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Last week, I told you about the hundreds, if not thousands of readers that wanted my head for remaining bearish on gold and silver.
Well, gold and silver have taken the shirts off the backs of loads of investors and analysts who refused to listen to me!
Gold has now cracked major support at the $1,583 and $1,554 levels. And silver has now sliced right through key support at $27.58.
What’s more, it is now confirmed: Gold should head much lower, first to the $1,480 level, then even lower to below $1,400. Silver should plunge as low as $20 in the weeks ahead.
Why are traditional safe-haven assets plunging when there are so many problems in the world?
In a nutshell, it’s because they’re not safe-haven assets right now.
I can already hear my email inbox beeping like crazy over that statement. I’ll be accused of treason.
But the simple fact of the matter is that for a variety of reasons, other asset markets have now become safe havens. Namely, the dollar and U.S. equities.
And that’s because right now, there are other overriding concerns on investors’ minds.
First off, there are the new and justifiable fears of confiscation, set off by the Cyprus event. If your deposits in a bank aren’t safe, then how safe could gold be? After all, it was confiscated once before by Roosevelt.
Second, almost the entire world already knows that the sovereign bond markets of Europe and the United States are just about the worst investment one can make.
Stop there. Money deposited in a bank is not safe. Money invested in a European or U.S. sovereign bond is not safe, and no yield to speak of either.
Third, is there safety to be found investing in the euro? Hardly!
Is there safety to be found in the Japanese yen, which is actively and aggressively being devalued? Hardly!
Is there safety to be found in the Chinese yuan, which just hit a 19-year high against the U.S. dollar? Perhaps there is longer-term. But right now the yuan is not international enough and not liquid enough to handle the amounts of capital that are on the move.
So then, what and where is the best place to put your money today? It has to be an investment that is …
1. Extremely liquid and can handle huge amounts of investment.
2. Largely safe from government confiscation.
3. Offering at least some sort of chance to generate a decent income.
4. Denominated in a currency that is being, at least right now, less actively devalued than the Japanese yen and at risk of outright failure like the euro.
If you follow the above thought process through logically and unemotionally, you can now see why millions of investors, corporate fund managers and even corporate treasuries are opting to put their money into the U.S. dollar and the U.S. equity markets rather than just about anything else right now.
Of course, the above is an oversimplified explanation of the actual process underway now in the markets and the forces that are at work.
But it is precisely what’s happening.
Look, I love gold as much as any of you. Over the long-term there is no better store of value.
But gold (and silver) is a commodity just like any other. At times, its safe-haven aspect will shine, while at other times, other asset markets will perform that role.
And right now, the dollar and U.S. equities have moved to the forefront. That will change, and commodities will move back to the forefront with gold leading the way higher …
But it’s not likely to happen until investors fully realize that Washington is just as broke as Cyprus, Italy, Spain, Greece, France, and others. And that’s a ways off.
So Here’s What I Recommend …
FIRST, do NOT look to gold and silver for safety right now. Their interim bear markets are not over, not by a long shot. Ditto for mining shares.
While there are going to be the inevitable short-covering rallies and bounces, gold, silver, platinum, palladium, and mining shares are all headed lower.
SECOND, if you are loaded up with gold and silver and mining shares from much, much lower prices and you decide to hold through thick and thin to capture their long-term potential, then at least consider hedging.
As I mentioned in my special Money and Markets alert on April 3, the best way to do so in my opinion is by purchasing shares in ProShares UltraShort Gold ETF (GLL) and ProShares UltraShort Silver ETF (ZSL).For mining shares, consider the Direxion Daily Gold Miners Bear 3x Shares (DUST).
THIRD, do not expect other commodities to rally right now either.
Copper is getting killed. Oil is now rolling over to the downside and has the potential to fall substantially. Grain markets are getting slaughtered. Soft commodities, such as coffee, sugar, and cocoa are also on the cusp of sharp declines.
FOURTH, stay in the dollar now. The dollar is in an interim bull market. One good way to play it is via the PowerShares DB US Dollar Index Bullish Fund (UUP).
FIFTH, start deploying money into cream-of-the-crop U.S. equities. Buy on pullbacks. But only buy great U.S.-based multi-national companies that offer you a decent dividend.
Right now, the U.S. stock markets are due for a pullback. But the Dow Industrials gave me a very powerful long-term buy signal at the end of March. After the pullback passes, I expect the Dow to work its way up to near, or slightly above the 18,000 level ― possibly by early summer.
SIXTH, start making U.S. real estate investments. Most think I’m nuts on this one too. But U.S. real estate is dirt-cheap on an international basis and is becoming a safe-haven investment for capital that’s on the move.
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| Foreign buyers see U.S. real estate as a safe haven … and a bargain. |
Consider well-capitalized real estate investment trusts and the like that spin off income.
And if you’re in the market for your first home, or a second home, now is a great time to buy and finance it at historically low mortgage rates, but do not finance with anything other than a fixed-rate mortgage.
