Silver Price: Silver “Could Easily See $75”, James Turk

Silver bugs anxiously waiting for a the next big move in silver could get one soon enough.  Goldmoney’s Founder James Turk is out with his next call for the silver price.  He believes silver could reach between $60 to $75, “easily,” but wouldn’t put a time period for that target range.

Turk does, however, expect a technical breakout of the silver price from its consolidation to take place sometime in November, which he expects will embolden the bulls to race prices through $50 and to all-time highs.  After $50, the sky’s the limit for silver. Get my next ALERT 100% FREE

“Silver is forming a beautiful, long-term, flag consolidation pattern,” Turk told King World News, Monday.  “The flagpole started in 2010 at $18 and peaked at $49 earlier this year.  We are now in the flag and we can expect a breakout, I think, within the next few weeks.”

As one of several old hands of the bullion business, Turk understands what drives gold prices—therefore, silver prices.  He takes publicly available Federal Reserve data to estimate the expected change in the Fed’s balance sheet and calculates to a ‘fair price’ for gold and silver.  He calls his simple, yet elegant, model, “The Gold Money Index”.

As traders watch for any hint of a Fed announcement regarding more QE, the matter before the Fed appears to be fait accompli.  As a reminder of the grotesque U.S. budget deficit, expected to reach at least $1.6 trillion for fiscal 2012, the U.S. Treasury issued a news release on Monday, announcing its funding needs for the quarters of Oct. – Dec. and Jan. – Mar., totaling $628 billion, or a 35 percent jump from the equivalent six-month period a year ago.

Here’s the widely-known problem with Treasury’s plan to fund additional deficits at this time:

Foreigners, who have propped up U.S. deficit spending for more than two decades through increasingly higher amounts, have been net sellers of Treasuries lately, not net buyers—and that 35% increase in additional funding needs comes at a time when foreigners are withdrawing from the dollar to debase their own currencies.

One question looms large.  Will the Fed have to buy the entire $628 billion net issuance?  If so, the Fed’s balance sheet will grow at a 47.9% rate from its approximately $2.9 trillion total.

A collision course with a big precious metals move is near, as auction results should show larger and larger take-downs of Treasuries from its primary dealer network.  That should spook the markets.

The formation for silver’s recent consolidation indicates the market expects the Fed to mop up Treasury issuance in another QE operation.  What else can it do? Talk of ‘inflation expectations’ and U.S. GDP is an obvious and tired smoke screen to the reality of Treasury’s funding needs.

“. . . it [silver price consolidation formation] projects to a $60 silver price, but given the strength of this pattern, one could easily see $75,” said Turk.  “The shakeout over the past six months has put a lot of people on the sidelines.  I don’t expect that money to come back into the market until silver goes back above $43.  When silver takes out $43 it should rocket just like it did earlier this year when it nearly doubled in price.”

The graph, below, illustrates James Turk’s confidence of rapidly rising silver prices in the coming months, though the extent of the anticipated damage to the Fed’s balance sheet, which drives precious metals prices, is unclear.

It’s no secret that higher interest rates cannot be tolerated by the Fed.  Near-zero rates at the short end of the curve until at least June 2013 is already entered into the record.  That is clear.  Therefore, if foreigners cannot be counted on (they don’t have the additional cash) to buy U.S. Treasuries, no one else but the Fed can buy them.

PIMCO’s Bill Gross asked the rhetorical question in one of his missives last summer, “Who will buy Treasuries if the Fed doesn’t?”  A better question might be, “How much Treasuries will the Fed buy?”

Or . . . and may be classified as a tin-foil hat proposition: what if an outrageous event occurred somewhere in the world that would scare investors into Treasuries at any price?  We could see Treasuries mopped up at lower yields and soaring precious metals prices simultaneously.  Who knows?  But traders of both gold and silver shouldn’t be disappointed in any event.

Peter Schiff: Silver Price going to $50, “So Buy it Now”

For those waiting to seize another drop in the price of silver, Euro Pacific Capital CEO Peter Schiff believes today’s bargain basement price won’t get any cheaper and that full-pricing of $50 in the white metal is coming—maybe within 60 days.

Speaking with King World News’ Eric King, Friday, Schiff warned procrastinating silver bugs, “We are going to eventually go through $50 [silver], so buy it now.”

The gold price, he expects, will reach $2,000.

Schiff’s latest advice comes on the heals of last week’s bold call, of which, he said a renewed drop in the U.S. dollar was imminent and a rally in the precious metals would ensue for the remainder of the year.  And if Schiff turns out to be right in the face of a teetering EU and the backdrop of FX Concept’s Founder John Taylor’s mid-summer call for a big dollar rally for the second half of 2011, clearly many traders will be knocked off guard.

Moreover, and for what it’s worth, especially during a period of overactive central bank intervention in the currency market, Schiff’s outlook for a declining dollar for the remainder of this year is consistent with the dollar’s 40-year seasonal pattern of weakness against major competing currencies during the months of November and December—a period, too, when precious metals have historically been inversely strong.

