Gold's Wild Ride: Trend or Dead Cat Bounce?

 We're doing a lot of head-scratching - and fielding TONS of phone calls - in our precious metals shop over this recent surge in gold prices.  Since the close of business on January 2 (the first full day of trading this year), gold has surged $100 an ounce in a bit over two weeks (from $1172 on 1/2/15 to $1273 on 1/19/15).

On a percentage gain, silver has actually outperformed gold in this same time frame (8.6% for gold and 12.4% for silver).

Will it last?  Is this just a "dead cat bounce" and the market will crash again?  Are better days ahead for gold and silver?  Should I buy?  Should I sell?

I wish I knew.

The paper precious metals markets - shorts, longs, etc. - are wildly manipulated.  Last I saw, for every 1 ounce of physical silver, there were 92 paper contracts. 

In other words, if less than 1% of the paper contracts were held and demanded physical delivery, the silver commodity market would go up in a mushroom cloud.  The physical silver just isn't there to fill the contracts!

Here's what I do know - 

• Japan - via Abenomics (the Japanese version of Quantitative Easing or money printing) - has obscenely devalued the yen and wrecked the Japanese economy.
• The European Union has confirmed that they will follow the lead of the Japan and the US, and devalue the euro.  They're going to "print up" the equivalent of 600 billion (over half a trillion) dollars to stimulate their economies.
• The world seems to think this will work just like it has worked for the last 20+ years in Japan, and more recently here in the US:  It won't do squat, other than devaluing the euro.
• On January 15th, Switzerland shocked the financial world and slapped the European Central Bank in the face by de-coupling the Swiss franc from the euro.  Over the next two days, the franc shot up in value over 30%, and gold shot up around $50. 
• Two Greek, "Too Big To Fail" banks are experiencing bank runs, and have come begging to the EU for "cashflow assistance" loans.   Analysts believe all of their other banks will shortly follow suit.
• Germany - very quietly - "re-repatriated" another 120TONS of gold in 2014 - mostly from US and French vaults.
• China, in 2014, bought 1200-1300 TONS of gold.
• Russia and India have been buying gold like crazy as well.  In fact, Russia is now ahead of China with regards to the largest gold holdings - they're now number 5 in the world, behind the US, Germany, France and Italy.

So what does this all mean? 

The governments of the world are on a tear to devalue their currencies, while at the same time, they are buying up gold like there's no tomorrow.

Their actions are screaming, "FIAT CURRENCY IS WORTHLESS!" and are buying the tangible assets.

Here in the US - at least for the time being - we've stopped our dollar-devaluing Quantitative Easing program, so the dollar should get stronger against the currencies of the world.  "Should" being the operative word.

Technically, that would force down the price of precious metals here in the US (since the dollar and precious metals generally go in opposite directions).

At least at this minute - despite all of these currency wars - the world seems to be regaining some sanity, with the price of precious metals going in the right direction, and getting closer to reflecting true market conditions (although it still has a LONG way to go, IMO).

So, I'll tell you what I've been telling my customers and callers:  I buy precious metals every month.  Some months, more than others.

I'm looking to buy some real estate in the medium-term future, and will definitely be selling some to finance the purchase.  As that time nears, I'll stick my finger in the wind, see which way it's blowing, and make my decision based upon the trends at the time.

If I personally needed cash within the next month, I'd probably be selling right now.  This recent upward trend may continue, but it may not.  I'd be banking the $100 per ounce jump we just got.  When you get greedy waiting for more "upside", you tend to get burned.

I am in PMs for the long haul. Market forces have always corrected manipulated markets in the past.  It will happen again.

I just don't know when.  No one does for sure.

Clear as mud, huh?



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