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I’ll get right to the point …
First, gold’s historic collapse — losing as much as $233 in just the last four trading days, a whopping 14.7 percent … and $565, or 29.44 percent since its high in 2011 — is NOT over.
Second, expect a bounce to soon occur, but don’t buy into it. If you do, you will likely lose a bundle of money as gold heads even lower.
The same advice applies to silver, to copper, to platinum, to palladium, to crude oil and more. Their interim-bear markets are not over, not by a long shot. Ditto for natural resource stocks.
For now, I’ll confine this update largely to gold. I want you to have the important system support levels for gold from my trading models. That way, you will have a road map.
I’ll cover these technical levels first, then I’ll briefly review the fundamental forces driving gold lower.
Gold’s major support levels now lay at …
— $1,380. Gold is currently below that level.
— 1298.70
— 1244.90
— 1160.90
— 1028.40
—  993.90
Each of the above levels should temporarily hold once they are hit. But the operative word is “temporarily.” Based on my system models, gold will likely not bottom until it hits major long-term support at $1,028.
As for overhead resistance, there is plenty. For any bounce that soon comes into play, expect resistance to form at the $1,380 … $1,412 … and $1,458 levels.
As for the fundamentals driving gold (and other commodities) lower, they are the same forces I’ve been telling you about for many months now …
First, central bank money-printing has lost its impact on the markets. Why? Very simply put, there’s too much bad debt floating around the globe and there’s simply no way central bank money-printing can offset it.
Second, austerity measures in Europe and the United States are also overpowering the inflationary impact of money-printing.
Third, and most importantly in my view, the Cyprus confiscation of uninsured depositor money has completely turned the world upside down. Money is no longer safe in a bank in Europe.
That, in turn, is causing hundreds of billions of dollars to essentially go into hiding. But not in gold, which is subject to confiscation, real or imagined.
Instead, capital is largely going into cash, which is also bullish for the U.S. dollar, since it’s still the world’s reserve currency.
Fourth, Japan’s new aggressive policy to devalue its currency is also not bullish for gold. Japanese investors are plowing their money instead into their own stock market, and my sources tell me loads of Japanese capital is also fleeing to our stock market.
In fact, much of the selling in gold originated in Japan. It was just a week ago that gold hit a record new high in yen terms, due to the depreciating Japanese currency.
But instead of lining up to buy gold, Japanese investors queued up at gold dealers around the country dumping every ounce of gold they could get their hands on, even melting down jewelry.
Why? Japanese investors don’t trust their own government, and if push comes to shove with North Korea, Japanese investors want their money liquid and mobile. That means cash, not gold.
In essence, we are seeing what I call “Money on the Run” and its momentum is picking up, in Europe and in Japan. Panicked capital is going into hiding, but in cash and equities in the U.S. and Japan, not in gold.
Later, when everyone realizes that Washington has many of the same problems that Europe and Japan has, all of the above fundamental forces will flip back to the bullish side for gold.
But that time is not here yet.
In my special Money and Markets issue of April 3, and in earlier columns, I suggested hedging any metals or mining shares you owned via purchases of the inverse ETFs, the ProShares UltraShort Gold ETF (GLL) and the Direxion Daily Gold Miners Bear 3x Shares (DUST).
I also recommended the ProShares UltraShort Silver ETF (ZSL) for a play on silver’s downside.
If you acted on any of those suggestions, you’re sitting pretty. Hold those positions and stay tuned for further updates.
Best wishes,
Larry
P.S. The April issue of my Real Wealth Report publishes this Friday. Don’t miss it! If you’re not a subscriber, simply click here now to join. At a mere $89 for an annual subscription, it’s a bargain.
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.
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Larry;
Thanks for all your great info. I’m into silver. When its time to purchase silver again, is it better to purchase “Silver Rounds”, “Canadian Maple Leafs” “Australian Silver Coins” or pay the premium
price for “American Silver Eagles”
Thanks again RR
Dear Larry,
Why did you give such a clear explation on gold after it fell?
