Gold, silver, and mining stocks were slammed on Friday, knocking gold below the technically and psychologically important $1500 level. Now, I don't think many people get the vibe that I'm much of a conspiracy theorist. But, even I took note of the coercion last week to knock gold down hard! See this common sense outline from Bill Downey at Goldtrends on Friday:
HOW TO CRASH A MARKET
Yesterday we reported the critical inventory level at the COMEX and JPM VAULTS. First the FEDs leaked out the FOMC minutes early and compounded the sell off by announcing that CYPRUS would sell 400 million dollars worth of Gold. Cyprus banking sources said no such talk took place.
SO WHAT TO DO NEXT?
There is only one way out of this. MAKE THE MARKET COLLAPSE and trip up all the stops at 1525. Then ---as the market collapses, STOP THE PHYSICAL MARKET FROM the ability to buy. And how can that happen? Read on for today's lesson in market manipulation.
So what happens? The physical market holders begin to panic. How can they protect themselves as they can't sell either?
There is only one solution, especially during a panic.
Amazing isn't it? Well, it probably shouldn't be too surprising to many but nonetheless when manipulation of a market is this blatant it still causes mild awe to see the levers being pulled on the public. Certainly, this flush to new lows on Gold has gotten my attention but there is a good possibility that this was a run on stops to cover record short positions this week before the metals move right back up. I like to use a 3 day closing rule of thumb to verify a breakdown/breakout and as mentioned above, Sunday night/Monday some margin selling could knock prices lower first. That said, they call it "Shake N bake" for a reason! Shaking a market to trigger stocks only to force weak sellers out then to virtually and immediately leave them in the dust (aka toast aka "baked") by reversing the market is not anything new.
The fact is that the selling that is still occurring in mining shares at pennies on the dollar has nothing to do with fundamentals but only because stocks are going down and fear is rampant. This is NOT time to be selling precious metals or mining stocks but it is the time for smart money and value players to be scooping up assets at a mere fraction of their value! The CDNX is trading at the same level as it was in 2003 when gold was under $400 an ounce. This is an environment that is sowing the seeds as we speak for the next bull market in mining stocks, which looks like when it decides to begin, it will be powerful.
Here is a terrific interview of Billionaire Frank Guistra, who is betting on future inflation.
He addresses a number of relevant factors that align with our thinking as well. This worldview recently has not been a profitable one but let me give you a glimpse to the end of the book.....we win. Stay the course folks and don't get shake n baked! Proper psychology is to envision ourselves with our catchers mitt on with low bid prices in our favorite names, catching/buying/increasing positions at fire sale prices, NOT selling for pennies on the dollar. This cyclical bear market in precious metals and mining shares is a dream come true for those with cash to deploy. This brutal market could continue into the summer but as we've mentioned many times, later this year we see a much improved resource stock environment. Those that have the patience and resolve to make it to the other side of the rainbow stand to make a bloody fortune.
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