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Every few years, a tremendous
opportunity arises. The autumn months of 2007 and the autumn months of 2008
offered such an opportunity to buy silver. That $11 silver price is long
gone. Many smart folks seized it. Whatever can be said on such silver
platters applies almost equally to gold. The silver sprint gains are
typically much larger than the gold steady gains. The coming autumn months
will feature a gaggle of supposed financial analyst experts
backpeddling in their hasty damage control. They
have been broadcasting a wide assortment of low level propaganda posing as
competent analysis, as they attempt to make the point that the anti-USDollar trade is done, the gold trade is over, the silver trade is spent. They are so wrong. A comedy of
clumsy oafs and dolts on the Wall Street payroll awaits the public in a grand
chapter on stage. They will struggle to explain the move in silver over $50
on its way to $80 per ounce. They will struggle to explain the move in gold
over $1600 and then $1700 per ounce. The mainstream news has been deeply
involved in a delicate balancing act. They must report the news, but it is
almost all very bullish for the precious metals. A new financial
mini-disaster unfolds almost every week. Last two weeks were Greece. The next
week might be Portugal. They must report the news, but it paints a picture of
a broken monetary system with debased currencies. They must report the news,
but it openly provides the gory blow by blow details of ruined sovereign
debt. The United States debt situation is Greece times one hundred.
This week, the loquacious jackass will
permit some lovely pictures to tell the story. Three graphs adequately tell
of a grand opportunity to latch onto the powerful Gold Train with a
super-charged Silver Scout. Who were the smart buyers back in September of 2007? The
false phony deceptive mainstream message then was that the subprime mortgage
problem was contained. That was the first major stumbling block by the
hapless witless clueless USFed Chairman Bernanke. He has made not a single
correct economic or financial system analytic call. Who were the smart buyers
back in October of 2008? The false phony deceptive mainstream message then
was that a TARP solution was being put in place to save the US banking
system. The solution turned out to be basic largesse to the big US banks,
enabling purchase of preferred shares, enabling outsized executive bonuses,
and enabling secretive bailouts of banks across the globe. Without the
Financial Accounting Standards Board allowance for insolvent banks to
continue to dictate the value of their own balance sheets, otherwise known as
systemic accounting fraud, the big US banks would have been liquidated. The
entire Too Big To Fail principle is actually a battle cry to avoid solutions,
to protect the banking elite that was mostly responsible for multiple
$trillion bond fraud and mortgage fraud. Without any reservation, it
can be said that TBTF means No Solution, no remedy, no recovery, and no
attempt at anything remotely resembling a road to economic recovery. In my
view, TBTF is the epitaph on the USEconomy and the nameplate on the
USTreasury Bond default. So who were the dummies who ignored the opportunity
to buy gold and especially silver in September 2007 and October 2008? The
majority of them listened and trusted the mainstream news, the Wall Street
misdirection, and all their fallacious messages.
