Curried Wealth Building
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September 8, 2008

Issue 5  -  Gold and Silver Slaughter         

Over the last several weeks, gold and silver have fallen at an alarming rate and has many people doubting themselves and beliefs about the commodity bull market.  I am not one of them.  I am very calm and relaxed about what is happening.  The reasons for this are simple.  I am not on margin and my common sense is still intact.

Let me explain.  The sell-off in metals in no way reflects reality.  Check any major metal dealer web site and you will see a curious thing:  lots of “out of stock” labels.  The law of supply and demand dictates that a falling price means more supply available.  Think of the price of any fruit when it hits peak harvest periods.  The price must be lowered to move the excess inventory.

This is not the case in the metals market.  Not only is there very little metal available, especially in silver, but if the dealer does have metal there is usually a waiting period of weeks if not months.  Does that pass the smell test?  In addition the price is, in most cases, many dollars over the spot price.

Now if something is in such great supply that the price is almost halved, how can there possibly be shortages?  The only way is manipulation.  The Powers that be have now embarked upon a path that can only be described suicidal.  Forcing the paper price lower, two banks shorted over ¼ of the world’s silver production in a two week period.  The main idea was to panic investors to give up their silver.  This hasn’t worked, as evidenced by the lack of available silver.  In fact, the spread between the paper spot price and the physical price has expanded and demand has INCREASED.

This is exactly opposite of what was intended and now they are cornered.  I believe the real intent was to scare people out of their physical and into the waiting arms of the planners.  The price would then be released to go skyward and they would clean up.  Since they acquired so little actual metal with the ruse, there is some doubt of whether the cat will be allow out of the bag.

I happen to think that they will as the financial shape of the financial system is beyond repair and nature must be allowed to take its course.  This means vastly higher gold and silver prices in the coming months.  Reality can only be concealed for so long.  As for the gold shares, these can be manipulated for a much longer time, especially the junior explorer stocks which have no revenue.  Companies that have revenue and especially dividends will have to rise as short sellers must pay the dividends due for all shares borrowed. 

In case you don’t know, margin is form of loans which are given by stock brokers which use the customer’s stock shares as collateral.  Margin accounts kill.  If you were highly margined over the last several months you were pretty much wiped out.  Ironically, margined accounts actually helped the price plunge as they were forced to sell shares to cover their margin calls for more money.  This further accelerated the price drop perhaps even leading to another margin call.  Stay off margin!

Even though my main mining stock shares are down over 40% I am not worried.  Black is not white and the natural order of things can only be suppressed for so long.  Look for a bottoming in the shares over the next few weeks and then a surge up as true state of things becomes clearer.  The financial system in running on fumes and that can only be good for precious metals.  Get yours now, if you can.