“Our short-term target for the euro, maybe by year end, will be up near 1.48,” Schiff told listeners of the KWN Oct. 25 broadcast.  “I think that’s going to catch a lot of people off guard who were writing the obituaries for the euro, to see the euro approaching the 1.50 level.  The dollar index should be headed back down to the 72 level.”

Friday’s big move in the euro and nearly equal move down in the USDX did, indeed, take euro shorts by surprise and aided further the move higher with an onslaught of short covering in the Forex throughout the trading day Friday.

One currencies trader, Jim Rogers of Rogers Holdings, was taken aback by the surprise deal struck in Europe, the impetus of the euro move.

“Never in a million years did I expect them to impose a haircut of 50% [on Greek bondholders], this shows at least somebody is starting to accept reality,” Rogers said in an interview with UK-based Investment Week.

“There has been a major overhang, so we will see the easing of some pressure, but the problem will come back because the Western world still has not dealt with its debt,” he said, apparently agreeing with Schiff insofar as the flight back out of the dollar may still have some legs left in it.

Mostly buried beneath the news out of Europe, however, was the story of the yen cracking a post-WWII high against the dollar as well as the dollar falling significantly below strong support at 76 on the USDX.

“Today the dollar is at an all-time record low against the Japanese Yen,” Schiff said, Friday.  “So you have a weak dollar, you have bond prices now headed lower, commodities up, stocks up, kind of across the board.  The message is get out of paper, get into stuff and the worst paper is dollars.”

But the BOJ didn’t miss the move and took violent exception to a strong yen.  At the open of Monday’s trading in Tokyo, massive BOJ intervention dropped the yen 382 points to the dollar within 30 minutes—severely punishing the longs to a six-standard-deviation bloodbath, further making it clear that attempts at refuge from the dollar to the Japanese currency won’t be tolerated.  As precious metals price dropped against the dollar, gold and silver rose against the yen.

The move by the BOJ comes atop China’s central bank re-pegging of the renminbi to the dollar, Swiss intervention in early September to weaken the franc, and the BOE move to weaken pound sterling.  Now, it may be the dollar’s turn, according to Schiff. Get my next ALERT 100% FREE

He expects the decline of the USDX will logically come from further strengthening in the euro, sterling and CAD, with another assault (3rd time) on the all-time support low of 72 USDX expected this year, or at the latest sometime in 2012.

USDX composition (weighting)

Euro (57.6%)

Japanese Yen (13.6%)

Pound Sterling (11.9%)

Canadian Dollar (9.1%)

Swedish Krona (4.2%)

Swiss Franc (3.6%)

“I think we will come pretty close to hitting $2,000 on gold this year,” Schiff reckoned.  “It would be hard for gold not to be above $2,000 in 2012.  I really think it would be unlikely that we wouldn’t see prices north of $2,000 next year.”

He continued, “The dollar is headed right back to the lows and I think it will take out the lows.  If it does break to new lows, that’s when we might see another crisis because then we might start to see the world questioning the viability of the U.S. economy….”

Silver price: Launch Underway!

With the global shift back to the dollar-flight trade, let’s look at the silver price’s technicals to see where we are in the trade, with the emphasis on one-way bets on silver—long!  With physical buying pouring into the market, taking a short position is suicide.

During the massive plunge (normal for the silver market) in the silver price, noticed where the heavy buying came in—right below Richard Russell’s 20-month moving average.  Russell looks for where to 20-month MA is relative to the 40-month for long-term buy and sell decision points.

“I’m looking right now at a chart of 20-month and 40-month moving averages of gold [said can be said of silver],” Russell said in a roundtable discussion with FinancialSense Newhour’s, “and May of 2002 . . . the 20-month moving average finally moved above the 40-month moving average.”  Coincidentally, the buy signal in the precious metals followed UK’s Chancellor of the Exchequer Gordon Brown’s dump of 60% of British of England gold reserves.

With no foreknowledge of the schemes of the gold and silver cartel, it appears the sell-off in silver is complete.  Notice the similarities between the sell-off during the de-leveraging event brought on by the collapse of Lehman Brothers in 2008 and the sell-off in the silver price during the coordinated raid by the cartel in May, made easy for the cartel from all the shallow-pocket speculators jumping on a moving train.  A simple margin raise was in order and watch the speculative longs fall like dominoes.

Volume statistics, as shown in the above graph, suggest a confirmation of COT reports which show speculative longs flushed out of the market during the May sell-off.  But note the volume; it’s reached levels not seen since the summer of 2010 when silver traded below $20.