THE COMMITMENT OF
TRADERS SIGNAL
A big hat tip to internet contributor RG, whose message was relayed by
the Midas Report. Consider verbatim his message, in which he gleefully
proclaims to be calling all Rocketeers of the Happy Silver Ship. The
goodfellow RG wrote, "The latest
Commitment of Traders Report for silver is now screaming out at full volume
BUY BUY BUY. In fact, the Commercial Short-Long Ratio that I have already
bored you with at great length in recent correspondence is now down at a
multi-year super extreme of 1.79. Below is an up-to-date chart of the COT
picture. In summary there have only been four other weeks in this whole bull
cycle where the ratio has dropped below 1.80, four weeks. The first two weeks
of these was the 28th August 2007 and the following week of the 4th September
2007. The second tranche was the 21st October 2008 and the following week
28th October 2008. If you study below both the chart of silver over that
period and also the HUI gold mining index, you can see how these extreme lows
below 1.80 in the ratio coincided on both occasions very markedly with a
bottom in both the silver price and the mining index. On each occasion this
proved to be a multi-year opportunity to take positions in both the metal and
the precious metal mining stocks. Each time the price of silver rose by
some 60% to 90% within a six month period! And the HUI index rose some 90% to
160%. Folks, there is no such thing as a risk-free trade. There is no such
thing as a free lunch. And there is no such thing as a one-way bet. However,
there are certain times in an investment cycle when an outstanding
opportunity presents itself and advantage should be taken. The evidence above
shows very clearly the historic correlation between an extreme low below 1.80
on the Commercial Short-Long Ratio and a multi-month bottoming in the price
of both silver and the precious metal mining stocks. I have been trading the
precious metal sector since 2003 and I would consider this to be one of
perhaps four of the most suitable buying opportunities within the last eight
years!" The man RG makes a compelling argument, without
providing the background factors that push the gold & silver prices
upward. He simply points out the COT signal and the resulting performance
after two significant lows were registered in precious metals prices. Very
convincing inded. Thanks to RG also for the fine chart.
![](http://www.24hgold.com/24hpmdata/articles/2011/07/img/20110708CLA07451.jpg)
Note the green arrow in September 2007, a strong signal when silver was
at a $12/oz price. Note the green arrow in October 2008, a strong signal when
silver was just above the $9/oz price. The same type of signal is
identified with yet another strong signal here & now in July 2011 with
silver price at $35-36/oz. It is ready for the next big upleg. This time
gold might lead, but as usual silver will follow and run fast and hard making
yet more breathtaking gains. The great springtime consolidation is over. The
power merchants have spent their ammunition with no lasting reversals, only
pause with consolidation. They must manage unending financial crisis without
motive toward remedy or solution. The climb has begun. Eager investors have
waited and will wait no longer. The Chinese have already begun to re-enter
the gold & silver markets armed and loaded with a $3 trillion war chest.
Hong Kong exchanges await the precious metals trade. Lawsuits against the
tainted SLV and GLD funds are in progress. A little more backfilling might be
required. The fundamentals are incredibly powerful and bullish for both
precious metals. The global monetary and sovereign debt situation is in
ruins, crumbling more with each passing month. If corrupt henchmen are not in
charge, then clowns and charlatans are at the USGovt, its finance ministries,
the USFed itself, the many regulatory bodies, and so much more.
PAST SIGNAL
PERFORMANCE
Consider the silver price move from the
two points in the past. The move up by 50% in six months to March 2008 was
interrupted by the Wall Street meltdown, followed by the insolvent collapse
of the US banking system. Those who bought all the way down from $20 to the
bargain price of $9.5 were amply rewarded. The key was to avoid leverage,
paper contracts, and the mainstream nonsense spouted daily with errant focus
and deceptive view. The sudden banking system insolvency in 2008 was followed
by grand orchestrated attacks on the entire anti-USDollar
trade. Hardly a hedge fund was not attacked by their own
creditors and brokers on Wall Street, incredibly desperate to stay afloat.
They found relief in white pixie dust. The US banks collapsed but did not
suffer failure. Instead, with FASB aid, coupled with TARP confiscated funds,
they continue to limp along as Grand Zombies. The silver price gain since
October 2008 has been on the order of 4-fold, almost 300%. This is a stunning
gain. The same will be said when silver surpasses the $100 price level. The
ruin of major currencies in falsely posed money forms, the parade of USGovt debt, the hapless unfixable
condition of the USEconomy, the submerged US
households, and the US banks suffering from shadow home inventory coupled
with investor lawsuit marred by defiant default in legal challenge, these
over-arching factors assure much greater ruin of money. They assure a march
to $100 silver. Many naysayers will be silent a year from now.
