Physical Gold Buyers Win The Day, Shorts Retreat

“So while the precious metals market may appear quiet on the surface, there are some meaningful crosscurrents going on underneath. Today’s action is another good example that the paper shorts can only push the gold and silver market so far, even with news that should have helped them pressure prices….

“That limit – which we have seen time and again over the years – is when the demand for physical metal starts to overpower the selling pressure in futures, forwards, options and other markets for paper-gold, which is what we saw today.

I think more and more people are starting to recognize this seemingly endless daisy-chain, Eric. Banks gets bailed out by governments, and then governments get bailed out when banks buy their paper. Central banks provide the grease to make it all happen with their ongoing money printing. For example, Spanish banks are borrowing EUR 152 billion from the ECB, three times the amount from one year ago.

So in the end, nothing gets resolved. All the bad debts remain. Even worse, more debt is added creating an ever greater burden. That is not a solution, and as I have said before, the so-called ‘can’ the central planners have been kicking down the road is now a 2-ton boulder.

It is only a matter of days – or weeks at most – before more banks and governments strap on the ECB’s bottomless feedbag to try keep their head above water. But importantly, money printing does nothing to fix so many insolvent banks – and insolvent governments too – here in Europe.

The next step for the precious metals, Eric, is to start probing overhead resistance. There are two levels to watch on silver, with $34 coming first, but the critical level, of course, is the $35 level we’ve been talking about for months now.

The key areas for gold are $1,700 first followed by the $1,800 level. If gold can decisively break above $1,800, the big move I have been expecting will be well under way. There is a fly in the ointment here. Next week is the important gold option expiry and we know from past experience that the shorts try to pressure prices during expiration.”

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