More importantly, the difference between the two sell-offs cannot be gleaned from the charts.  The action is in the physical market is decidedly different this time, as a slew of reports coming from bullion dealers across the globe tell of physical buyers jumping into the market with both feet at these lower prices—in stark contrast to the 2008 sell-off.  Goldmoney’s James Turk and Eric Sprott of Sprott Asset Management (read article here) have both reported experiencing equal dollar amounts of purchases between gold and silver.  Significant order of silver run weeks to delivery—again!

Considering the price ratio of gold and silver is 50:1, already-long delays in securing a supply of silver provides a critical disincentive for the cartel to act anytime soon—if at all, in the future.

Tocqueville Gold Fund manager John Hathaway told KWN, “To the extent that this is a rigged game, the game is now over.”

He notes that commercial physical buyers may panic to secure silver at any price to keep production of its products moving.  Due the small amounts used by commercials in the production of most consumer electronics, to them, silver is an inelastic commodity.  JP Morgan is very well aware of this dilemma and most likely won’t push this manipulation scheme to a de facto force majeure (may never officially acknowledge one) at the COMEX intentionally.

Chief Investment Strategist of Sprott Asset Management John Embry agrees. “Right now we are in the throes of something similar to the old ‘London Gold Pool’ getting overrun,” Embry told KWN.  “I remember the London Gold Pool situation quite well, you have to be old to remember it but I do.  I see absolutely no difference this time except conditions are infinitely worse this time around and there is less central bank gold [silver supplies worse] available for the manipulation.”

Embry added, “So to me if the seventies were fantastic as a result of the London Gold Pool being broken, this one is going to be way better.”

Silver Price much too Low, Eric Sprott

Nervous about the silver price during the worsening global economic slowdown?  Don’t be, according to Eric Sprott, CEO of Canada’s largest independently-owned securities firm Sprott Asset Management.  Silver (and gold) have become de facto reserve currencies, according to him.

In the silver market, “we’re going hand to mouth these days,” Sprott told listeners of Financial Sense Newshour.  And Sprott, of all people, should know; the last significant order placed in the open market by his firm in late 2010 took three months to arrive, he said, “and some of the silver that was delivered to us was manufactured after we purchased it.”

Following the massive ambushed on the silver market by Fed proxy JP Morgan during the month of May, Sprott, has noticed a radical change in the dynamics between the paper market for silver and the physical market for the white metal.

“The physical market is what I analyze more than anything else, and all I see is buyers,” Sprott said, at which point FSN host James Puplava chimed in, “That’s what the dealers are telling me.”

In the past, a Fed ‘take down’ caused demand for physical to cool significantly.  Today, however, typical supply/demand norms have been righted—that is, lower prices increase demand and visa versa.  In other words, the silver market has become functional through its physical market participants.

“It was very convenient for central bankers and governments, the price of gold fell off exactly as Europe hit its sort of peak in risk of the financial arena in the sovereign thing,” Sprott mused.  But, this time, the Fed-led take down of silver and gold prices revealed a large crack this time in its scheme to suppress precious metals demand in the physical market.

Sprott suggested that the evidence gathered from buyer demand in physical bullion at his firm, and others he deals with, has led him to conclude that gold has finally taken on the role as the preferred reserve currency, a conclusion also drawn by Grant’s Interest Rate Observer author and publisher James Grant, World Bank President Robert Zoellick, Euro Pacific Capital’s Peter Schiff, as well as bullion experts James Sinclair and Goldmoney’s James Turk.

“The markets have made gold the reserve currency.  That’s what I believe, that’s gone up 100 percent against every currency in the world,” Sprott explained.  “So, it is the world’s reserve currency, as far as the markets go.”   “And as an offset to that, gold is not going to be a reserve currency without silver playing a hand here.” Get my next ALERT 100% FREE

If an investor takes a three to five-year horizon of the silver market, according to Sprott, the historical ratio between gold and silver of approximately 15:1 (a geological observation of relative scarcity of earth deposits) will, again, be achieved as investors realize that a decision to buy precious metals to offset ongoing devaluation of fiat currencies across the globe will more likely favor the relative cheaper of the two metals to the other.

Moreover, as Sprott points out, mining production statistics throughout recent years reveal a decline in the historical ratio of availability between silver and gold ores.  Today, it appears that the ratio has been stuck at approximately 10:1 for some time now, suggesting to some analysts that maybe ‘peak silver’ is upon us.

“So why should it trade to a 50:1 multiple?” posits Sprott. “Give it three to five years; we’re going to get back to ratios which are way more appropriate to the underlying fundamentals of gold and silver.”

At today’s gold price, a reversion to the historical norm calculates to a silver price of $110, or a whopping 70% discount to today’s $32 price tag, under the Sprott thesis.

As approximately 57% of the world’s GDP, that percentage, which is the combined GDP of the U.S., EU and China, appears to be collapsing—again (see IMF), a well-founded sense of gloom for a coming worse economic time has gripped global markets rather quickly, creating fear of another Lehman-like unwind of money flows out of dollar and euro-denominated assets, back into those currencies, which could, then, take down the precious metals complex.

