Gold And Silver Prices Rising…A Gold And Silver Bottom May Be In

February 11, 2016

gold and silver pricesIf a stock has "bottomed out", it means it might have reached its low point and could be in the early stages of an upward trend. Investors usually see a bottom as an opportunity to purchase securities when they are potentially underpriced…The bottom is used in technical analysis by defining the lowest level of support when charting a stock, commodity, index or economic cycle.  http://www.investopedia.com/terms/b/bottom.asp

Last July, über market-timer Martin Armstrong predicted a gold bottom could happen between November 30th and December 7th or, during a certain week in early 2016 (known to his subscribers); and because I believe silver is subject to the same market forces as is gold, i.e. manipulation by the paper money cabal vs. free market supply and demand, a silver bottom would be in as well.

Because of Armstrong’s reputation for accurately calling market turns (he predicted the 1987 stock market crash, the 1989 top of the Japanese Nikkei, etc.), I am always interested in Armstrong’s predictions; and, as December approached, on November 24th, an article in MarketWatch, The case for why gold may finally be nearing a bottom supported Armstrong’s prediction of gold nearing a bottom.

In that article, George Milling-Stanley, head of gold investment strategy at State Street Global Advisors wrote:

With gold trading near its lowest level since early 2010 [$1,075.00] and on track to log a third straight year of losses, it’s apparent that sentiment toward the precious metal is bearish, but that doesn’t mean that prices are destined to see a sustained move lower…gold should find solid support about $1,050 an ounce”

Then, between November 30th and December 7th as Armstrong had predicted, Rick Ackerman of Rick’s Picks wrote that a gold bottom could be in. On December 3rd, in his article, Gold Inches from a Major Support, Ackerman noted that gold—then at $1,049.80—was inches from a possible bottom.

I hold Rick Ackerman (Rick’s Picks) analytical skills in extremely high regard. Because of Ackerman, I had profitably exited a previously-losing position in Agnico-Eagle warrants at the top of gold’s extraordinary 35% 2-month surge in 2006.

In my article Timing The Gold Bull, I wrote of my experience with Ackerman and his “hidden pivots” strategy.

Using a technical model Ackerman based on ‘hidden-pivots’, Ackerman predicts tops and bottoms, i.e. turning points, for all markets, i.e. commodities, treasuries, stocks, etc; and, in 2006 we had an opportunity to see what Ackerman’s hidden-pivots could do.

In 2006, we were holding warrants issued by Agnico-Eagle Mines. Warrants on gold mining shares can often be more volatile than profitable. In March 2006, our warrants had lost 2/3 of their value before gold suddenly began moving upwards, increasing exponentially the value of our warrants in a very short period of time.

Warrants, by definition, are time-dependent giving buyers the option for a limited time to purchase underlying shares at a predetermined price; and as gold began rising in 2006, the question became, what would be gold’s top before it turned down?

Gold had started its rise in mid-March at $535. In April, it moved up past $600 and by the end of the month was nearing $700. The hidden-pivot Ackerman predicted for gold’s turning point [i.e. top] was $715.50 and I remember watching gold’s daily move towards Ackerman’s hidden-pivot.

In early May, gold crossed $700. Then on May 11th, gold exceeded Ackerman’s hidden-pivot during inter-day trading before dropping to end exactly at $715.50, Ackerman’s hidden pivot…

Note: The next day, on May 12th we sold the now highly-profitable warrants and enrolled in Rick Ackerman’s Hidden Pivot Seminar in New York to find out how he had made his astonishingly accurate prediction.

Indications pointing to a gold bottom were also noted on December 3rd,  in the Gold Basis Service, a subscription newsletter by Sandeep Jaitly at Fekete Research; and, as with Martin Armstrong and Rick Ackerman, I am always interested in what Jaitly has to say.

I met Sandeep Jaitly at Professor Fekete’s Gold Standard University in Hungary in 2009. Prior to the event, Sandeep had forwarded me some of his papers and I found them insightful and brilliantly written. In the following year, Jaitly made a significant contribution to Professor Fekete’s study of the gold and silver basis with his addition of the “co-basis”. His explanation follows:

…the gold basis is the difference between the futures price and spot price of gold. However, there is a refinement to this observation after Carl Menger. Menger was the first to realise that economic analysis should have its foundation in terms of ‘spread’ as opposed to ‘price’. The price of a good itself does not exist as a monolithic entity but is composed of a spread itself: the bid-offer spread.

