The perennial question that everyone wants to know is where gold and silver are headed in the immediate future. The reality is that, for most people asking this question, the answer doesn’t really matter. My potential customers thinking of buying or selling precious metals are normally making long term plans, where a small move in the market today won’t make a significant difference in the distant future.
However, sometimes gold and silver do quickly move up or down by a significant percentage. Those who are thinking of trading would like to avoid buying just before prices tanked or selling before the big rise.
Very short term projections of price movements are treacherous because they are susceptible to a lot of unexpected influences. Producing a ten year average price projection is far more likely to be accurate than, for instance, forecasting what the price will be exactly one year from now.
In the past two weeks, there has been much more than normal activity by the US government’s trading partners at adding to their short positions in the gold and silver markets. Obviously someone, probably in the US government, has given the orders to restrain the recent price rises for the two metals. It is evident that, for now, the limit for gold has been set at $1,160.00 and for silver at $18.50. Should the metals get close to these levels and stay there for at least three days, such a trend increases the likelihood that prices will break out on the upside.
Since the prices of gold and silver have been pushing these targets at the close on Wednesday and Thursday this week, it was important to the US government that the prices be suppressed on Friday. That is exactly what happened.
Of course, those who don’t accept the theory of the US government being behind the price suppression will point to yesterday’s announcement that the Securities and Exchange Commission filed fraud charges against Goldman Sachs as the reason for the decline. This development resulted in a quick drop in US stock markets. With some investors receiving margin calls that they have to cover, other prices may suffer when investors have to liquidate other assets like gold and silver to get cash flow. Also, John Paulson’s financial activities are linked to the charges against Goldman Sachs, which may create fear that Paulson’s recently created gold fund may have to sell some gold.
While this event is almost certainly having a significant impact on the decline in gold and silver prices, you have to understand the close relationship between Goldman Sachs and the US government. Many who have held the position of Treasury Secretary formerly worked for Goldman Sachs. I have two suspicions here. First, with so many former Goldman Sachs officials currently holding high offices in Washington, I think that the company was not only aware of the forthcoming charges, but actually helped plan when the news hit the market. Second, it is conceivable that this news development may have been timed to come out on a day when “something” was needed that would have the effect of knocking down gold and silver prices.
To me it is entirely possible that the charges against Goldman Sachs were deliberately released yesterday as part of the effort to attack gold and silver. I have no proof of this but, when you consider the recent track record, to the US government this would be a sensible tactic.
However, I do not expect yesterday’s trend to last long. My conclusion is of the “more likely than not” variety rather than a “virtually certain” one. The factors supporting my thinking are not exact data that can be double checked or referenced. Instead, they are more of collecting stories from people working various sectors of the precious metals markets, and trying to find a common thread among them.
The overwhelming direction of the stories I have been hearing focus on investors trying to purchase greater amounts of physical gold and silver but having greater difficulty at being able to do so. There are also multiple horror stories about investors trying to take physical delivery on contracts and being thwarted entirely or at least having to wait months beyond the promised due date. The stories that may be most significant are those that suggest that some former allies in the gold and silver price suppression are now taking the opposite side to become buyers when the price declines offer temporary bargain buying opportunities.
Another reason I think the dip will be short-lived is the reaction of the public to suddenly lower prices yesterday afternoon. My own company enjoyed its second highest sales day for silver in the past 30 years (as measured in US dollars)! Our gold sales ranked among the top five sales days in the past 30 years!
Before the end of April, there will be some gold and silver price suppression when the current options expire. Nonetheless, I think that, before the end of April, it is more likely than not for the price of gold to break its all-time record set in early December 2009. I also anticipate that silver has a good chance to approach or exceed $20.
Patrick A. Heller owns Liberty Coin Service in Lansing, Michigan and writes “Liberty’s Outlook,” a monthly newsletter covering rare coins and precious metals. Past issues can be found online at http://www.libertycoinservice.com/ Pat Heller is also the gold market commentator for Numismatic News. Past columns online at http://numismaster.com/