Sprott believes that argument will ultimately prove to be a specious one, a throwback to another time when the U.S. dollar (and euro) was readily accepted as a reliable medium of exchange.  Today, investors should, instead, focus upon horrendous supply constraints and mushrooming investor demand, driven by eroding faith in the both the dollar and euro.  Violent short-term swings shouldn’t dissuade investors from holding silver for a three to five-year outlook, according to Sprott.

“God forbid that we actually end up with a seriously declining economy,” he said facetiously.  “Because if you think it’s bad for banks, today, wait until you have to deal with a couple years of negative GDP growth and what happens to value of those paper assets that they own.”

Sprott added, “The ultimate destiny for gold and silver is that people will prefer to own those investments rather than have money in the bank.  And there’s a lot of money in banks.  People don’t yet perceive that gold and silver are the superior investment, but in my mind they are.  Because when you have money in the bank, there is tremendous counter-party risk.”

Counter-party risk?  That’s a Goldmoney’s James Turk’s theme—a theme, Turk believes will seep into investor consciousness over time, catapulting silver to phenomenal heights in the coming years.  Ditto for Eric Sprott, who said in a MineWeb interview of April 5—“Silver is the investment of this decade as gold was the investment of the last decade.  So we’re sitting back waiting for things to evolve here.”

Here we go again! Another Silver Shortage

In the midst of a Wall Street Journal article that suggests the groundwork for an addendum to the Fed’s ‘Operation Twist’ program is being laid right now, bullion dealer reports of lengthy delays securing silver are surfacing—again.

Of interest to traders seeking to catch the next big move in silver, both previous instances of shortages in the silver market led to an average price appreciation of 156% during an average of 10.5 months time span, with the second instance of a shortage catapulting the silver price higher in percentage terms and within a shorter time period.

“There is extraordinarily tight supply right now in Asia.  When you order silver there is so little available at these prices, that’s the trouble,” King World New’s frequent guest, ‘Anonymous London Trader’, told Eric King.  “You can order it all day long, but you are going to have to wait for it.”

Silver Price Manipulation Scheme Coming to a Close

The symptoms of Big Government seeking to defy nature’s law as it relates to the utmost important of all human behavior, that, of self-preservation, in response to a threat to said preservation, has become increasingly more self-evident in the silver (and gold) markets.  In the end, nature always wins.(1)

In that vein, KWN’s Anonymous sheds some light on the subject of the manipulated market price of silver and what he sees happening behind the scenes as the grip of government weakens on the price of gold’s kissing cousin.

“The price of silver has no reality to the paper market at all, absolutely zero reality there anymore,” Anonymous said.

“All of the sudden the game has changed because you have actual investment demand increasing exponentially vs. industrial demand, competing against industrial demand to buy,” (s)he continued.  “All of these sovereign entities buying silver know it’s manipulated.”

As the Fed successfully brought down the COMEX paper price (with a lot of help from speculative froth created by momentum traders who pushed the silver price up 171% within eight months) in April, the table is set once again for another Fed QE and another relaxation of the shortage of silver—which could result in an even higher percentage rally from the previous monstrous move in the paper price as we embark on the third go-around.

“To the extent that there has been intervention (in the gold market), you kind of have to wonder if the government in Europe or the European central bank didn’t want gold to be on the defensive because of all of these announcements about a lending facility,” another frequent guest to KWN, John Hathaway of Tocqueville, told Eric King listeners on Thursday.

The weekly Commitment of Traders reports illustrate an excellent source of validation of Hathaway’s suspicion in addition to his 40-year experience working the bullion markets.  According to the most recently published COT report, commercials scrambled aggressively to cover their shorts, suggesting, maybe, the a big rally could be coming as traders await word from the Fed of the possibility of an additional QE.

“I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities,” Fed governor Dan Tarullo stated in a speech at Columbia University on Thursday.

Add Tarullo’s statement to Fed Chairman Ben Bernanke’s recent language on the issue of more stimulus to the U.S. economy, as well as Thursday’s announcement that the biggest thorn to Bernanke’s behind, Kansas City Fed President Thomas Hoenig, has been appointed by Obama to vice chairman of the FDIC.  That should keep Hoenig quiet and serve as warning to other Fed governors who wish to remain at the Fed that transfers to other agencies of less distinction could be coming their way, too.

Aside form the political developments, the pattern of Fed intervention in the silver market prior to QE announcements may not be evident to the typical momentum trader who only watches price movements of anything that happens to be trading well, but for those focused on the Fed’s dilemma as it attempts to cushion a worldwide collapse of debt at ever level of the world economy, the Fed’s modus operandi makes much sense, but more importantly, the Fed’s timing model may provide clues to future movements and price levels along the way.

Back to Anonymous.  (S)he believes time is on the side of the silver bull.  As investors take on an ever increasingly greater role in the ‘pricing at the margin’ in the silver market, industrial demand will always play a critical factor as well, as a goof-ups by the Fed on the downside of price could ironically bust the COMEX.

