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Bernanke "No Tapering"; Silver Goes Up and Down Again
In February, I wrote What Drives the Price of Gold and Silver?
If there is a credible rumor that the Fed is planning to further extend its “Quantitative Easing”, how would you expect the monetary metals to react? Typically, the gold price would rise and the silver price would rise even more. The question is why.
Traders read the headlines and they know how the price “should” react to such news, and they begin buying. For a while, the prophecy fulfills itself. But then what happens next? It may take an hour or a month, but sooner or later some of the new buyers begin to sell.
Most people accept the Quantity Theory of Money. In brief, if the money supply rises then prices will rise (though often there is a caveat that not all prices will rise uniformly).
Today, Fed Chairman Bernanke said that the ongoing increases in the quantity of dollars will continue. The silver market reacted as it "should": more money = higher silver prices. Look at this annotated chart.
In about 15 minutes, the silver price rose 2.2%. I call this the "Quantity Theory of Money Gap". In about 15 minutes more, the price fell back to where it had been.
Within 30 minutes, all those who had bought based on this idea were, if not proven wrong, at least given losses by the market.
The price of the dollar as measured in gold or silver is collapsing and the rate of collapse will accelerate. This will be reflected in much higher prices of gold and silver when quoted in dollars. But it is not due to the quantity of money, and certainly not due to talk of the quantity of money.
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Silver with the bad news in China (Industrial), the no tapering and then tapering news, is not going down much, while Gold goes down, means that Silver is close to a bottom here.
Also the weird price action overnight Sunday showing an immediate bounce seem to indicate a rather interesting situation for Silver.
HERE IS THE OUTLOOK
1. Fed tapers off. Equities hate it, there is a pull back.
2. Bonds yield continue to rise.
3. Then economy improves and inflation gest only slightly higher
Gold and Silver are utterly trashed because we are ~back to normal~.
Next bond yield continue to creep and inflation creeps up.
GOld and Silver start to rise again but noone pays attention, economy continues to accelerate with inflation.
Fed talks about raising rates a bit, 7 years treasuries start to tank long bond yield is flat. Gold rise quite a bit.
Next teh Fed has to raise rates, sell your Gold, cover your short 30yeras and your 5 years short, keep them.
Economy slows down as the Fed has to choke the rates, Gold falls, treasuries rally. As economy gets into a shallow recession, buy back your Gold, and short your treasuries 30 years again, rinse repeat for hte next 15 years. At the end of the period, Gold at 5,000, interest rates at 12% , S&P at 2,000.
By that time, a group led by China organize a ~CHINA run IMF~ like bail-out for the US as US loses access to bond market.
I like silver because it is shiny....
It was admitted a few weeks ago that a few banks get together each day and set the price of gold. Why would anyone even begin to think that there is a free market for it?
Gold and silver will not go up in price until the illuminati own all of it.
monetary metal=gold
There is not one central bank on the planet that holds significant silver as reserves.
If you are betting that the thing that you want to be true will come true you will loose....big time...buy GOLD.
lasvegaspersona - I need to point this out to you. You are partially right but Silver for milenia has been money and it is only the CBs' that stopped that for their own greed. How's that working out for everybody but them?
I see China playing a big part, along w/the BRICS and Asia in the future, in the worldwide monetary system. Also, China is buying massive amounts of Silver. What for?? I see a basket of metals and commodities backing currency. Only the metals are Money!
WRONG.
gold is a store of wealth & a medium of exchange.
silver is a medium of exchange & somewhat a store of wealth
[& a commodity]
YOU need BOTH...
what are you going to be trading "gold dust' out of your old west bag...for some bread in a post mad max era???
Maybe you are so wealthy only you can afford ALL GOLD only?
..if so, people will be wondering & wanting to meet up with you later & not to 'hang out with such a cool guy- like yourself".
Are you so foolish as to not see the value of silver?
http://www.youtube.com/watch?v=Ict4jzzwL5I
a single gram of gold is about $55 at APMEX, so no excuse that gold is too expensive.