The idea of a spread has been transferred to the concept of carry, in particular with regards to gold. There is no such a thing as the carry for gold: the carry itself is composed of a spread the lower bound of which is referred to as the ‘co-basis’ and the upper bound the ‘basis’. Simplistically, the co-basis and basis are analogies in the space of carry to the bid and offer in the space of prices.

In the December 3rd update of the Gold Basis Service, Jailty confirms both the high probability of a gold bottom and the continuing backwardation of gold and silver. An excerpt is reprinted here with the permission of Fekete Research:

 LONDON, 3rd DECEMBER 2015, 11:39 HRS GMT. Spot gold is currently $1,050.91/96 and the gold/silver ratio is currently (bid/offer) 75.33/43. The conclusion from the last missive sent on 28th October read:

The shorter-term movements in the bases are indicating that there’s likely to be real supply coming to the market that may depress gold/silver prices in the shorter term. Today saw an intra-day reversal of gold with spot having reached a high of $1,183.10. There’s a risk that gold may test the intermediate lows in September. Should there be a reversal in the current trend in the bases, notification will be sent.

The fiat v. gold/silver exchange rose as was mentioned might occur. However, with that the basis/co-basis has moved sharply lower/higher.

December has given way to February gold in terms of largest open interest. April gold is already in backwardation and still only represents less than 10% of total open interest! April gold being in backwardation at this early stage has no precedent. To all intents, gold and silver have reached permanent backwardation – in that the active contract (as well as the next and one after) is in a consistent state of positive co-basis. The next stage of fiat’s demise will involve a rising and positive co-basis. This ties in with a low and falling fiat interest rate and the theory relating the two is being developed currently by the New Austrian School team. One will have to be up to scratch with all aspects of Mengerian economics from marginal utility to marketability and bills of exchange to keep pace; you have been warned!..

CONCLUSION:  …The extent (not level) of backwardation and relative open interest reached has no precedent. The dips that have occurred in the metals have presented the opportunity to accumulate. Whether around here is the ultimate low [i.e. bottom] will have to be seen but there is a high probability that it’s in place.

GOLD - IS THE BOTTOM IN?

Martin Armstrong told his subscribers gold would make a bottom between November 30 and December 7th or during a certain week in early 2016 (a date known to his subscribers). Today, February 10, 2016, gold closed at $1208, almost $160 above its low of $1050 in the first week of December.

Does this mean gold’s bottom is now in and its upward trajectory assured? Maybe so, maybe not. In support of Armstrong’s prediction of a gold bottom in early 2016, on February 4th I received a FLASH UPDATE from Sandeep Jaitly’s Gold Basis Service that warned:

Since the middle of January, the co-bases for both April gold and March silver have declined noticeably from the peaks achieved. 15th January saw the peak in April gold’s backwardation with a co-basis reading of +0.06%. As of today [February 4th], this stands at -00.23%. Furthermore similar movements are being mimicked with March silver. This is the first time that both gold and silver have been out of backwardation for over 18 months. Accordingly, in the short term, this is a bearish sign.

Gold and silver could possibly fall again and make a new bottom as Martin Armstrong predicted. Nonetheless, the bottom for both gold and silver is either in or soon will be. The battle against the bankers’ fiat paper money charade continues with the end now in sight and victory certain.

My interview with Ralph T. Foster, author of “Fiat Paper Money” can be seen at https://youtu.be/3InWieQ2NcQ; and, the 3rd episode of Moving Through the Maelstrom: 2016 – The Crisis Accelerates, at https://youtu.be/JpCwBrYjiL0, I explain how I came to predict today’s crisis, our role in that crisis and what we can do.

The crisis is now accelerating. It has been a long time coming. Its effects will be unprecedented.

Buy gold, buy silver, have faith.

www.survivethecrisis.com

www.drschoon.com

Darryl Robert Schoon writes and lectures on the causes and significance of the economic collapse. His book, Time of the Vulture: How to Survive the Crisis and Prosper in the Process predicted the collapse and the following severe downturn. He graduated from UC Davis (1966) in political science with a focus on East Asia. His immersion in the 1960’s subculture in the Haight-Ashbury radically altered his outlook contributing to the unique point-of-view through which he views the collapse of the present economic system. He has lectured in Europe, Australia and the US and has written five books. Visit his website at www.drschoon.com. You can reach Darryl at: info@drschoon.com.

The volume of all the gold ever mined can occupy a cube 63 feet on each side.