If shortages become too acute through the Fed’s proxy JP Morgan and its criminal activities, the panic to buy the metal will most likely come from the commercial users, who will pay several times the manipulated COMEX price in order to secure the metal for their business applications.  After all, most industrial applications whereby, silver, specifically, is used, require too small of amounts to affect final product costs in any meaningful way.  For commercials, it’s not a matter of price, it’s a matter of availability.  Therein, lies the Achilles Heal.

But in the end, nature always takes its course, anyway.  The hogtied Fed will eventually strangle itself attempting to free itself from the virtuous Mr. Market.

“Yeah, any sort of attempt to hold back the market sooner or later falls apart,” Hathaway said.  “I mean we saw that with the London Gold Pool in the late 1960’s.  So you can keep the market off balance for a while, but you can’t do it forever and the longer the move is put off, the bigger the explosion on the upside.”

(1) Storing previously endured labor for future consumption as the intended lifespan of a human machine’s usefulness is reached is a serious matter.  But in the end, nature always wins; the human desire to survive outlasts the government’s ability to overcome that spirit.

Therefore, it’s truly time to move off the question of whether the silver price is manipulated.  The question, now, should not be whether Gold Anti-Trust Action Committee (GATA) is correct, or not, with its contention that the precious metals markets have been (and still are) manipulated; the question should be: Why do so few people know of a basic, undisputed sixteenth-century concept of economics, Copernicus-Gresham Law?  Why should GATA have ever existed?

Silver traders: Stop Cryin’ and Start Buyin’!

As another financial crisis comes to a head, another silver crash ensues.  Oh, the tears of sorrow!


Though there still exists economists, portfolio strategists and corporate CEOs who still don’t see or admit to seeing a double-dip coming to America [did you watch CNBC yesterday?], everyone’s favorite sleaze, George Soros, on September 21, told—that very same 24-hour propaganda doubly-sleaze outfit—CNBC, that the U.S. is in “a double dip already.”

Sometimes, Soros, too, tells the truth, as long as it aligns well with his fascist global-community agenda.

But if you’ve been listening to John Williams of, you’d already know the fake recovery was just that, fake, and that the worse days for the U.S. are yet to come.

“As activity begins to turn down again, you are going to see things get even worse, and the continued economic trouble is going to be very long and very deep,” Williams told KWN on July 11.  “That puts the Fed in a circumstance where you virtually are assured of a quantitative easing three. That in turn will weaken the U.S. dollar further.”

But as we all know, Bernanke, instead of giving the market what it perceived it needed on Wednesday, crushed the dollar slide, instead.  No QE3!  Not today, anyway.  But Williams will most assuredly be proved correct after the fight from Republicans on Capitol Hill turns Captain Queeg ‘yellow stain’ as it did during Speaker Newt Gingrich’s 1995 noble fight to turn the money spigots off by shutting down the Treasury-Fed cabal.

At some point, the mob will beg for QE3!  Ask Gingrich, who went from Time’s Man of the Year to the bum who authored the ‘Contract ON America” —which leads us to today’s Fed puzzle.

“The markets apparently were hoping for a large, magic pill for an anemic economy that feels like it’s catching the flu,” Barton Biggs told Bloomberg News.  He’s now been quoted by the Washington Post as saying we may be “on the eve” of a financial crisis.

And Dr. Feelgood at the Fed can’t wait for his patient to beg for that shot, thereby garnering support in Washington and within his own ranks to play catch up in the race to minimize the impact of a crushing debt load plaguing the U.S. economy.

John Williams (as well as BU’s Laurence Kotlikoff) has worked the numbers and concludes that the federal budget is “beyond containment.”  The U.S., too, is standing inline for a Greek moment—a Minsky Moment—but that moment is temporarily frozen in time.

What Bernanke showed us Wednesday is that he is indeed very concerned about commodities prices forking the wrong way during that critical phase of a debt-based monetary system gone hopelessly broken, a phase that von Mises referred to as the ‘Crack-up Boom.’

Bernanke doesn’t want hyperinflation; he’s not stupid.  But he does want some inflation in the money supply (however it’s defined)!  “The Bernanke” just doesn’t want his helicopter money printing of U.S. dollars to become expected by market participants.  Admittedly, in hindsight, he had no choice but to punish the markets for even suggesting, at this time, for that whopper monetary shot.  Bernanke wants everyone on the same page begging for QE3.

The Bernank refers to inflation expectation incessantly in his testimonies, speeches and writings.  Believe it or not, The Bernank (and Greenspan, and every Fed chairman since Marriner Eccles (from whom we get the name of the politburo headquarters in Washington) has heard of von Mises and has read his brilliant works.