If you’re super wealthy, look at some other asset markets too ― such as diamonds, art work, and numismatic coins. I am not an expert in any of them, but from a broad macro trend point of view, they are likely to skyrocket higher as safe havens for the super wealthy.
Best wishes, as always …
Larry
Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader.
Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.
{ 26 comments }
Are you still Recommending TBT ?
Larry, I have most of my liquid cash invested in the Canadian dollar. Is this a good place to be?
Thank you!
One thing I fail to understand is that why most analysts are recommending the purchase of Gold as a safe investment? The problem today is that the price of Gold is not derived by it’s physical demand or supply but more by the speculative positions standing long or short on the commodity exchange like any other traded commodity, stock or currency.
The basic mechanism of price discovery (based on demand and supply for actual use) of anything traded on an exchange has been terminally infected by speculators having access to unlimited funds and super fast computers for trading leading to volatile price swings. This has been made worse by the launch of ETFs for anything and everything under the sun by the financial community.
The price of everything including Gold is likely to suffer when the speculators unwind their positions due to some event that they have not anticipated or foreseen.
How can gold be confiscated when its in bullion form under your bed at home????
What happened to your hold all long tern core gold positions????
What happened to Dow 9000 now your saying fill your boots on US equities that we all know now are at all time highs allready
Dear Sir,
Can you tell the medium to long term direction of other global equity markets. Will they also perform like Dow or only US markets will show gains. Previously all world equity markets were coupled like in 2008 meltdown all world markets crashed substantially.
Regards
Arvind
Keep up the good work Larry
Gary b
Mr. Edelson:
You look very familiar and your name is familiar as well. Are you originally from the Washington D.C. area? Did you attend Camp Shohola in the Pocono Mountains back in the late 1960’s or early 1970’s? I think there might be some connection somewhere in the past. If so drop me an email. If not drop me an email anyway.
Your analyses are good. I think we are in for a serious shake out before gold and silver rise to new highs. As for the stock market, it always over shoots on the upside due to money printing. The big question is, unless you invest in index based ETF’s, it is very difficult to pick the right stock or even mutual fund.
And real estate is so location and timing sensitive. My mom and my wife were/are real estate agents and have been routinely confounded. Although we’ve never lost any money selling our houses during moves from one job to another, since 1987, we’ve never made any real profits either after all costs including interest, insurance, maintenance, moving, taxes, and sales commissions.
As for numismatics, I’ve been in that field since 1964 as collector, sometime dealer, and long term investor. Talk about fads, frauds, and fakes. I have been fortunate to not lose any significant amount of money on any one purchase. However, I have only occasionally made really significant profits over decades of careful cherry picking and timely sales. I know so many dealers who have on several occasions either gone down the tubes financially or have almost done so on more than one occasion.
As for gems, My boss (wife is a four letter word and it’s pronounced “Boss” with the appropriate amount of loving and pleading inflection) and I have about 30 years experience in that field and we find that you have to establish a significant financial relationship with a small number of reliable jewelers to get close to a reasonable price. More importantly, the quality and quantity of synthetics is making it tougher and tougher to purchase fine quality affordable natural stones. When we now travel to NYC we can see entire displays with only a very few decent sized stones that are clearly natural. Add in all of the manipulation that occurs to emeralds (drilling, injections, oiling, etc.) and rubes (heating, irradiation, coloring, etc.) and you’ve got a real problem putting your money into this area in anything like large scale purchases.
It’s tough out there!
Have a good and prosperous week.
Mark Gusack
As always, Larry has pegged the trend very accuratly. US stock market and treasuries are poised for a run up. Global bond yields are about to plummet, (see Euro rates).
However, I am not so sure that “…Washington is just as broke as Cyprus, Italy, Spain, Greece, France…”. The reason that those countries are vurnable is they do not control their monatary policies and their fiscal options are constrained by treaties. While Larry belives, at some point, investors will recognize that the US government is insolvant, I remain skeptical. For now, the US has a strengthened hand at being the reserve currency of the world.
What I find surprising is that, (despite the bumbling leadership in Europe, that is threatening insolvant bank stock/bond holders with forced bail-ins,) the Euro is getting a boost from Japanese investors bailing into alternate curricencies in search of yeild and safety. How long can that Euro price appreciation trend last when the dunderheads in charge are fixated with austerity policies that shrink GDP? IF other currencies, particularly the euro, are about to rally, and If, in general, rising euro = falling dollar = happy metals. Eventially we will get to a “back up the truck” moment.
The question is where is the loading dock?
