Tim Murphy
Precious Metals Advisor
Tim Murphy is a Precious Metals Advisor with over 15 years of experience. He started on the New York Commodity Exchange floor before founding his own brokerage firm. Tim joined Scottsdale Bullion & Coin to leverage the small-company feel with national exposure, focusing on personalized, client-first service and fostering long-term relationships.
Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few, gold has been the asset of last resort.–Antony C. Sutton
Gold and silver reversed handsomely higher last week and anyone reading my last email should not be surprised. Yes, gold and silver prices have been dropping due partly to a rising dollar and anticipated higher interest rates via the Fed, but as mentioned last week, a lot of smart people believe the metal prices were forced lower by the bullion banks (maybe/probably for the very last time), and in the process, managed funds/speculators covered their long positions and actually went short, while the bullion banks covered more of their short positions and went net/net long silver. Additionally, last Friday’s COT (Commitment of Traders) report revealed (yet again) that the bullion banks, led by JP Morgan, reduced their net short gold position, and increased their net long silver position. Simultaneously, the managed funds/speculators went even more short!
Ted Butler of Butler Research made the following observation this weekend in regard to the metals “poor action” of late, “The COT report included yet another stunning result in gold, with silver not that far behind.In COT report terms, which measures by far the most important, if not sole driver of metals prices – positioning changes on the NY COMEX – the record couldn’t be clearer, namely, that the bullion banks/commercials, have been hell-bent on buying as many metals contracts as possible, including short-covering and new buying. Since the only practical way the commercials (mostly banks) could possibly buy significant quantities of COMEX metals contracts and avoid massive losses was by orchestrating a contrived selloff intended to dupe the managed money traders into selling aggressively, this explains the selloff in a nutshell.”
So why is it so important to understand these long/short COT “position” trends?
Because for decades, and especially the last year, the greedy bullion banks have been artificially keeping the gold and silver prices down, and it’s very probable this manipulation is finally ending. This new trend is happening at a time when the bullish sentiment for gold and silver is extremely low. (As mentioned last week, major market bottoms are much more likely when speculator and public sentiment are relatively very bearish). Furthermore, aiding higher prices later last week were the statements made by Fed Chair Powell, who expressed new concerns about the economy and the possibility of slowing down interest rate increases.
The same “smart people” mentioned earlier also believed the Fed would soon lighten up on raising interest rates because the economy and stock market were not strong enough to absorb the increases. Sure enough, the following remarks were released by Chairman Powell: “Financial-Market Conditions Have Tightened A Good Bit”, “There’s Evidence Labor Demand May Be Slowing A Bit”, and “Likely Appropriate To Slow Increases At Some Point.” Even the IMF jumped on board by warning, “The World May Soon Be Teetering On The Edge Of A Global Recession As It Lowers Growth Outlook.”
Lastly, Egon von Greyerz of Matterhorn Asset Management had the following to say, “Deep down, we all know this, even the stock market bulls: You can’t solve a debt crisis with more debt paid for with money created by a computer rather than GDP. The other simple yet common-sense and historical reality is that no recession (not one, not ever) can be defeated in a backdrop of high rates and a strong currency, the very policies which the US is currently, deliberately and temporarily pursuing. Despite the fatal hubris and immense power of the Fed, the U.S. will be no exception to these recessionary realities and consequent policy shifts.”
Of course, there are no guarantees in predicting markets, but let’s consider the following:
- We know why gold and silver prices on the NY Exchange have been “relatively weak” – because of consistent selling raids by the bullion banks. And for the first time in over twenty years, we are seeing evidence that the bullion banks are pulling away from manipulating the metal prices.
- Plus, due to lower prices, the public is shying away at the very time they should be jumping in with both feet.
- Due to trillions of dollars being printed, Covid related supply chain issues and shortages of energy and food related items resulting from the Ukraine invasion, inflation will continue onward and there’s nothing the Fed can do to stop it.
- Demand for physical gold and silver now exceeds the annually produced supply.
From a short term and long-term perspective, if you are considering selling gold or silver, or you are holding off on making a purchase, now is not the time. All markets, interest rates, the dollar, the economy and precious metals are in epic transitional modes which could last a decade or two. The fact that stocks, bonds, real estate and crypto are coming out of bubbles “the likes of which have never been seen”, support the urgency of owning “real money” – of owning something tangible that has been in existence and of value for over five thousand years.