Many people have been surprised by the large gains in the precious metals sector recently. The only surprise to me is how long it has taken to play out. The question now seems to be “How far can this go?”

It is anyone’s guess but I think it is safe to say that there will be major upswings and major corrections along the way. For those of you who have had conversations with me, I believe you are aware that I am expecting prices that are orders of magnitude higher than they currently are. Already, if you follow the “chart chasers” you would have already missed out on a stunning move upward.

In the past few years, the “chart chasers” have been very accurate in spotting turning points and pointing them out. I have always said that this would work- until it doesn’t.  As long as the paper “markets” were in charge of price discovery (an anomaly in itself) the chartists could see when the algorithms would say buy or sell.

My hypothesis now is that since we may have a shortage of physical metal to deliver the paper price is being overrun by physical demand and the price may run far further than anyone is anticipating at this time. This makes the charts more irrelevant by the day.

I have pointed out many times what happens when there is no “paper market” for a metal like Rhodium- trading at 9000.00 per ounce according to Kitco (no paper games). Or palladium- the “cheaper” cousin of platinum which is trading for over DOUBLE what platinum is trading for. Why? Because there is a lack of physical palladium and the paper price is being run over by physical demand. It appears that a similar situation may be taking place with gold and silver. As I watch the charts those “in charge” are hitting the price day after day (selling large amounts of paper contracts) with little to show for it.

This does not mean, however, that sharp corrections won’t take place along the way.

Right now, I believe that the downside is severely limited because of strong physical demand and years of price suppression while the upside is virtually unlimited.

The most likely driver of a major downturn would be a major correction in the stock and/ or bond markets where all assets sell off. In this situation I would expect a sharp but short-lived selloff because the loss of confidence in the fiat markets would likely lead investors back to the one asset that doesn’t count on someone else’s credit to pay them off- gold. Silver would likely follow suit and real assets would be preferred to paper promises of any kind.

I am on vacation and I will wind this up with a few of “nevers”

#1 The amount of times gold has rallied 13 of 14 days- NEVER

#2 The last time anyone outside of the Fed had any REAL idea of how much they are actually conjuring up out of nowhere and buying assets with – NEVER.

#3 The last time our government looked the other way while the Fed is “printing and Buying” the world’s assets -Never

#4 The last time a central bank had the ability to create “money” out of nowhere that is virtually worthless and prop up or smash down prices at will on a global scale – Only now

#5 A fiat (backed by nothing) currency that has survived over time in its original form- NEVER.

Don’t expect that the laws of economics only exist elsewhere. It appears that the USA and its national currency are getting a lesson in gravity as I write this.

I believe we are in the beginning of a new financial system that will be revealed to us in the next few months and years. It appears the old dollar system is on its death bed.

Personally, I am more concerned about preserving my purchasing power more than anything right now. If the US dollar gets replaced as the world’s reserve currency (my opinion is we are well on the way down that path) how concerned are YOU going to be about how many dollars you hold?

Those in Venezuela don’t care how many Bolivars they hold when it costs millions of them for a cup of coffee while an ounce of silver feeds a family of 4 for over a month.

Get the picture?
Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.

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Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

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