Housing is Rolling Over Again

Housing is cooling off by a host of measures. Prices have begun to soften, mortgage applications are down. Also, murmuring about huge shadow inventory estimates have begun again, ultimately putting more pressure on central bank policy decisions.

The president has just announced a new Treasury IRA, the myRA, by which citizens will be given the “option” to save via these Government and, therefore, faith-based instruments. It is truly surreal that something like this has come to pass. The ramifications are truly ominous, if not genius, from a propaganda standpoint. Could a central bank that directly, arbitrarily, and selectively determines the rate of interest on bonds be any less independent?

China Rolling Listing

The “China issues,” ranging from massive ghost city expansion, inflation and domestic lending bubbles, have been pervasive. Also, despite recent listing in their repo markets it is like most of the issues above – just one more “convenient” narrative to float when the time is right.

These are Not Black Swans

They are some of many possible trigger points, though none of them are truly random. And therefore, they are capable of inducing the kind of inferno the financial system is fragile to.  A true black swan would be devastating.

Response will ultimately be more stimuli, more than likely in the form of a bank bailout or perhaps a European bail in.

The dollar could gain in value before a flood comes back in.

New SDB lowest price(1)Stuck in a Range

In the absence of a true black swan, prices for gold and silver remain firmly range-bound. However, one potential positive is the latest stable performance on recent equity volatility and a few recent financial data releases.

Nevertheless, the price action dictated by the big commercial banks painted a huge upward resistance at $1270 for gold and $20.60 for silver. Until these levels are breeched, the speculative and momentum chasing community will be largely absent.

Because of the bearish options structure, precious metals investors should not be surprised if and when we get another washout before prices move higher.

At the end of the day, it is important to remember that the success of intervention comes directly from its credibility. And this requires that participants or investors be convinced that the lender of last resort is always ahead of the game.

 

Comments

  1. When I hear the word ‘range bound’ I feel like a heifer in the chute

  2. The only thing range bound are the imaginations of financial pundits. Silver and gold are being tightly controlled. Every time they make a move it is allowed to progress until it hits the granite ceiling provided by our paper selling buddies.  Silver is breaking 20 right now, but if at all possible it will be quickly pounded back under that mark. Gold has the same problem at 1260.  It is an impressive demonstration of HFT authority over the metals.  Their prices do not reflect natural limits, ie, the willingness of investors to pay a higher price. 
    The big playuhs merely supply the necessary paper to satisfy the moment’s demand and halt any advance in its tracks.  ‘Range bound’ implies the sentiment just isn’t there, which the rapid spikes upward show to be nonsense.  The paper is provided to cover all the bids, and the beat goes on.  The spikes only happen due to the short delay between demand increasing and paper being dumped on it.
    The physical gold is pretty much gone, silver, who knows.. The wait continues.

    • @Conax
      “Silver and gold are being lightly controlled”    
      Are you saying that PM investors can NOT get the physical gold and silver they desire?   I have not seen the reports.
      “merely supply the necessary paper to satisfy the moments demand”    
      How does paper satisfy physical demand?   It doesn’t.   Paper supply satisfies paper demand, investors that buy paper gold are NOT gold investors.
      “The physical gold is pretty much gone”       Evidence of this statement?   Or is this just a “gut” feeling?      If physical gold was “pretty much gone” , the market would be trading at much higher levels, it’s at $1260 because there’s plenty of gold available at $1260.
       

    • Plenty of paper gold, go by a thousand ounces and see how fast you can get phyz. Small amounts are available for the stackers to keep us happy but no way can you get a large amount in any fast time frame.

    • Ask the Germans how easy it is to get 300 tons of THEIR gold back from the holding company that they stored it with 50 years ago.  That was done because of the “Soviet Threat”.  HA!  Look at them now.  The REAL threat was a bunch of sticky-fingered banksters in NYC.
       

  3. I keep reading about these “Chinese Ghost Cities”, blah, blah, blah. They are not Ghost Cities. They are real cities you can smell, feel and touch. And they are functional and ready to go, for you to move in. Now, which is better?
     
    Unpopulated, fully built cities in China, that can be used to Relocate/Imprison their local poor migrant workers, who cannot afford to buy/own their own housing.
     
    OR
     
    Fully populated cities in the USA, like Detroit, that are being depopulated due to job loss, manufacturing loss, increasing un-employment, late/no/defualting mortgages which will result in eviction/homelessness.
     
     

  4. @zman
    .

  5. @zman
     
    We live in America. There is plenty of everthing. For now. We have soo much of everything, we get pissed if we have to wait for anything. But the supply chain of everything is fragil. A couple years ago, we had a 2 day warning on a ball buster blizzard. I dont live in a huge town, about 150,000. By 36 hours before the blizzard, If you didnt have your food, You couldnt get it. Unless you like rice cakes and anchovies.
     
    The moral of the story is, dont assume there will always be plenty of everything. There wont be.
     
    P.S.  I live in ranch country, the U.S. cattle herd is low, expect beef prices to rise over the next few years, mabey sooner if the drought in Califonication persists.

    • Just as an aside, @Silver Dollar, there is no drought in Californication Land.  The FACT of the matter is that the US West Coast has been in an unusually wet period for about the last 100 years.  The length of that period fooled people into thinking that was normal.  It isn’t.  It is now returning to its NORMAL rate of precipitation, which is considerably less.  People are squealing about drought because they mistakenly planned that what was once available for water resources now isn’t.  The Columbia River, however, could probably irrigate every bit of farm and ranch land in Calif plus a few other states.  If we had any sense at all, it would be doing just that and there would be a BIG meter on it that brought some of that Calif farm and ranch money back to the NW in exchange for all that irrigation water.  It would be a win-win.  But, no, thanks to provincialism, we simply can’t do that.  It would make too much sense.
       

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