Austrian economics professor Ludwig von Mises (September 29, 1881 – October 10, 1973) stated that the Crack-up Boom we’re immersed in today can lead to two outcomes: deflation or hyperinflation.  Von Mises wrote:

“If once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum size. For under these circumstances the regular costs incurred by holding cash are increased by the losses caused by the progressive fall in purchasing power. The advantages of holding cash must be paid for by sacrifices which are deemed unreasonably burdensome. This phenomenon was, in the great European inflations of the twenties, called flight into real goods (Flucht in die Sachwerte) or crack-up boom (Katastrophenhausse).”

Money supply dropped post 1929 crash, and the student of the Great Depression vowed to Milton Friedman that it won’t happen again.  Take Bernanke at his word.  That’s why he was chosen to head the Fed.

But there’s a catch to the money pumping, many, in fact, but most notably the expectations for the direction of consumer prices.  Are inflation expectations “firmly anchored”? as Bernanke likes to state.

And the best way to crush exceptions is to coordinate an attack, initially, on the Swiss franc and commodities complex, then the precious metals, then, everything connected to the inflation trade.  Bravo.  Well done.

Bless CNBC’s Bob Pisani, too, for his repetitive comments regarding traders “gaming the Fed” the week prior to the FOMC meeting.  He was right!  And Bernanke certainly was on board with that observation along with every hedge fund manager from Tokyo to Greenwich, Connecticut.  Even Greenwich’s has-been Barton Biggs ended up looking like a chump for making a call for a market bottom in August.

Well, it’s Revenge of the Nerds.  Isn’t it?  Cool hedge fund managers getting clocked by a bearded policy wonk.

So what is a fiat-money slave to do?: 

Well, has anything materially changed in the outlook for currencies debasement in the coming zillion years?  Read a little from BU’s Laurence Kotlikoff or subscribe to John Williams for an instant primer on the disaster that has been covered up by everyone who’s been benefiting from the cover up.

So, stop cryin’ and start loading up the basket of silver goodies left behind by those unfortunate, scared, stupid, impetuous, lazy, distracted or drugged out to know the tsunami will eventually move from the entire world back to U.S. shores.

And, by the way, if you happen to live in Brazil and were clever enough to hold gold (silver prices will be a commin’, too), gold hit a record high in Reals yesterday.  What?  No coverage on CNBC?  So, the inflation generated by, and led by, the gang of four at the Fed, ECB, BOE and BOJ has reached the ‘invincible’ Brazil.  A crushing 22% collapse in the Real since July 26 spells potential civil unrest from those lagging behind its approximate $10,000 PPP national average.

Watch for a potential Brazilian Real-like crash in the Malaysian Ringgit, Thai Baht, Philippines Peso, Indonesian Rupiah and other currency escape routes out of the U.S. Dollar.  The tide has gone out fully now, and the Bernanke knows it will eventually come back to the shores of the U.S.

MP Nigel Farage said it well; he told King World New’s Eric King, yesterday, “Yeah, we’ve had a setback, a little bit of a settling of the gold price after what was a meteoric rise.  I think the worst in the financial system is yet to come, a possible cataclysm and if that happens the gold price could go (higher) to a number that we simply cannot, at this moment, even imagine.  Gold is in an uptrend and professional traders should be buying the dips.”

Naturally, it’s dittos for buying silver.

Silver trades “astounding $2.48 premium” to COMEX

Shanghai traders suddenly have become rabid buyers of silver, said an anonymous King World New (KWN) trader out of London, taking the price in Shanghai to a mind-blowing 6% premium to the COMEX, yesterday.

“China is trading gold at a $17 premium today vs COMEX futures,” Anonymous told KWN’s Eric King.  “Silver is trading at a premium of $2.48 vs futures price (COMEX).”

What does that ultimately mean to silver bugs?

The game of contracting to buy physical silver in Shanghai after New York’s routine price pounding with naked shorts has trapped the manipulators into systematically booking bigger and bigger losses at JP Morgan.  Ahhh, the ole’ Chinese Water Torture technique.

Either the situation in the silver market is the eventual result of another failed attempt to fight the invisible forces of the hand, or it’s a convenient method for Beijing to acquire this critical metal for its infrastructure plans as well as to provide its people with financial protection above and beyond Beijing’s massive gold accumulation activities.

In any event, this Yellow Brick Road to force majeure in the silver market could be the cumulative result of decades of Karma payback and Sun Tzu tactics rolled up into one neat one-world multi-cultural package.  We wonder if New York Times’ Thomas Friedman had all of this in mind when he wrote his version of Mao Tse-Tung’s The Little Red Book, entitled, The World is Flat.

Back to Anonymous: “If there is that strong of a bid for gold out of the Eastern hemisphere, what that tells me is that all of the heavily leveraged paper manipulation in the West will not have much more downside impact,” said Anonymous.  “All the manipulators are doing at this point is compressing a spring, but at some point this market is eventually going to gap up incredibly hard against them.”

