Precious metals analyst Larry Edelson examines gold and silver’s recent crash, and explains why more selling could be ahead for the yellow and gray metals.
Gold has crashed. So has silver. So have senior and junior miners. All just as I had forecast.
Gold getting down — so far — to as low as $1,243. Silver to as low as $17.11 (both basis December futures contracts). The typical senior miner has shed more than 30% since early August, as measured by the AMEX Gold Bugs Index.
And all this despite …
➔ Just about every analyst on the planet calling for a new bull market.
➔ The possible failure of Deutsche Bank, one of the largest, riskiest banks in the world, leveraged 40-to-1 with derivatives.
➔ The craziest, most destructive and rebellious elections in the U.S., probably ever.
➔ Russia’s Putin making new aggressive moves in Eastern Europe and new threats against the U.S.
So the two main questions on most investors’ minds are …
1. “Why is gold falling?” and
2. “How low can it fall?”
A. Gold is falling because investors are hoarding cash, not gold. As I’ve said all along, gold is not portable, it’s illiquid and it’s not going to help any large institutions survive what’s coming.
So instead, the opposite is happening … large hedge funds, pension funds and others are liquidating gold and silver and hoarding cash instead.
B. How low can it fall? Well, there’s a very good chance $1,243 was that secondary bottom I’ve been telling you about. My target — and I showed you the forecast charts — was $1,250 by October 5 to 7 — and we got a near perfect bull’s-eye on that forecast.
But it’s really a tad too soon to say. The selling torrent in the precious metals and miners that was unleashed last week may need some more time to probe and form a bottom. There may even be one more stab at a new low. Ditto for silver and miners.
Plus, the crisis with Deutsche Bank is not yet over. If Deutsche Bank goes under — and it may indeed totally collapse, as I noted last week — it will be a weapon of mass destruction many times larger than the failure of Lehman Brothers in 2008.
And if Deutsche Bank goes down, you can certainly expect more liquidation of precious metals.
So what should you be doing now? For now, I’d stick with the same suggestions I had last week …
For one thing, you should mostly be in cash, as I have stated all along.
For another, if you acted on any suggestions I made to hedge gold and silver holdings with inverse ETFs, you should exit those now — if you haven’t already.
Yes, the metals can move lower. But a bird in the hand is worth two in the bush.
Meanwhile, also as forecast, the dollar is soaring … the euro weakening. And in other markets, crude oil should be reaching a top soon, with another leg down coming, despite the recent OPEC production cut.
And the Dow Industrials? Biding its time. Still at risk of a correction, but also very bullish longer-term.
The SPDR Gold Trust ETF (NYSE:GLD) rose $0.22 (+0.18%) to $119.96 in Thursday morning trading. Year-to-date, the largest ETF tied to the spot price of gold bullion has gained 18.25%.
Meanwhile, the iShares Silver Trust ETF (NYSE:SLV) fell $0.06 (-0.36%) in morning trading today to $16.59. Since the start of 2016, SLV has still gained 25.82%, although the largest ETF tied to silver prices is now about 16% off its yearly highs set in early August.
This article is brought to you courtesy of Money and Markets.