The Ultimate Precious Metal Portfolio High-Grading Opportunity


by Andy Hoffman, Miles Franklin:
I have many important things to say in today’s very important, and pragmatic, article; and thus, am starting it early Sunday morning. After which, I’ll take a break, and resume Monday morning – so you won’t miss a moment of real-time commentary, in an ever-changing, and increasingly “PiMBEEB,” world.

To start, my increasingly strong belief that Precious Metals are set up for a sharp rebound in the not-too-distant future. Not that I know why the Cartel has been so vicious in recent weeks – starting the day of the Fed’s shockingly unexpected “hawkish hike” last month; when, despite an onslaught of negative economic news, the “data dependent” FOMC’s statement; whilst objectively, being as far from “hawkish” as possible; didn’t offer a single hint that it might slow its (turtle-like, statistically insignificant) “tightening” cycle any time soon. This, as gold was just about to break above $1,300/oz, with both metals on the verge of decidedly breaching their 200 week moving averages and 5½ year downtrend lines. Hint, hint.

Irrespective, it all comes down to what drew me to GATA, or the Gold Anti-Trust Action Committee, 15 years ago; i.e, that ultimately, today’s “New York Gold Pool” will be defeated – as all Cartels ultimately are (like OPEC – perhaps, by year-end), by the reality of the physical markets underlying the paper frauds that mask them, no matter how sophisticated the “manipulative technology.” In OPEC’s case, due to the historic energy glut that may never reverse; and in the gold Cartel’s case, the equally massive shortages coming, given the – perhaps, irreversible as well – damage inflicted on the mining industry by two decades of price suppression, coupled with exploding physical demand (caused by price suppression and unprecedented “money” printing. And of course, the overt and covert rundown of Central bank inventories – likely, to modern era lows – in the quest to promulgate history’s largest, most destructive fiat Ponzi scheme. To that end, after reading Jim Rickards’ MUST READ article this weekend – based on his extremely high level of “inside” information regarding the global physical gold market – I believe this more strongly than ever.

In Friday’s “latest Cartel blitzkrieg, and fabricated ‘jobs’ report, setting the stage for significant precious metal shortage,” I discussed silver’s heinous “flash crash” 12 hours before yet another ugly jobs report; which, unlike last month’s NFP horror show, was “dressed up” with a fabricated, “better than expected” headline number. In fact, a half hour after the report’s dissemination – which by the way, caused the “odds” of a September rate hike to plunge from 18{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} to 13{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, gold was only down $1 for the day; whilst silver, which was smashed by a whopping $1.50/oz in seconds during the aforementioned “flash crash,” came within a dime of turning positive.

That said, clearly Thursday night’s flash crash was done for several reasons. One, to “signal” what was coming Friday morning; when, following the aforementioned, bullish PM action following the supposedly “strong” jobs report, prices were suddenly smashed into oblivion despite no other market materially budging. To that end, interest rates and the dollar index were no different at day’s end – with gold down $13/oz, and silver $0.45/oz (this, as oil prices plunged, whilst base metal prices were flat) – than they were when gold was down just $1/oz, and silver $0.10/oz. Secondly, to (as always) deliver a false message that the “better than expected” jobs report was “bad” for Precious Metals, and “good” for stocks. This, despite the odds of a September rate hike declining after the report! But most of all, in my view, it afforded the Cartel – er, the COMEX “commercials” – a chance to cover as many (naked) shorts as possible.

Which I say with such confidence, given that the weekly COT, or Commitment of Traders, report that was published Friday at 3:30 PM EST depicted an acceleration of the massive short covering efforts that commenced four weeks ago…I kid you not, EXACTLY when the Fed’s “hawkish hike” was enacted. Yes, the COT report only describes “commercial” activities up until Tuesday afternoon’s close. However, I think it’s safe to assume that amidst the massive Cartel attacks this week; starting with the unfathomably blatant raid during Monday’s paper-thin pre-Holiday trading session; and culminating with Friday’s post “flash crash” blitzkrieg attack; that the odds that next week’s COT report will depict further “commercial” short covering – perhaps, dramatically so, is extremely high.

Following four weeks of massive short covering (again, excluding what likely occurred in the three trading days since the most recent COT reporting period), the “commercial” short position in both gold and silver has plunged to levels not seen since…drum roll please…the ultimate Precious Metal bottom in December 2015, when gold touched $1,060/oz, and silver $13.75/oz; which ironically, occurred the very week the Fed “raised rates” for the first time. Which I put in quotes, given how comical it is to believe that raising rates from ZERO to 0.25{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528} – which 19 months later, are still just 1.25{5f621241b214ad2ec6cd4f506191303eb2f57539ef282de243c880c2b328a528}, with essentially no chance of being raised until at least December -can be considered “raising” at all.

In the process, both gold and – particularly, silver – have been driven to extremely technically oversold levels. Which, while having relatively low importance in my analysis, given that short-term technical analysis is largely ineffective in rigged markets, there is definitely a strong precedent – even in recent years, when Cartel manipulation has been most pronounced – for a material bounce when paper gold and silver prices become so technically oversold.

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