What the heck is going on with the gold inventory drawdown at CRIMEX? Over the last 90 days without any announcement, stocks of gold held at Comex warehouses plunged by the largest figure ever on record! As to how and why they are [being] removed, that is a mystery. [Up until now], eligible stocks were on the continual increase throughout the bull market. Now that trend has changed.†According to; http://bullmarketthinking.com/comex-gold-inventories-collapse-by-largest-amount-on-record/
Anyone have any follow up information? After the hedge fund big boys bailed out of gold, the only substantial buyers left are central banks right now. Is that where these stock piles of gold are going? Are central banks, in effect, shorting their own currencies? Trading fiat for gold?
What say you?
Larry,
Glad you are back, Glad you held to your view. Sooo tired of other who say buy silver now and blah,blah, blah. I believe that a world view, as you say, is the only overall picture. Their are some of us out here that are really listening and following you chain of thought,
Thanks, Jeff
Looks like a newsletter of interest.
Thanks.
I assume I will continue to get email alerts? Or always look to this site for my subscription?
With gold and silver sell off, someones have to be buying. Who’s buying?
Another insightful article by my man Larry . . . . . all you naysayers can eat crow. Gold and Silver ended today over 5% down. Gold – $1,476 and Silver $25.76. Love you Larry!!! Keep making me $$$$
I stuck with your recommended interim investments in DUST, GLL, ZSL and UUP despite the thrashing they received last Tuesday. I can now ackowledge your godlike prescience and prognisticating abilities. I bow down before you.
Let us know when you think all this is going to reverse — perhaps in the July timeframe?
Since I am a member of your wealth report, why did I not receive this information directly rather than having to find it through a reference in Martin’s article? Please check to see that I receive your articles directly.
Since I am a member of your wealth report, why did I not receive this information directly rather than having to find it through a reference in Martin’s article? Please check to see that I receive your articles directly.
Larry,
You are right on top of the markets and have a very sound plan without the hype that is common
Today. On target with the facts to support you plan. Most likely due to your perspective outside of
The US. Your no frills approach is why I am a subscriber. Smell the roses.
maybe stop printing oops not working market way down quickly fed steps in prints much more like geitner told boener year one 3 trillion market goes crazy up !! just before nov elections OBAMA WILL BE A HERO AGAIN ! DEMS WILL FINALLY BE ABLE TO FIX THIS IMPOSSIBLE PROBLEM unless anyone has a better ma for the job
This is right on. When gold and silver go lower it will be another great buying opportunity. Real estate has high carrying costs and property taxes I have learned the hard way.
i respect your opinion
i respect your knowledge
Larry you were right in December of 2011 when you said gold and silver were going lower. When in January of 2012 gold and silver dramatically rose I questioned your reasoning. I now applaud your insight when so many did not believe your story.
Wish I would have followed your advice.. Ken
Larry,
Thanks so much for saving my shirt!!!!!
Now, can you call the bottom prices for gold and sliver?
And, what is your best estimate of when in time, how far away, that this will occur?
All the best,
Ted
PS: Are you still looking for a correction in the stock market?
Larry,
You not only have the guts to speak your mind; but, you are one of a very few; that, permits your readers to comment. At least you offer your readers alternative investment choices when gold and silver are on the skids.
I am buying gold and silver, periodically; but, am now just buying the rare, first releases (MS-70); and, in the case of gold – – only the pure 24K – – .9999, quality. I just like the stuff. My holdings are for insurance purposes; with hopes to pass it on to Children and Grandchildren; to hold for that special emergency.
Have been in the Reno Metro Area for the past week, looking for a house or condo to relocate for Weather purposes. Lot’s of property for sale. The Catch: Rich Investors are continuing to destroy the Dream of ordinary Americans; by, rigging the game in bidding on foreclosures and short-sales; and, in some cases, regular resales. How so? Simple! Because there are now MULTIPLE Bidders on the, so-called, “good deals;’ and, wanting to gain the Number One Position with Sellers and the Banks; they are over-bidding by thousands of dollars $30 – $40K, in some instances; so their bid will be excepted; and they get a signed contract; knowing full well the Property will NEVER Appraise! By the time that information comes back; the other bidders have scattered; thinking the successful bidder was stupid; or, foolish; and, they are out looking for other properties.
When the Property fails to appraise; these Investor Vultures negotiate a new price; or, walk away. By this time, the Seller and the Bank, panic; and offer to take the new low bid; often times, less that what the Bank initially suggested it might take. This process is screwing first-time home buyers who are credit worthy and are able to put 20%, down.
You would not believe (or, maybe you would); how often this practice has occurred.
What do Investors do with the property? Splash some paint on the walls; install, new, cheap carpet; have the home or condo cleaned; and, then rent it for almost usury rates.
This would make an interesting Investigative Report to see how wide the practice is Nation-wide. Just another example how the rich are scamming the middle class and the poor. It just makes me sick!
For Your Information . . .
don larson
Larry, I recently was taken to task by Andy Hoffman.
You were right even though I am almost at a panic mode as a Seasoned Citizen of 73 and fully stacked in silver and some gold.
Guess the only thing I can do is WAIT WAIT WAIT.
Robert