$2,000 gold, $50 silver this week?
Posted on 22 August 2011 with 12 comments from readers
A few weeks ago the suggestion that gold is in imminent sight of $2,000 an ounce and that silver would pass its April-high of $50 would have seemed pie-in-the-sky.
But not this week, it is a simple extrapolation of a very sharply rising trend line and would require nothing more than a repeat of the price advance of the previous week. Incredible but true!
Besides when we noted that gold appeared to be going parabolic last week, it did so and this is merely an extension of this trend (click here).
Short squeeze
It was interesting to read Bill Murphy from the gold market conspiracy theorists say last week that the gold cartel’s hold on the marketplace has broken down in the past few weeks. That explains the parabolic surge in the gold price last week, and it gives no reason to think it is going to stop anytime soon.
Gold and silver prices always have had and always will have price corrections in this bull market. But that could easily take us to $2,500 and $70 an ounce before there is a major reversal.
That would be scary for those buying now but merely confirm the bullish long-trend further for those who have been following precious metals for the past decade. We are at the start of a price spike and nowhere near the endgame for precious metals.
Reversal or not?
What would cause the gold and silver market to reverse? Well there is still the high probability of a financial market implosion like 2008 coming up and that also took precious metals down into a sharp down-phase that took a year to recover.
But that may only come after gold and silver have lured in some more buyers. A big dip like in 2008 would be a major buying opportunity but not of course if you had put everything into precious metals now and took a big loss.
It may be different this time. Gold halved in 1975-6 only to go almost straight up in an eight-fold gain by 1980. Let us hope it is the same this time for precious metal investors. Should you invest now? That is for you to decide.
But if you want actionable investment ideas then our subscription newsletter is where we offer this (subscribe here).
12 Comments posted by readers:
I will repeat agian what I have been repeating for weeks – We still do not have true price discovery. Everyone is still looking at (rigged) charts in a (rigged) paper / pixel market.
This false price discovery mechanism we currently use will continue until we reach a physical supply ‘event’ and the real quantities of physical Gold and Silver actually available then become known. The ensuing scramble for physical possesion of what little metal is actually available for delivery will leave ‘paper metal’ by the wayside. Until then we are all caught up in the existing system.
Gold and Silver will eventually have thier day (true price discovery).
Firstly we will see the long awaited physical / paper price divergence, then a new or evolved price discovery mechanism emerge. Hopefully this will not take too long now that central banks are taking delivery of Gold, and private investors are stockpiling (staking) Silver.
My estimation is $2500 USD Gold and $60 USD Silver by December, with the BIG increases in both metals (especially so Silver) coming early next year.
Silver looked like it was going up forever when it last hit $50 an ounce. That was clearly a parabolic spike in the same way as it is for gold now. I don’t think it’s the best time to buy and I am slightly influenced by the technical analysis in the weekend’s Financial Times, which suggested gold may drop to a figure of around $1,500 before rallying and continuing its upwards trend. I’m hoping for such a correction anyway so that I can buy in.
Silver looks relatively better value at around $42 down from the last spike of $50 and has been maintaining a bit of a range, so it could well move up. However, if gold does start falling, I have a feeling this will influence silver too, so I’m also not overly keen on putting much in at the moment. Of course, if they announce QE3, I’ll start buying both gold and silver immediately……
Gonna continue to be a wild (and exhilarating) ride!
Thanks for the article and the comments.
Must be a tough call to buy now, which makes me wonder where the buyers are to drive the prices to 2500 and 70 short term? 70 for silver I feel is more likely but I would take profits at 60 and buy some physical and go back to gold, but what do I know? Manipulation of silver and a sharp fall in industrial demand scares me but longer term it seems to me a 15 to 1 ratio for silver to gold is highly likely. I have a small trading position for silver and a strategic one for gold.
At 2500 gold I would sell half and buy more land and put it into production, when the SHTF it would not hurt to have a crop in the field I fancy.
Interesting ideas from James McShirley, who has noticed that bullion prices rise only about 1% per day (max 2% daily) and, if I followed the conversation a 3% rise in one day has not happened with gold and silver for as far back as he has looked – to the beginning of the century.
This 1-2% daily rise, he has also found applies elsewhere too and was recently broken in the Dow when it rose by 3% in one day. He flags this up as a “red flag event” with the Dow because it indicates to him that those, who regularily (indeed, automatically with pre-programmed computers) keep things no higher than 2% per day, failed.
Since they failed with the Dow for, I believe, the first time in a decade, I think he said, then they, who suppress markets, are currently having a more difficult time than previously.
McShirley is, therefore, looking at a rise of 3% or more in one day for bullion so he can raise the red flag on gold or silver or both.
He has also noticed a regular pattern that if there is a 2% rise in a market or commodity one day, then the next day the rise is always no more than 1% followed by a few days of no change, after which they bring that particular market down.
It seems from what he has discovered that there is a sophisticated institutionalised system to suppress daily price rises. He even suggests that this exercise is computer-programmed to operate.
You may like to listen to the interview where he is interviewed by James Turk and, at least, check my recollections. It’s on http://www.goldmoney.com/ and is a recent video.
Here’s a very interesting comment about gold … from none other than Alan Greenspan.
“Greenspan also said that he did not think gold, which reached a record above $1,900 an ounce this week, was in a bubble.
“Gold, unlike all other commodities, is a currency,” he said. “And the major thrust in the demand for gold is not for jewelry. It’s not for anything other than an escape from what is perceived to be a fiat money system, paper money, that seems to be deteriorating.”
At least Greenspan’s comments are consistent with his famous essay in 1966, entitled “Gold and Economic Freedom.” Google it. It’s a must read if you haven’t already read it.
Ed Note: He is always wrong. Look at gold at $1,750 again today!
What is happening to the gold price £37,000 per kilo 22/08/2011 £33,900 25/08/2011 ?
Ed Note: a correction, $1,913 was the high, it will come back and go much higher.
I would dare to take issue with Alan Greenspan where he says that gold is currency.
My developing understanding of these things is that gold is money whereas dollars etc are currency.
I find it essential to make this distinction in comprehending the importance of owning gold at this time of huge debts and deficits. If Greenspan really did say “currency”, when he should have used “money” for gold, then I am shocked at his lack-a-daisical attitude to communication at this dreadful time the world is in.
We should all be stocking up on “money” because the banks are going to collapse and, with them, companies too. There is no point in stocking up on shares and bonds and cash because these are all in “currency”, which is being inflated the whole time by QE etc.
We should hold “money” because the money we hold is not open to anyone else devaluing it or squandering it or breaking their promise to us in regard to returning it to us. They can do all this for currency but not for money.
And money is gold! Historically, money is gold and, since silver is linked to the value of gold, so is silver.
With apologies to Obewon, there is no counterparty risk to gold because gold is money though, sadly, money can always be stolen from its rightful owner.
I’ve just watched a video on GoldMoney where a Swiss fund manager (Egon von Greyerz) is interviewed. He says that there is nothing else that people should invest in these days (just as Mike Maloney also said in his video) and he also briefly discusses counterparty risk http://www.goldmoney.com/
@ M. Robinson:
As the Ed. stated, this is a “much needed” correction in the gold and silver commodities prices.
Gold may oscillate within a trading range (e.g. $1700 – $ 1775) for a while; perhaps for a month or two, before heading back north of $1900.
Your precisely correct on this writing
I fully agree completely
Thank god some bloggers can write. My thanks for this read!