WALLACE, Idaho — Well, after the Great Big Smackdown, what's next? Explanations as to the cratering of gold and silver these past days are all over the map.
As usual, silver was harder hit than gold's spectacular drop from March's anemic $1,600 to Monday's $1,350.
The Swiss call such market events a Rheinfall, after the waterfalls in the River Rhein, which drops spectacularly around a corner at Schaffhausen after a smooth flow from its headwaters at Lake Constance about 60 klicks upstream to its destination in the North Sea via The Netherlands.
To continue our esoterica, it was in Schaffhausen that the electrical process of refining aluminum was invented, driven by cheap hydro-power generated at the new dam built by Swiss industrialist Johann Heinrich Moser above the falls.
An American watchmaker, Florentine Ariosto Jones — a director of the E. Howard Watch Co. — enticed by this cheap source of power and the quality of Swiss labour, founded the International Watch Co. in Schaffhausen. A mid-range IWC watch — they are still made there and are highly treasured — fetches about 25 grand, give or take a sawbuck or two. IWC remains the only watchmaker in the German-speaking part of Switzerland.
For some distance, the Rhein defines the border between Germany and Switzerland, and American bombers mistakenly dropped fire and death on to some small neutral Swiss towns during the Second World War that had the misfortune to be on the wrong side of the river.
Alexandre Gustave Eiffel, of Eiffel Tower fame, designed and built many fine iron bridges over the Rhein, which continue to serve the people of Switzerland and Germany to this day.
(Last historical note: Gustave Eiffel, a Freemason who lived from 1832 to 1923, also designed the ladies' garter. It is a running joke in Paris that the Eiffel Tower is really an upside-down garter. Go look, then go figure.)
At any rate, this past week's rout in silver and gold was a Rheinfall of epic proportions. And I digress. Enough of history ... or maybe, not. Have we not seen this sort of catastrophe before?
Silver fell even more spectacularly than gold, and their price ratio tells the story: from trading at about 52 ounces of silver to an ounce of gold, it would now take almost 60 ounces of silver to buy an ounce of gold.
Scuttlebutt is that China's economy is entering into recession-mode — welcome to the Western World! — and that the Cypriot banks might have to dump their gold onto the market to stay in the Eurozone, and that the U$ Dollar is strengthening against the Euro.
I don't buy any of that offal.
The Great Smackdown came directly from Goldman-Sachs, which together with JPMorgan wilfully shorts the precious metals markets to prop up the paper currencies they are so enamored with. Goldman came out with a prediction for a $1,200 gold price last week and, well, the lemmings fell for it.
Long-time silver analyst Ted Butler explains it better:
“Basically, a neutron price bomb was detonated in certain NYMEX/COMEX markets that selectively targeted gold, silver, copper, platinum, palladium and crude oil prices. On just about every other market, like stocks, bonds, currencies, grains, meats, soft commodities yesterday was non-eventful pricewise.
“The importance of this distinction that only selected markets experienced unusual price weakness is that it eliminates many general knee-jerk explanations about prices being impacted by broad macroeconomic factors. How could broad economic factors influence certain commodities and not the stock or currency markets?
“Looking deeper, the commodities experiencing price weakness all have different supply/demand fundamentals relative to one another, so as to eliminate the possibility that all those unique fundamentals changed yesterday in synch. Commodity fundamentals change glacially; it's impossible for the supply/demand equation of many various commodities to change overnight.”
Ted and I go back three decades, and I tend to trust what he thinks and writes. Even with China having to correct is prolifigate ways, and Cyprus needing to unload some gold to keep the banksters happy, the fundamentals for silver, gold, copper, lead zinc and the rest haven't magically changed. And at 60:1, silver is a bargain relative to gold.
But our markets, and the values of the mining companies who employ the folks who work here in the Silver Valley, remain not at the mercy of free markets but that of Goldman-Sachs and JP Morgan — not to mention the U.S. Fed, none of whom see silver and gold as friends to their paper instruments.
Is the silver price manipulated? Would I jump in and buy right now, in the middle of this cat-fight?
Nah.
