Looking forward in gold and silver

We are not in the business of making predictions, we preach balance because the reality is no one can predict when the next crash will happen.  What we can predict with absolute certainty is that it WILL happen.  We recently saw this quote which puts it nicely:

“Sooner or later there will be another full-blown crisis, at which point gold ownership will definitely be of great advantage. It is often said that the only certainties in life are death and taxes, but that is not quite true. There is another apodictic certainty: all booms driven by credit expansion will eventually blow up.”

There appears to be another near certainty (on the weight of expert opinion) and that is the Aussie dollar is headed south next year with some majors even calling 50’s but most in the 60’s.  So whilst opinion is split on whether the gold and silver US spot price has bottomed or not, many believe it has in AUD terms as gold and silver prices rise in AUD as the AUD falls.  That lower AUD will also likely be in part off the back of more rate cuts next year meaning earnings in the bank will be even less.  Many are cashing up at present in anticipation of the looming crash.  Vern Gowdie of the Daily Reckoning has this to say last week:

“The thing is to stay nimble — plenty of cash reserves — and be alert to the changing conditions.

My gut feeling is we’re on the verge of a deflationary depression from which it will be hard to extract ourselves. A lot of people are going to lose a lot of money.

Err on the side of caution — losing a percent or two in return is nothing compared to losing the majority of your capital.”

Some investors are put off by the fact gold and silver don’t yield.  Let’s face it, after tax the ‘yield’ / interest on cash in the bank is miniscule and will be even worse next year.  Vern’s point is simple.  You can risk losing 40-50% of your capital (in a crash) in the pursuit of a, say, 5% yield; or you can forego the yield and protect your hard earned from what’s coming.  

At the risk of repeating ourselves we remind you of September/October this year.  On just a relatively small correction in global financial markets the rush to the comparatively small gold and silver physical investment markets saw bullion dealers and refiners cleaned out and waiting lists ensue.  The price did not respond proportionately as it coincided with the big short side setup on COMEX futures.  We saw a disconnect between the spot price and what you had to pay for physical due to that physical demand, but the spot price remained subdued.

The clear lesson is those waiting for ‘the bottom’ may be sorely disappointed as that bottom may well be the day before we see a much deeper repeat of September/October of this year, and you simply won’t get the metal (“better a year too early than a day too late”).  Additionally, any sizeable movement in the spot price can then trigger what could quite simply be an epic short covering run on COMEX and it will be too late, the price could take off given the size of that current record short position by the speculative managed money on COMEX.  As Hebba investments wrote this weekend:

“We think this is only exacerbated by the recent Fed meeting which changed the dynamics of the financial markets. Regardless of whether or not this was a policy mistake (we think it was), the fact that there is a significant change to the financial landscape means that by default we should see more volatility in all assets. That is relevant to gold because with gold positioning at such an extreme, there are a lot of nervous traders with very large short positions that may exit positions quickly - volatility is not a friend of longs or shorts at such extremes.

This is a time for patience for gold investors and we continue to believe that building or holding positions here in physical gold …. is the prudent move.”

Finally if you haven’t watched it already here is Mike Maloney’s latest video for your holiday viewing and on what he sees ahead of us.

From all of us here at Ainslie Bullion, we thank you for your business, friendship and support this year and wish you and yours a wonderful festive season and look forward to seeing you again in 2016.

Remember we close at 4pm today, reopen the webshop on 4 January 2016 and the store on 11 January 2016.  Web order deliveries from today until 8 January will be sent 12 January.