Bottom Formation & Price Painted Gold

The brains trust of gold focused investors, Sprott Assett Management, has produced a lot of clear thinking on the behavior of gold and silver during this financial shamozzel.

Below I have some text from two of their brightest lights—Eric himself and Rick Rule.

Eric deals with the facts of supply tracking and doing the math on published numbers and sees the potential for a huge shortage with the presence of voracious buying from Asia.  Rick points to gold market technical price behavior putting it in historical context.  both men point to the massive potential for equities that survive this bear cycle.

Will we have a massive capitulation this summer?  Maybe.  I would like that to happen.  But will it?  The effort put into creating just that internal questioning is a mark of the success that the operators of this market have had so far.  But we all know they are doing this manipulation, seeking a way out of the hole the financial system has dug itself (initially with greed and then using the government shovel). 

Still watching. Still waiting.  Still ready.

G

Excerpts:

Gold’s Lower Price Is a Ruse: Eric Sprott

By Henry Bonner (hbonner@sprottglobal.com)
Sprott Global Resource Investments Ltd.

"...It was my feeling that during the first quarter of the year, up until April 15^th, there were many signs that there was going to be a shortage of gold. We wrote an article about a year ago, titled ‘Do Western Central Banks have any gold left?’ where we quantified that there’s been probably an extra 2,300 tonnes of demand every year since 2000, and yet gold production has not gone up in that timeframe.”

But instead of a demand squeeze, driving prices higher, gold has declined from nearly $1,700 at the start of the year to lows of around $1,200 now. How could the price decline if there truly was a shortage?

Mr. Sprott continues: “I put the slam down to the people who are short gold – it’s been very well-documented that certain parties had very large short positions in gold. Shorters who were expected to deliver gold that was not deliverable could have created this downdraft in order to cause gold to come into the market.”

“But it totally backfired,” says Mr. Sprott. The sudden drop in price led to extreme levels of demand for physical metal even as “paper gold” sold off heavily, says Mr. Sprott, citing record demand for physical metal, particularly out of India and China. ..."

Read full article here.

Rick Rule: “The Precious Metals Could Sell Off Again”

By Tekoa Da Silva

"...in a couple of prior interviews that you and I did, I said that bear markets ended in capitulation selling but I hadn’t seen that yet. We are now in capitulation. This is the fourth time in my career that I’ve seen capitulation selling and it gets ugly and spasmodic, but this is the beginning of the end. Certainly I believe the precious metals themselves as bullion are oversold, but they could sell off again. That’s not uncommon, a double bottom.

I think if we do get a [stronger] rebound in the precious metals prices, that it will not in the near term pull over to the equities. I think we’re going to get washout selling this summer---absolute capitulation selling. Then you’re going to have a sideways tail in the equities as both the buyers and sellers are exhausted.

The market will certainly bifurcate. The better names will do better but they will only do marginally better. It won’t feel good. But we are setting up the type of recovery that we saw in 2002, 1994, and 1986. This is the way markets work. It’s bear markets like this that cause bull markets and the inverse reaction is a function of the strength of the action.

The depth and severity of this down market cycle, the fact that maybe 700 juniors will go away over the next 12 months, sets the stage for a truly spectacular recovery. Bear markets cause bull markets, and bull markets cause bear markets. >.."

 Read full article here.

The time to begin reporting again has begun: GOLD BULL MARKET RESTART SOON

It seems the wait may soon be over. Hints of rationality are returning even in the face of certain manipulation. The size of the true debt the people of the wealth-side of our world is the largest bond bubble ever. Yet the economy is moving, yay—the truth is there exists no historical precedent no data to review for patterns which might reveal what to do.

The amount of attention each little move, fluctuation and uncertainty receives has never happen before in the history of the human race.  This market moves in ways that are affected by is own movement or, rather, the attention each move in the market affects how the market moves.  Which all means don't mistake the trees for the forest.

G

Here's the article—PS: don't forget to down load the report: ‘In Gold We Trust’

Trusting in Gold - $1,480 in 12 Months, $2,230 Longer Term by Ronni Stoeferle

Ronni Stoeferle, with specialist advisors, Incrementum AG, produces one of the most comprehensive analyses of the global gold market available under the on going title–‘In Gold We Trust’(54pages) (download here).

Stoeferle a believer in gold as a monetary metal rather than as a commodity and notes that gold analysis should be the preserve of those who study monetary matters rather than those who specialize in commodities which is the normal pattern amongst the major financial institutions.

Ronni, is positive on the role of gold and produces some extremely comprehensive analyses of various aspects of the gold market with regard to global economics. Stoeferle notes as follows: o “Even though the consensus is convinced that the gold bull market has ended, we remain firmly of the opinion that the fundamental argument in favor of gold remains intact.

There exists no back-test for the current financial era.

Never before have such enormous monetary policy experiments taken place on a global basis. If there ever was a need for monetary insurance, it is today.’
 


•  “In the course of the recent gold crash, the market has once again demonstrated its tendency to maximize pain. Massive technical damage has been inflicted. We are convinced that repairing the technical picture will take some time. Accordingly $1,480 is our 12- month target.”
   
• Incrementum warns: “As central banks are engaged in the greatest monetary experiment in the history of finance, the current bubble dwarfs all previous financial bubbles by a large amount.
   
• We believe that there are unmistakable signs of an enormous debt bubble – respectively bond bubble.  However, government bonds are still considered to be ‘risk-free’ assets in private and institutional portfolios as well as foreign reserves. This dominant paradigm is absurd, especially in times of structural over indebtedness and negative real interest rates.” This too suggests that some form of insurance against stock and bond market collapse is perhaps essential and gold would very much seem to have the potential to fill this role despite its recent weakness.
  
• Indeed,the fall in the price will, to many believers in gold, make it a better investment than ever for those who may have missed out on the bulk of its 12 year bull run.  
  
  Stoeferle’s 12-month price target...  (Read full article here)