And that “some point” is nearing, said Anonymous, and will usher in “a religious experience” for the cartel and record prices in both gold and silver as these  market goes into a Jim Sinclarian liftoff.

But, as many in the hard-money camp icons have always warned through the years, patience is the key to scoring big in the silver (and gold) trade.  The great stock trader Jesse Livermore (1877-1940) — and incidentally, a once partner of Jim Sinclair’s father, Bert Seligman—once said, “It never was my thinking that made the big money for me. It always was my sitting. Got that?  My sitting tight!”

And even the Department of Homeland Security has graced silver traders with its wisdom for patience in the fight against the evil forces of darkness.

“We ask for cooperation, patience and a commitment to vigilance in the face of a determined enemy.”

—Janet Napolitano

Smart lady.

Here’s how the Fed could Shock the Gold Price Tomorrow

Sentiment between holding paper assets and hard assets will be tested shortly, as the FOMC deliberates on the multitude of troubling data from around the globe.

As of 6:37 a.m. EST, September 20, the Dow:Gold ratio stands at 6.37, just below its overhead resistance of 6.50.

For those preferring silver as a potentially much more exciting vehicle for fleeing paper assets, the Gold:Silver ratio trades at 45.26, or just north of its resistance of 45.

As the FOMC begins hashing out its next policy moves, beginning today, it appears traders are mixed on the prospects of a Fed surprise beyond ‘Operation Twist’ (Fed sales of short-term Treasury debt and simultaneous purchase of longer-term maturities) expected as a result of the scheduled two-day meeting.

So if the next big moves in gold and silver (equities and bonds, too) could well be predicated on the Bernanke Fed on Wednesday, what can we expect?  One interesting take on the Fed’s next move comes from David Rosenberg, chief economist at Gluskin Sheff.  He speculates that the Fed may be out to surprise the markets big time on Wednesday in its effort to juice equities markets as its only direct policy move to ignite an already dangerously fragile U.S. economy.

In a note, Rosenberg postulates:

“The consensus view that the Fed is going to stop at ‘Operation Twist’ may be in for a surprise. It may end up doing much, much more.  Look, we are talking about the same man who, on October 2, 2003, delivered a speech titled Monetary Policy and the Stock Market: Some Empirical Results. I kid you not. This is someone who clearly sees the stock market as a transmission mechanism from Fed policy to the rest of the economy. In other words, if Bernanke wants to juice the stock market, then he must do something to surprise the market.”

Since the market is already abuzz with expectations for ‘Operation Twist’, another money-printing scheme above and beyond will be announced, according to Rosenberg, in the Fed’s desperate effort to put some animal spirits back into, what Max Kieser refers to as, the ‘Casino Gulag Economy.

Rosenberg continued:

“’Operation Twist’ is already baked in, which means he has to do that and a lot more to generate the positive surprise he clearly desires (this is exactly what he did on August 9th with the mid-2013 on- hold commitment). It seems that Bernanke, if he wants the market to rally, is going to have to come out with a surprise next Wednesday.”

But here’s the danger for traders betting on the Bernanke put, he said, and clearly will be on the mind of Bernanke during the two-day central-planning powwow.  What if Bernanke doesn’t come through with the votes for the next step on the road to Weimar’s Hell Hole?  Rosenberg stated, “If he doesn’t, then expect a big sell-off.”

A sell-off in what, you may ask?  Well everything benefiting from the inflation trade, according to Rosenberg, including precious metals.  But if the Fed insists upon keeping the casino doors wide open, the Dow:Gold and the Gold:Silver ratio will most likely drop like a stone once again.

Silver to reach $75 following Wild Volatility, says Silver Guru

Silver investors have become routinely accustomed to silver’s rapid price advances during less-impressive advances in the gold price,and vice versa, on the way down; silver has plunged sharply while gold merely “corrected” during the decade-long 2-steps-forward-and-1-step back bull market.  Silver can be said to act as a leveraged play to the gold price.

But during a period when global market participants suddenly get hit in the face with the chilling reality of how bad the state of the financial and political system of the West really are (and, now, how this mess could affect China), a lot of unwinding of trades dependent upon the prospects for silver’s industrial demand will greatly dampen, or depress, the upward move in the silver price which otherwise would result from buyer of silver as a safe haven monetary metal.

But not to worry about silver’s temporary disconnect with gold, according to life-long silver aficionado, David Morgan, the publisher of The Morgan Letter.

In an interview with The Gold Report, Morgan said it’s hard to predict the amount of hot money in the silver trade at any one time compared with committed money in the metal.

“As people figure out that there really is no solution to the global financial system without a great deal of pain and some defaults along the road, more will seek the safety of precious metals,” said Morgan.  “So, even when things calm down for the moment, it does not mean the precious metals will not get pushed down.”

In the event of a tragic solvency crisis turning into outright signs of a Depression coming, the bloodletting in the silver market may continue until it’s flushed of weak hands jumping from one trade to the next—which is a considerable amount when considering the ratio of dollars held in paper silver against physical silver is approximately 100:1, according to GATA.