I like most of the posters here and I really have nothing to gain by saying things that irritate people. So why say things like: "gold will be a wealth asset of the future and silver will be only an industrial metal"? Because it is true. Look at the direction China is going. All gold and little silver. I was there a year ago. There are gold shops, there are no silver shops. The producers of the world and the bigshots make the rules. I am just trying to learn what they are doing and planning so as not to get crushed.
If you are wise you will give this some thought.
Again I am just one of many people here who comment. I have income I have savings I have a tiny little ego...just big enough to get by. There is something wrong with the current monetary system. It is about to pop. We had all better be correctly positioned when it goes. I suggest silver will not be worth much after the pop and its industrial use will decrease and no country considers it money.
Also...talk to friends who have lived through hyperinflation...the currency used is still the country's currency (or a strong neighboring currency) it is not silver.
best of luck to all
I dunno- After the little spike up, gold fell lower than the initial price, silver stopped right where it started. A little strength there.
If the banks hold no silver I would expect they would have less ammo in the war to keep it down. Just an opinion. Gold is money, but silver is money and crucial to manufacturing. It has charm and brass knuckles.
(BTW, I didn't red ya for your opinion)
EDIT: Whoops, there it goes.. haha
What an incredibly fucking profound piece.
Fuck silver-buy lead.
Maybe gold silver and lead...
If the SHTF- we'll find out true price discovery of ALL metals.
let the nonsense continue!
guess what:
This just proves people do not think for themselves, and that can largely be attributed to our K-12 educational system not teaching us how to think for ourselves, by design.
Just when Gold would hit $2500 per oz, expect the cartel to start pricing it in the IMF currency basket which will immediate plunge the $ price as there is no more incentive for growth in the price
" Whiskey Tango Foxtrot."
You haven't figured out yet that there are no more free markets, and therefore no more free market fundamentals?
I can't believe how many people are still plugged into The Matrix who still believe in free market fundamentals, analysis, charts, etc.
I emplore all of you still plugged in to please take the red pill.
All of the stackers should be rejoicing the price continues to be suppressed-even with large premiums.
Being fully aware that there is no spoon does not negate the comedic use of WTF from time to time.
This is very disturbing. Reminds me of the old Soviet Union.
"...not all prices will rise uniformly"
True, that. QE's been inflating prices in the equities market, the bank debt market (as in keeping it from default), and most of all, most importantly, the derivatives market.
Anything outside those three gets crumbs. Now PMs are nice, shiny bait for middle class wages. A store of only so much value as will be allowed.
Funny thing about physical, slides easily under the table to your heirs avoiding oligarchy rape. It also travels very well, so if you must travel buy gold, to store value living where you are buy gold and silver. To KEEP any of either buy lead and use it liberally on those who would loot you.
Gold and silver don't travel very well across borders.
This shit is so disgusting, I have had eneough of these liars!
In the face of global shortages and a future very bleak for mining production, it's hard to see prices remain at any where near these low levels for another 3 months. The key, IMO, will be the next deliveries (or cash settlements) from COMEX this month and next.
Been arbitraging this BS for the past three weeks... Does that make me a prostitute or a pimp?
This is a rigged casino. Failing to see even the arbitrage opportunities now. "so that of the Street, by the Street and for the Street shall not perish from the earth." the banks and large insurance concerns have such massive internal trading operations it's really hard to see how unless you're inside these businesses how you're going to get an "in." I've done better than pretty much all the hedge funds as ridiculous as that is...where is the liquidity coming from here?
Survivor.
Let them play. Picked up .925 Sterling today at the black market for fiat $1.00 oz.
Coins arriving daily also.
same here. we do have to thank Ben for the incredible bargain, tho.
There will be no tapering, but plenty of tampering.
and plenty of lying - 'when it gets serious you have to lie' - Junker
Full disclosure:
Be aware, it's not that the government isn't unaware of the American people's confusion resulting from the inadvertant misinformation. It's just that the lack of unintended disclosure relating to internal issues has a natural tendency to foster the type of response we're seeing now.
M'kay? :-)
Tampering has been going on since silver almost hit $50 at the end of April 2011. All US markets are criminal, manipulated markets now.