Precious Metals: Buy Now, or Roll the Dice?

Precious Metals: Buy Now, or Roll the Dice?

Written by Jeff Nielson (CLICK FOR ORIGINAL)

Buy low. Sell high. Precious metals investors are rational investors. They understand that they are currently converting their wealth into gold and silver at extremely advantageous rates. However, like all rational people, they would prefer to engage in this wealth conversion at the most advantageous rates.

Many of these rational investors may already be judging themselves somewhat harshly in hindsight. With the absolute chokehold that the banking crime syndicate has exerted over these markets since the spring of 2011, prices have continued to drift sideways-to-lower, even after those prices endured the original ruthless take-down.

Such self-recrimination is unwarranted, however. In the spring of 2011, gold and silver were still undervalued as priced in the bankers’ worthless/near-worthless paper currencies. Until that point in time, there had still been some degree of legitimate price movement in our markets, and thus, we made the reasonable assumption that prices would continue to rise.

As the saying goes: that was then, and this is now. Now, many price-battered precious metals holders may be leery of further wealth conversion, even with present prices at multi-year lows. Why “buy low” if you can buy even lower?

This brings us to the central issue of this commentary. As individuals seeking to shelter our wealth in humanity’s oldest and surest “safe havens,” we cannot become fixated on price alone. We must also consider availability.

During the Crash of ’08, the price of gold was taken down by over 30%, and the price of silver was crushed by roughly 60%. It was the ultimate “buying opportunity” in precious metals, with one exception: for smaller investors, there was virtually no silver to be found at those “crash” prices. Only the largest silver bars remained readily available.

However, once again: that was then, and this is now. Now the Next Crash approaches. Now our government’s level of insolvency is multiples worse than it was in 2008. Now our economies have been stripped bare by seven more years of bankers' economic blood-sucking  . Now we have “bail-ins,” and all of our paper wealth is at risk.

Now we must not only focus on price, but also pay (at least) as much attention to availability. Already there are warning signs of tight supply in the silver market. Once upon a time, the U.S. Mint obeyed U.S. law and kept the U.S. market “fully supplied,” as required by the law. Now this same mint announces that it has “run out of silver” at least once a year.

These (illegal) supply interruptions come after years of demand being near or at all-time highs for these silver bullion products. Certainly it is impossible for the U.S. Mint to claim it is “surprised” by this high level of demand. Thus, a shortage of silver is the only possible explanation for these increasingly frequent supply interruptions, and the U.S. isn’t the only country experiencing a shortage.

The Royal Canadian Mint recently announced a shortage of its own. Previously, it had engaged in what it called “carefully managing supply,” but what media commentators have simply called “rationing.” There’s no need to ration anything if supply is plentiful. While the flow of silver still seems abundant in the Eastern world, in the West, the “taps” are gradually slowing to a trickle.

Anecdotally, many readers who are still regularly converting their paper into bullion may have already encountered occasional supply interruptions in some of the products for which they are shopping. And this is the current state of the market with gold and silver. They are now more shunned (as an asset class) in the Western world than they have been at any time in at least the last decade.

What will these markets look like when panic and crisis hit in one form or another, and possibly several forms? What will these markets look like when, once again, the words “gold” and “silver” mean more to the masses than just the medals hung around the necks of athletes? 

Almost certainly, the banking crime syndicate will take advantage of the chaos (which it will create) and slam gold and silver prices significantly lower than they are at present, despite the fact that prices are already at an extreme low. But will we be able to obtain any silver or gold at such prices?

The fantasy, paper prices that the banksters have imposed on these markets are only to our advantage as long as we are still able to exchange their corrupted paper for real metal at such prices. Once supply dries up, those prices will be significant only as a testament to the massive fraud perpetrated in these markets.

Then there is the additional variable that many readers fail to consider in their financial planning: the “premiums” that we pay when exchanging our paper for metal. With the price of silver at one-third of what it cost back in 2011, dealer “premiums” of 25% or higher for such exchanges are commonplace.

Here the artificiality of these markets descends to the level of semantics. A “25% premium” to convert paper currencies into silver? Why? Such premiums should amount to nothing more than the transaction costs of the dealer (which are relatively minimal), along with the “mark-up” that represents the dealer’s profit. Again, this has traditionally been a small, single-digit figure. 

This base premium can be modified by “market conditions” i.e., supply and demand fundamentals. When gold or silver is deemed especially plentiful, the premium shrinks to an even narrower margin for dealers. When supply tightens, that premium rises. However, the soaring “premium” to convert our paper to silver has remained consistently high, even when there have been no visible supply pressures in the market. 

The term “premium” no longer applies to a price that has disconnected from supply and demand fundamentals, including the less visible fundamentals of the “physical” market. Regular readers will be familiar with the market terminology that has been applied to such a price disconnect - decoupling.

There are, in fact, two means by which we could once again see a legitimate price for gold and/or silver. One is already well known: a formal default in the fraudulent, paper “bullion” markets operated by the banking crime syndicate. A formal default would expose the bankers’ fraud and thus delegitimize the paper prices produced from that fraud.