![](http://www.24hgold.com/24hpmdata/articles/2011/07/img/20110708CLA07452.jpg)
Ditto for the gold price moves, but the
size of the gains are much less. The shape of the chart is very similar
though. The springtime correction was not as great, but the gold gain was
only half the silver gain. The crumbling global monetary system is the
primary push factor for gold, not price inflation. The quality and substance
of money is under scrutiny and question. In the next year or more, the price
inflation factor will be put more in the forefront. Investors and households
will be forced to seek out true inflation hedges, if not hedges against
personal ruin.
![](http://www.24hgold.com/24hpmdata/articles/2011/07/img/20110708CLA07453.jpg)
FACTORS IN VIEW &
ON HORIZON
The future holds many crucial factors to
be extremely important. The Greek Govt debt bandaid will prove again to be pathetic and useless,
buying a little time, while it aids the big European banks in toxic asset
redemption. The bag holder is the Euro Central Bank, going down the tubes
with its outsized Southern European sovereign debt and deep losses. The debt
contagion will spread to Portugal next, then Spain and Italy. Those two large
nations, spared the shame and focus up until now, will deliver two lethal
deadly blows in the near future. When these two large columns fall on the
European bank offices, the Germans will finally announce their exit plan. The
Euro Central Bank just hiked interest rates by 25 basis points to 1.5% in
defiance of the USFed. My Jackass forecast made in
early 2009 was that the USFed would be dead last in
hiking rates, and that call seems correct. The big US banks have troubles in
court. They actually believe a mere $8.5 billion can permit them to walk away
from well over $1 trillion in bond fraud. They want bond fraud and mortgage
contract fraud forgiveness with limits on restitution and penalties. Their
executives in New York City and London still enjoy $200 lunches. Not a single
settlement deal will stick, not when investors and individuals are winning
every single court challenge against the banks. The municipal bond and
auction bond fraud deals will follow. The budget battle within the chambers
of the USGovt has exposed the polarization,
corruption, ineptitude, lack of leadership, and inability to avoid the
catastrophe. It is simply too broken to fix. Taxes cannot be raised due to
economic fragility. Entitlements cannot be cut due to public outcry and
dependence. War cannot end since too profitable to the syndicate. Deficits
will pile up regardless of any accords. Whatever progress is made will serve
as tiny down payment for a bigger problem just a few months ahead. The next
news item to anticipate is flirtation with USTreasury
auction failures, against a backdrop of absconded USGovt
worker pension funds. It is no wonder Treasury Secy
Geithner wants to leave town. The next QE initiative will come in response to
an auction failure, as buyers have vanished and primary bond dealers are
under extreme distress. The lousy auctions last week were the telling
indicator, largely ignored by the blind in the madding crowds. The US states
are falling like flies in the summer heat, trapped inside window frames.
Their extraordinary measures to avoid default have become almost a tragic
comedy. Talk has come of splitting California into two states, of silicon and
latin stripes. Illinois and New Jersey are basket
cases. Wisconsin is a war zone.
The USEconomy
sputters down the hill over the cliff with lost brake systems and no
functioning engine. The industrial base has been forfeited in its core.
Legitimate income was replaced by debt which defaulted. Then lastly consider
the assault on global crude oil supply, the silly futile release from
strategic petroleum reserves, following the Gulf of Mexico shutdown. The
elite want $150 crude oil. The oil release effect has been forgotten already
in just two weeks. With all the positive factors toward gold & silver, by
the middle of next year in 2012, one must wonder what motivated people not to
invest in precious metals after seeing the strong COT signal once more. The
smart ones among us have learned long ago to ignore the Wall Street sell side
artisans, to ignore the USGovt wrecking ball
managers, to ignore the equity stock analysts whose paper game has turned
into a leveraged valuation bonfire. Money
faces ruin, as Gold & Silver offer preservation and growth during the
greatest transfer of wealth in over a century. Recall the barons who
exploited the Great Depression, whose names are part of the elite landscape
of banking and politics and philanthropy.
Jim Willie CB
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Willie CB is the editor of the “HAT TRICK LETTER”
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