With silver down just over 4%, the dollar continuing to grind lower and gold consolidating, today King World News interviewed James Turk out of Spain. When asked about gold and silver Turk responded, “Nearly all of Europe is closed today to celebrate May Day, and Asian markets are notoriously thin even in the best of circumstances. So when the news of Bin Laden's death hit the tape, the dollar bounced in an emotional knee-jerk reaction. Silver was pummeled, and gold ended slightly lower. The important point Eric, is that both metals are bouncing back.”
When asked about the violent action in the metals Turk replied, “The volatility scares a lot of people, which is understandable. It can be heart-stopping to see silver drop 10% like it did, but silver is not unique in this regard. Even blue-chip stocks or other high-quality assets drop in price during certain periods. Unfortunately, those big price drops can easily cause you to take your eye-off-the-ball or shake you out of a position. Don't let that happen to you in a bull market such as we are seeing in gold and silver.
What's worse is that these occasional price gyrations play into the hands of the anti-gold crowd, who claim that gold is a volatile commodity. Of course, the real volatility comes from central bank interventions that distort the market process as well as the huge amount of leverage used in the paper-gold market. The point is, Eric, long-term price trends are caused by underlying fundamental factors that determine the true value of an asset, not news items. And the underlying fundamentals for both gold and silver remain very bullish.
Look for example, at the US Dollar Index, which is trading at a new low as we speak. The trading day just ended, and the "Bin Laden bounce" is already history.
More importantly, this new low in the Dollar Index suggests that the waterfall decline we have been speaking about is gaining momentum. The ongoing destruction of the world's reserve currency inevitably means higher gold and silver prices. It also means for the time being, a euro that will approach $1.50 or so - at least until people recognize that the euro has its own intractable problems and is no more a safe-haven than the US dollar. When that happens, the flood of money going into precious metals will be overwhelming.
You know my longstanding price projections have been $1800 gold and $50 silver by the end of June. Silver essentially reached my target already, so it would not be surprising for it to move sideways in a large trading range waiting for gold to catch up. But regardless of when those price targets are reached, KWN readers need to focus on the fact that the US dollar remains in a long-term bear market.
The flip-side of that coin is that we are witnessing a major bull market in the precious metals. So readers should not be misled by price gyrations or news items that are of no long-term consequence. Everyone's main task remains the same, continue to accumulate the precious metals month-in and month-out. If today was your day to buy and you picked up some cheap metal on the lows, good for you. Next month your purchases may be at a higher price, so it all evens out in the end when you have a long-term accumulation program.
In a world of pernicious central bank interventions, excessive leverage and rampant speculation, the ongoing accumulation of precious metals is your platform of safety. Given the horrific track record of central banks as evidenced by the continuous erosion of purchasing power of national currencies, it is obvious that we cannot rely on central banks to do the right thing anymore. More and more people around the world are waking up to this fact and they have begun to act as their own central bank. The way they are executing this strategy is by owning physical gold and physical silver as their personal reserves.”
When asked about silver specifically Turk stated, “I believe if you look at the chart (above) silver is in the early stages of a bullish flag formation. The size of this flag pattern is much broader in terms of size than the previous flag, but this should be expected because volatility increases as bull markets continue. If this pattern holds, silver will continue its consolidation for some time before climbing to higher levels.”
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