However, readers have previously been told of a second avenue back toward legitimacy: decoupling. As the absurd paper prices generated by the Big Banks become more and more detached from reality, the legitimate element of this market – the “physical” market – simply ceases to function (at such fraudulent prices).

At that point, this dysfunctionality can only manifest itself in one of two ways:

1) Retailers refuse to sell their products at such extremely fraudulent prices.

2) Retailers begin to set their own prices for gold and/or silver.

Beginning at the retail end (or even the wholesale end), the physical market simply begins to ignore the fraudulent paper prices of the bankers. The real market decouples from the paper market (and all its frauds), and a real-world price for metal begins to evolve . This evolution is what we are already seeing in the silver market.

These are the circumstances that exist today. A market (the silver market), which is already in tight supply, is expected to get even tighter. A market (the silver market), which has already started to decouple from the paper-fraud market, can be expected to decouple much further as even more extreme price/supply conditions come to exist within it.

Will we benefit if the “official” price for silver is $10/oz (USD) or less, but there is no silver to be found at such prices? No. Will we benefit if that price goes to $10/oz (USD) or less, but the dealer price “plus premium” is $25/oz or higher? No.

Currently, we don’t see similar price pressure or supply pressure in the gold market. However, for a variety of fundamental factors, it is much easier (for the bankers) to hide such pressures in the gold market than in the silver market. What we see today in the silver market we could see tomorrow in the gold market, with no warning.

Many price-battered precious metals investors may currently be sitting on some quantity of capital that they plan to convert into gold and silver, but they are wondering when “the best time” is to do so. This is an easy question to answer.

Please email with any questions about this article or precious metals HERE

Precious Metals: Buy Now, or Roll the Dice?

Written by Jeff Nielson (CLICK FOR ORIGINAL)

Comments

[lakecity55]

Gold, Bit-Chez!

[Save_America1st]

gold paper is a sell...there, fixed it for you.

Get out of everything paper and convert that fiat into phyzz now while it's still available in U.S. dollars at a reasonable premium over this highly manipulated and undervalued paper spot price.

Don't forget also that in the 2008 crash, silver went down as low as 10/oz and supply dried up quick while premiums went to 100% above spot! 

So you can stack phyzz now with low downside risk in paper spot prices and still be able to get delivery with a very low premium, or if you wait for another big crash you will have a very hard time getting delivery unless you will be willing to pay up to or at least 100% premimums.

And don't forget this date:  April 2016; this is when China will release the physical gold bomb on the world that will crush the Crimex paper Ponzi scheme. 

http://goldstockbull.com/articles/gold-price-discovery-moving-to-china-i...

[KnuckleDragger-X]

Yep, don't confuse the casino for reality. The world is changing right now and you can play with paper promises, or buy some metallic security. Your choice.......

[Save_America1st]

yep...and also regarding the top comment to which I was responding too previously, gold sellers may be dwarfing gold buyers, but again, that's gold paper sellers...naked short scumbags (the big banks) who can flood the market anytime they want with naked shorts with just a few keystrokes.  I'd say I hate them, but as phyzz stackers we should be thanking them for making phyzz cheaper for Americans in U.S. fiat than compared to pretty much every other fiat currency on the planet.  All others are paying at or near record prices for phyzz around the world.

But this will end soon enough...and when it does...well, we all know what's going to happen then.  So stack now...don't try to catch that falling knife just to save a few bucks.

All those holding paper will eventually have to liquidate when someone finally yells "FIRE" in that Crimex theater.  With silver paper leveraged over 100:1 paper ounces to actual phyzz still in the Crimex vaults, and with gold nearly or more than 300:1, I think the stampede for the exits is going to be fucking epic. 

And then there will be no more phyzz for anybody. 

And also just think what's going to happen to supply when the other long term shorts, the hedge funds, finally decide to start buying.  There's just not that much phyzz silver available for them to buy.  If just 2% of them in America decided to reverse course at some point it would immediately cause a massive shortage.  It would only take like 7 billion dollars to buy up what's left in silver (I think that's the number I heard recently, but I may be misremembering)....but whatever the actual number is it ain't that much!  A few billionaires could wipe this stuff out immediately.

So when the hedgies start to scramble to accumulate what's left well that's going to be some crazy times for sure. 

Not to mention again that when China begins it's own yuan based gold fix benchmark in April what do you think is going to happen to the cheap phyzz still left in the West when China revalues gold at say 1500/oz USD?  What if they pegged it at 2000/oz???? 

That giant sucking sound (as Ross Perot coined) is going to be the last phyzz left in the West getting vaccuumed up in the arbitrage between the Crimex price and the China price.

And they have the phyzz to back it up.  The West no longer has it which is why this system is very soon to implode on itself. 

Force Majeure, bitchez.  And then it's game over for those holding paper who didn't heed the warnings and convert to phyzz now while there's still time.

[lakecity55]

They might easily bounce Ag up to around 35USD/oz.

Pt and Pd are a long buy also, as China starts up its consumer economy, which means cars. They might even add catalytic converters due to their crappy air quality...