Crash in gold, silver hints thinness of metals pipeline; in crisis, scarcity

This coin is the American one-ounce gold Eagle. (Photo

I’m writing Tuesday morning. In the 33 years I’ve been brokering silver & gold, there are five words I have never before yesterday heard from wholesalers: “We’re not selling silver today.” At least one major West coast retailer was not selling gold yesterday, and wholesalers well selling “as long as we can get it.”

See how thin the physical silver & gold markets really are? By thin is meant that there is very little product in the pipeline. Wholesalers won’t take any chances.

The market is backwardated, but the backwardation shows more in availability than in price. A “backwardation” occurs when the price of metals for immediate delivery climbs above the price for future delivery. Normally, the interest and storage cost of carrying metal for future delivery makes futures prices higher, so a backwardation reveals demand for immediate delivery greater than anyone can meet. In this case, you can’t buy at ANY price.

It would be easy to draw the WRONG conclusion from the crash in silver & gold, namely, that the bull market has ended & Happy Money Pumping Days Are Here Again. Well, stop the band and think: if that were so, why did the Establishment need to crash silver & gold? Why make such a concerted effort — SocGen & Deutsche Bank & Goldman Sachs downgrades & FOMC minutes leaked and all the rest — to knock down silver & gold?

Because they’re worried.

Ask yourself this question: if the U.S. had the gold it claims, why did it tell the Germans, when they asked for their gold stored in the U.S., it would take seven years to return it?

Why? Bureaucratic maze? No airplanes to carry it? Why?

Why did the powers that be need to crash silver & gold? Why?

Go back to the touchstone of fundamentals, the reasons we began buying silver & gold in the first place. Ask if they have changed.

Fundamentals unaltered

CENTRAL BANKING. Central banks & their fractional reserve banks create money out of thin air.

INFLATION. Inflation makes money cheap, which causes bad investments & blows up bubbles, bubbles burst, panic ensure, they paper it over with more liquidity & more blarney, & they run the cycle again, stripping all you victims of your capital. Success begets excess.

Has the system changed? Has the monstrous, unimaginable debt burden been removed or written off? Or have they kept on papering it over with Quantitative Easing this & Stimulus that, blowing up another bubble in stocks?

MONETARY DEMAND, the demand for safety from this system, drives all silver & gold bull markets, & nothing else. Until the system changes — and never mind the bloody raids the Establishment makes on silver & gold — silver & gold will continue to rise.

THE BULL MARKET HAS NOT ENDED. Silver and gold have not topped. The cause has not changed, the effect will not change.

I laugh at people worried about government confiscating their gold and silver. Why would they go to all the trouble to send out their thugs to collect it when all they have to do is manipulate the market down and people willingly turn in their silver & gold, at bargain prices. Why force them when you can trick them so easily?

The Establishment played this same trick in 1974-1976, driving gold down 47% immediately after ownership was “legalized.”

They did this in 2006, and I’m pretty sure they did it in 2008.

If the bull market has ended, why will no wholesalers sell silver? Why do retailers refuse to sell gold? Why does U.S. 90% silver coin cost $3.50 over melt?

Keeping your eyes on the horizon, not the headlines

Yes, silver & gold have been wounded. Yes, it will take some time to recover, but ask yourself this: If you lived in Cyprus, would you rather have (a) electronic euros in a bank that you cannot withdraw, or (b) silver & gold in your hands, even though 20% lower than last week?

The establishment’s goal is to slowly pick your bones clean. Their chief means of bringing you into powerless serfdom is inflation & debt. Their system is breaking down, & silver & gold offer you a key to unlock your chains.

Do I understand the pain of market collapses? As keenly as every one of you, but I keep my eyes on the horizon. That’s the only way you can prevent yourself being fooled, to your own destruction.

Used by permission. Subscribe to the Moneychanger’s daily commentary by dropping your email address at Franklin’s website, Franklin Sanders is publisher of The Moneychanger, a privately circulated monthly newsletter that focuses on gold and silver and the application of Christianity to economics, culture and family life. We have subscribed to this newsletter for more than 20 years, and consider it a must read. F$149 a year. Franklin is an active trader in gold and silver (he’ll swap your green Federal Reserve rectangles and give you real money in return). He trades with savers and investors outside Tennessee. Subscribe to his daily price report and market commentary on the website. F. Sanders, The Moneychanger, P.O. Box 178, Westpoint, Tenn. 38486 Tel. 888-218-9226

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