Tight Gold & Silver Markets To Spark Massive Breakout

Kitco News – August 13, 2012

Today James Turk told King World News, “I had the chance to read John Embry’s comments today on KWN about the tightness in the physical gold market, and I wholeheartedly agree with him.” Turk also said, “This tightness is further evidence of the backwardation in the gold market I spoke about in our last interview. The most powerful rallies are the ones driven by a tight gold market, and that is exactly what we see right now.”

Here is what Turk had to say: “Both gold and silver don’t appear to be doing much since we last spoke, Eric, but appearances can sometimes be misleading. The action in the precious metals over the past couple of weeks has been very constructive, and here’s the important point. Slowly but steadily gold has been pulling away from $1580, while silver has been pulling away from $27. As I have been saying, I think those prices are history. We won’t see them again.”

“The precious metals at the end of last week again approached the top end of the huge bases they have been building since May. Gold and silver dropped back a little today to take a breather. Nevertheless, they are ready to probe the top layer of overhead resistance that has been keeping their price contained.

The next step is for gold to break above $1630 and silver to break above $28.30, and when it happens it will signal their long awaited breakout from these 3-month bases….

“Hopefully these two hurdles will fall on the same day. If they do, it will signal real strength because both precious metals are confirming each other by breaking out of their base at the same time.

Clearly the precious metals will soar if the Fed or ECB announces more quantitative easing. But gold and silver don’t need QE to move higher. Given all of the financial uncertainty out there, there are numerous problems that we know about which could be the trigger lighting the spark to send the precious metals higher.

All we then need is for the mining shares to break out of their base too. I expect they will, but the metals are closer to a breakout. So look for the metals to move first. Though this pattern has prevailed in recent years, it used to be that the mining shares usually led the metals. Anyway, the key points to watch for the shares, Eric, are 170 on the XAU and 465 on the HUI.

I think the important point to focus on here is the threat of higher inflation. Energy and food prices are moving higher in major uptrends. They signal that more inflation is coming, which of course bullish for the precious metals. Right now I am watching the yield on the 10-year T-note, which has jumped from its record low near 1.40% last month back into the 1.60s.

That’s a big move, and not surprising given what’s happening with energy and food prices. With more inflation, higher interest rates are to be expected, and here’s the important question, Eric, can the Fed stop interest rates from rising? The Fed has done a pretty good job of it so far, but with trillion dollar federal government budget deficits as far as the eye can see, the Fed cannot stop a tidal wave of new debt.

So one of two things has to give, either interest rates have to rise to reflect the growing inflationary pressures, or the federal government has to bring its fiscal house in order, which looks highly unlikely. Higher interest rates could be the wake-up needed to focus attention on the dollar’s problems, and not just those of the euro.

Some people are concerned that higher interest rates will be bearish for gold and silver. They seem to forget that gold and silver prices moved higher in the 1970s along with steadily climbing interest rates. It was only after Fed Chairman Paul Volker raised real interest rates – interest less the inflation rate – to extraordinarily high levels did the precious metals start dropping.

That won’t happen this time around because the federal government can’t afford the high level of interest rates Volcker needed to quell inflation. Remember, back then the US was the world’s largest creditor nation, and now it is the biggest debtor nation the world has ever seen.”

Turk also added: “I had the chance to read John Embry’s commentstoday on KWN about the tightness in the physical gold market, and I wholeheartedly agree with him. This tightness is further evidence of the backwardation in the gold market I spoke about in our last interview. The most powerful rallies are the ones driven by a tight gold market, and that is exactly what we see right now.”

More “Source” Input On Coming Precious Metals Price Explosions

Submitted by lemetropole on 08/12/2012 17:08 -0400

August 12 – Gold $1619.70 – Silver $28.06
More “Source” Input On Coming Precious Metals Price Explosions
Over the past month+ I have been pounding the table that based on information from three extremely informed sources the prices of gold and silver would begin their launches to much higher prices in August … a launch that would lead to all-time highs in both precious metals and well beyond.

The reason for this Mini-Midas is that I just received some new input, which supports what my original sources have been telling us for some time. It is from someone I have known for a long while and is of the same caliber as my other sources in terms of reliability. When you have traded commodities and stocks as long as I have, and get to be my age, it is fairly easy to sort that all out … and what to run with.

Here it is … short, sweet, and maybe VERY important:

August 10, 2012


I have spoken before about my contact on the Board of Trade who trades mainly the metals and is in touch with New York minute by minute. He has been saying for several weeks that the metals would have one more big drop (1525-1550) before they really took off. Today he changed his mind. They saw heavy covering of shorts in Chicago and New York.

This should show in next week’s COT. They see an explosion of huge proportions and are adding four more floor traders as they see August as a record month for them. He closed by saying “We could see a 100% increase in 90 days.” Tie this in with other things that we have read and heard. Golden regards

If what Peter sends us pans out anywhere close to what he has been told, this Mini-Midas is more than well worth the read. What fascinates me is that this new input confirms what my other three sources have been saying. Now we wait to see how this plays out in the three weeks of trading left ahead in August.

In addition, as you well know by now, it has come to my attention from all of my original contacts that JP Morgan has a big problem with their silver short position and that this problem will reveal itself in a public way in the near future…


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