2008 Sep 1

This is the greatest Silver and Gold buying opportunity of all time, or is it the end of a bull market?

The bull market is far from over. To say the precious metals bull market is over is as foolish as saying there was never a bull market in the first place. It's a documented fact, throughout history, all bull markets last 14-19 years. This bull market has been going since 2001. So we still have at least, another SEVEN years to go. Commentators, who believe that the commodity bubble in silver and gold has popped, don't understand what drives them in the first place.

Remember, if the fundamental reasons that drive a market don't change... The market direction has No reason to change.

The fundamentals have not changed! High energy prices, government over spending, the under-water banking system, the credit-mess, inflation and especially the mass production of the FIAT based U.S. Dollar.

The key fundamental reason that drives Gold and Silver is the mass production of the U.S. Dollar.

Silver, especially Gold are not commodities; they are money and nothing else.

Intelligent investors and main street people, whom have piled into gold and silver, have done so for protection. They are not buying metals because they think that the demand for electrical conductors or jewelry is going to go through the roof. They are buying it for protection against the devaluation or outright devastation of the U.S. Dollar.

Ask yourself; is the devastation of the U.S. Dollar over?
Not even close! Wall Street has always used the old smoke and mirror trick of currency index markets, where they trade one currency against the other.

Think of it like a wrestling match, they pin two equally bad FIAT based currencies against each other to see who's worse off. The recent rise in the dollar index does not mean inflation has slowed or stopped, nor does it mean the Federal Reserve stopped printing money. Bottom line, inflation is caused by a devaluating dollar. The devaluating dollar is caused by the mass production of paper currency.

The un-Federal Reserve can never stop printing money. More and more worthless paper money has to be pumped into the system in order to keep the "ponzi scheme" going. Like all schemes, they always come to a devastating end.

The real question is, how close are we to that end? You can do the math, since the 1913 inception of the Federal Reserve; the U.S. Dollar has lost over 97% of its purchasing power. Every time the Federal Reserve bails out another bank and "adds liquidity" to the tune of Trillions of dollars; it creates money out of thin air, creating more inflation. In turn, the purchasing power of your money lessens, despite what the U.S. Dollar Index is saying.

Currency index markets are manipulated. Don't believe it?
Look at the Japanese Yen; everyone knows it's artificially suppressed by its internal government in order to make their goods more affordable for the rest of the world to buy. Japan is a net exporter... They need the income!

The recent drop in gold and silver, resulting in the rally of the U.S. Dollar, is nothing but a short term manipulation caused by the unwinding of hedge funds and central banks that are notably walking away from the U.S. dollar.

The U.S. Dollar is now seen across the world, as a liability, not an asset.

All markets swing like pendulums. Many times, they swing too far one way and then too far the other. Gold and Silver prices became overbought, they went up too high, too quick. The same market funds that were short dollars, betting the dollar down, were long silver and gold. Once major hedge funds started unwinding their short dollar positions, they also took profits in their net long metals positions.

This created a snow ball effect. Meaning, the drop in gold and silver were "technically-based". Futures traders who leverage the market price of gold and silver, saw the volume and open interest swing from net long (higher forecast) to a net short (lower forecast). Plus, the charts and indicators, indicated sell signals which added to the sell-off.

What does it all mean?

The market pendulum has gone too low, too quick: gold and silver are now extremely oversold.

Look at the numbers: Silver, which is always more volatile, is down 37.4%. Gold, on August 15th, was down to $787.50, that's a 21% correction, If you're in it, I know this can seem harsh and hard to stomach, but these numbers are not eccentric, they are quite normal. The dollar amounts may seem out of the ordinary however, the percentage moves are quite common.

In the world of technical trading and charting, all traders use one key technical indicator called the "Fibonacci Retracement" which states that in any bull market there will always be a 38% retracement and up to a 50% retracement, before the market begins its next "leg-up". We are here!

Take a look at silver prices, from the recent high, down to November 2001 at $4.025, a 50 percent correction would mean silver prices would be priced at $12.30, which was practically seen on August 15th.

On the other hand, if gold and silver prices are correcting the 2006 to 2008 price gains, then gold hit its 50 percent correction level on Friday August 15th at $782.60, and to give you an idea of how oversold silver really is, silver now finished its 75% correction.

If that sounds absurd or just plain crazy? Think about this....Five years into a bull market in 1987 the Dow plunged more than 30 percent in just four days. Some called it a crash and the end of a bull market.... those commentators were wrong!

Remember, all bull markets last 14 to 19 years, that's why the stock market rose more than 10 times in the following 12 years. Meaning, the stock market is now in its 17-18 year run. Again, bull markets runs only last 14-19 years!

Bottom line: Gold and Silver remain in a powerful bull market with another seven or more years to run to the upside.

The bull market gods are handing you a gift: Buy!

We have probably seen the bottom. You can expect gold and silver markets to trade in a range, in the following days, up a couple of days and down a couple of days..... That's a good sign. That means the market is holding its support levels (floor).

The last thing to consider is that the U.S. Dollar is suppose to go up in August, gold and silver are suppose to go down in August as well. We have seen this pattern every year for the past 34 years. You can also see for yourself, that same seasonal chart indicates, gold is about to make its largest move to the upside for the year.

In 34 years it's never been wrong!

Take a look:

In closing, the fundamental reasons that have driven gold and silver prices to exponential highs for the past seven years have not changed, therefore the market trend/direction will not change.

Gold and Silver will continue going higher and the U.S. Dollar will continue to devalue.

The FDIC, expects a run on the banks, the question is not "are more banks going to fail" the real questions are how many and how bad is it going to get.

The "wild card" is our government's hidden or not so hidden agenda against Iran. If and when we take any action, the stock market will plunge and the U.S. Dollar will Crash.

For or against wars, no one can argue, we can't afford them!

In my professional and personal opinion things are going to get worse before they get any better.

If you agree, start protecting yourself.

Accumulate Gold and Silver, before prices go up again.

If you have any questions, feel free to contact our office.
Alex Panameno
Trading Director
Goldworth Financial
Restore the Republic Metals Adviser