“You could see gold and silver react to the downside, perhaps dramatically—$5/ounce (oz.) silver is not entirely out of the realm of possibility,” Morgan speculated in the event of another 2008-like sell off, though the catalyst for today’s crisis centers on the insolvency of governments and the shock of much weaker-than-expected economic growth from debtor nations.

“My best guess is we will see some pullback going into mid-August,” he added, as investor demand comes back in to pick up silver at bargain prices before the traditional September to April buying season and strong demand accelerating out of Asia.

But more importantly, Morgan, who agrees with Swiss money manager Marc Faber suspects that the endgame in the Bretton Woods currency scheme failure is near, and that governments will opt to continue debasing their respective currencies in lieu of outright default.  But where the two men differ from Goldmoney’s James Turk and the legendary Jim Sinclair is, first, a sell off before the historic advance in the silver price past the all-time high of $50.35.

As the crisis deepens in Europe, banks have stopped lending to each other, as no one really knows the extent of hidden liabilities on the books of their brethren banks.

“It seems interbank lending is starting to freeze up in Europe,” said Morgan.  “This was one of the main factors contributing to the financial crisis of 2008. So there is much to consider and it boils down to the fact we are in the final stages of a currency depreciation on a global basis.”

And like 2008, Morgan expects the same volatility in silver in the coming weeks, though maybe not as dramatic as 2008′s swoon.  And this time, the strong hands, who understand the unpleasant symptoms of volatility during the currency crisis in progress, will be rewarded on the other side—as was the case in 2008.

“What happened in 2008 was a silver sell-off that caused a shortage, pushing the physical price of silver at the retail level to around $13/oz., while paper silver traded under $9/oz. on the futures exchanges,” concluded Morgan.  “Excessive short selling then ran the price from about the $20/oz. level to the brink of $50/oz. The next leg up could take out the $50/oz. level after a few tries and then not look back until establishing a new nominal level of $65/oz.–$75/oz.”

Gold Market: Anonymous London Trader eyes $1,680

The anonymous London gold trader is back with King World News (KWN) to offer his latest thoughts perched with a bird’s-eye view of the gold market.

Confirming the report from Goldmoney’s James Turk, who said that the gold shorts have been under tremendous pressure to cover above $1,600, the anonymous London trader told KWN he sees a lot of shorts unwinding positions above the $1,680 level.  If the gold price can maintain a move above $1,680 at the close, the short squeeze will be on in earnest, according to the anonymous trader.

“The action is very positive,” the trader told Eric King.  “If there is a pit (Comex) close above $1,680, gold will race to $1,705 because of all of the buy stops above $1,680.  There are a tremendous number of shorts in the gold market and a significant number of them will capitulate and close out their shorts above that level.”

As early as two months ago, Goldmoney’s Turk issued the same warning to traders who are not positioned to ride the gold (and silver) market higher in the event of a short squeeze, which Turk said is very likely.

As today’s market action shows the Dow falling hard to 11,650, while gold advances to $1,678, the Dow-to-gold ratio has dropped below the important 7-1 level within the first 90 minutes of New York trading.  If the trend continues, it could indicate traders have lost faith in a U.S. recovery and the prospects of a profitable “risk-on” trade.

On that point, Marc Faber told CNBC on Tuesday that equities have kicked off a fresh bear market, while Barton Biggs, on the other hand, said that yesterday was the day to beginning buying equities for the next 7%-9% rally higher.

According to the London trader, the Faber thesis for the future trend in stocks will show up in the gold and silver market—if the gold price can be sustained above $1,680, and above $42 for silver.

The London trader continues, “The same guys who are shorting gold have been shorting silver.  And if we get the covering in gold above $1,680, silver should move $2.50 higher on short covering as well, which at that time should be roughly the $45 level.”

Moreover, the trader said the strong buyers, who typically accumulate at the best prices for the two precious metals during the seasonally soft summer period, have not yet bought, waiting instead for the pullback.  But, those buyers may have to chase prices higher, creating even more trouble for the shorts, which then may begin a virtuous cycle of higher prices, similar to the massive precious metals rally during the April run-up.

Adding to the drama in the gold market is tomorrow release of the U.S. jobs report.  Another horrendous report on top of June’s (released on the first Friday of July) nasty surprise could trigger the next wave of short covering, according to the London trader.

“The physical buyers in gold have not been chasing the market at this point,” the trader said.  “They have been waiting for their usual summer gift, and it hasn’t come.  Usually they are filled by now, so we are going to see those guys come in shortly, possibly after non-farm payrolls.  They (the physical buyers) have moved their levels way up now and they are going to start chasing price at some point.”

So far today, gold briefly pierced $1,680 to trade as high as $1,682.15 on the Comex before it was slapped back to $1,675.

“Remember, $1,680 is the key here,” the trader said.