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« Gold and silver prices look to have bottomed | Main | Before You Shoot Your Next Arrow »
Sunday
Jan302011

Gold and Silver are on the starting blocks

Eric Sprott 25 Jan 2011.JPG

A strange start to the year and a strange end to a volatile week, so we take a whiz across the air waves in order to get a 'feel' of whats going on, so this will be a mixed bag of data. The first eye catcher is this:

Eric Sprott - Expect $50 Silver, Gold Possibly $2,150 by Spring.

What follows is brief summary of an interview that he gave to King World News.

Eric Sprott recently launched a silver fund and so entered the market to acquire 15 million ounces of physical silver, to his surprise it wasn't readily available and in fact it took 10 weeks to get his order filled. Another order placed for 1 million ounces has been given a delivery period of around 2 months. The silver that he received looks to have come directly from the refiners as it is so new. This again tells us that that the supply side is indeed very tight. On the subject of China Eric drew the listeners attention to this interesting dynamic; In 2005 China exported 100 million ounces of silver, fast forward to 2010 and China imported 100 million ounces of silver, thats a 200 million ounce turnaround in an 800 million ounce market.

Other influential factors included:

One of China's major banks has offered their customers a facility whereby they can save a portion of their savings in gold, they then had to open one million accounts which required 10 tones of gold to satisfy the demand. He then ponders the outcome if this idea were to spread throughout China and further afield, say to India. What is the effect if we get an extension to QE2 or even a QE3? The current meeting at Davos were the possibility of a 100 trillion dollar fund is being considered. The UK, where economic confidence remains rather weak. (The Bank of England supremo, Mervyn King talks of the UK being in a depression.) Over in the United States the social security department has announced a 45 billion dollar overspend for 2011.

There appears to no hiding place as the currencies via for pole position in a race to the bottom. Rallies are no longer based on an individual currencies merits, but rather just how slowly the other fiat currencies are falling apart.

In India,China, Asia and many other countries throughout the world the concept of receiving money for doing nothing is laughable. For the western world to remain remotely competitive, welfare, social security, bailouts, handouts, freebie benefits are existing on borrowed time, you have been warned. Securing your own financial independence has now reached a critical stage, think, plan and implement new ways to supplement your income.





Now, just what was the reason for gold prices taking a dip recently, we take a quick look at a possible scenario as proffered by Zerohedge from an original piece by the WSJ, as below:

Over the past several weeks there had been rumors that the reason for the precipitous drop in gold was primarily driven by a hedge fund liquidating its futures positions. This has now been confirmed: "Yeah, that was just me liquidating my spread position," Mr. Daniel Shak, [of SHK Asset Management] 51 years old, said in an interview. "I had a significant, fully margined position. The dollar amount of the gold liquidation was very small, it was just a lot of contracts." Of course in the extremely jittery gold market, the kind of persistent marginal gross selling of contracts was all that was needed to spook weak hands into a consistent dump of the precious metal, which as we pointed out was beyond overdone. Judging by this morning's jump in the PM complex, SHK's liquidation is now not only over but about to promptly reverse as daytrading momos realize they were duped by one single guy. Look for gold to resume its upward advance as investors realize that the gold dump was nothing more than an ongoing futures position liquidation.

A huge trade by a tiny hedge fund has sent shudders through the gold market.

Thanks to the nature of futures trading, Daniel Shak's $10 million hedge fund held gold contracts valued at more than $850 million, more than 10% of the main U.S. futures market, and the equivalent of South Africa's annual gold production.

It just goes to show how sensitive this market can be when the above action has such an impact. No doubt there are other contributing factors that also lent weight to the movement in gold prices but this will suffice for now.


Finally, you might want to catch the UKIP leader Nigel Farage - interviewed about the EURO on Russia Today, where he expresses his views regarding the lack of compatibility of some of the member states with the one size fits all currency. Italy could be the next candidate for a bailout, despite the soothing words from the Eurocrats.

Nigel Farage 31 Jan 2011.JPG

Please click here to watch the clip.

For disclosure purposes our political support lies with UKIP, even though they have yet to get one candidate elected to the British Parliament.

And finally, yes we are almost done, for New Zealand readers, the movie Inside Job is being released across the country at selected cinemas, so take your partner for a surprise evening out, otherwise you will have no-one to explain it to you later.

Have a good un.




............................................................................

Over in the options trading pit we have just closed 3 more winning trades, so we now have 62 winners out of 64 trades, or a 96.87% success rate.


If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart Jan 2011.JPG


The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

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Reader Comments (3)

I thought it was all in the waves......

A different perspective:-

http://www.wallstreetwindow.com/node/1126

My questions are:-

Is the correction over?
Dip below 1300?
Sideways for how many months/weeks?
What is the highest point this year?
When will it happen?

What does your crystal ball say?
Let's sit back and watch everything unfold.

January 31, 2011 | Unregistered Commenterep

ep,

These are all difficult questions but as we see it at the moment, sideways for a couple of weeks, hold above $1300/oz, high point for the year, above $1800/oz.

Very volatile along the way and frustrating at times as more players get involved pushing gold prices either way. Also the speed of transactions due to the web based trading platforms that are readily available, will add to the volatility.

The bull of 1980 is often mentioned, especially by those of us who were there and participated. But that bull really only involved the US and the UK and we didnt have the internet to enable speed of purchase and sales of stocks.

This bull is global and it has go faster strips, we expect our wildest dreams to be exceeded.

Just our opinion, of course.

January 31, 2011 | Unregistered CommenterGold Prices

Makes you wonder if the "one World"ers took into consideration a "World wide" stampede into Gold via the World wide web as they were sowing their diabolical criminal intentions of reaping power, plundering pockets and executing empires through "Legal tender for all debts, public and...." I for one am sure they dismissed the notion the second it was thought.....Now the only question that remains "Will the sheeple turn out to be as blind & naive as they think" NOT THIS SHEPARD, and I am my Brothers keeper

January 31, 2011 | Unregistered CommenterVincent

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