Larry,
I’ve been following you since 2011, good call sticking to your guns, must feel good for your analysis to finally come to fruition.
sign me up for Money and Markets please
Larry – you provide great insight in an easy to understand language when it comes to the future of gold, silver and precious metals in general. I’m curious – whose advice do you follow when it comes to other industry stocks.
Great info Larry! You really nailed it this time! Can you give your price targets for silver also?
When do think the bottom of gold prices for gold will be? and commodities in general?
Shaping up for an August bottom.
Read some articles indicating that the total real price to produce an ounce of gold is, on average, $1250. There was some suggestion that this reality would inhibit, in some way, a fall to or below that level. If so, then it could not remain at those prices for any length of time.
I was wondering if Larry had a point of view regarding those numbers, and if there are inhibitions to the price of gold falling based on them.
quid, unfortunately the futures market has disconnected the price of physical gold (and silver) from its production costs. Normally a low gold price would reduce production, causing less supply, which would cause prices to rise. However the volume of paper gold traded overwhelms the volume of physical gold, and it's much more easily manipulated. Institutions shorting gold futures contracts (and dumping longs) can drive the price much lower than production costs. The price crash last week started with massive shorting on the Asian market–prices were smacked down when volume was the lowest.
“The actual cost of production these days, best guestimate, is around $900. Nevertheless, markets can and often do fall below the cost of production. So I would not bank on “production costs†as containing any downtrend in the metals. Anyone who says otherwise simply has no experience with markets.†— Larry
Tim Iafolla “I disagree. Saying the futures markets are disconnected to the physical market for gold would be equivalent to saying the S&P 500 futures index controls the price of the S&P 500. It’s simply not so. Keep in mind there has to be a buyer for every futures contract sold, and vice versa. Even massive shorting requires someone to buy those short sales. The fact that sellers are more aggressive, and that buyer are weakening, is the more telling story. There are no big manipulations going on in the gold, or silver markets.†— Larry
Larry, It seems to me that you must have an informant working for JPM or you have a crystal ball. Either way you have been right. The problem is that when you get your buy signal there will be no Silver left for the average guy on the street. You will agree that the Gold and Silver paper and physical markets will soon go their separate ways. The paper market will disappear and the physical market will do a moon launch. By then there will be no physical Gold or Silver left for us little guys to purchase. I forget what your forecast is for a Silver high but don't you think people should buy while there is still some on the shelf?
You are soooo damn right! We little people should just hold on to real physical gold and silver … and buy more if you can afford them(only physical stuff).
“No, I do not agree with all this conspiracy, manipulation and shortage stuff. That’s conjured up by 1. People who have little experience with the markets, 2. Analysts who are biased and make money from selling you metal, and 3. Conspiracy theorists. The physical and futures markets do not disconnect; they sometimes very, but they do not disconnect. Keep in mind the stock market is a paper market too. Will that disappear? Hardly.†— Larry
Larry, nice call. You are one of the few who were realistic about the lower price movement.
OK…u were right on gold…I did get out at $1900 and stayed out because of your persistent advice to do so…the argument was compelling…I will now wait for your call to reinvest in gold but in the meantime there is lots of money to be made elsewhere.
Check this out: Hold on to your real physical gold; Let them play with paper gold!
" Today Jim Sinclair sent King World News one of the most extraordinary and powerful pieces he has ever written in his 50 years in the financial business. Below is what Sinclair, who was once called on by former Fed Chairman Paul Volcker to assist during a Wall Street crisis and grew up under the tutelage of his father Bert Seligman, who was business partners with legendary trader Jesse Livermore, had to say in this remarkable piece.
Sinclair: “Gold is freeing itself as an emancipation process from the gold banks control via paper gold that has no gold whatsoever involved in it. The thralldom of the gold price ends when the Evil Kings of Gold, the Gold Banks, are clearly proven to have no gold clothes on.
The emancipation of gold from paper is now in progress as physical demand increases unperturbed, and rather pleased by the lower price of the metal of kings. The central planning fools, in their effort to try and break the mystique of gold via a paper crash, have only ignited what once was sparks into flames for its physical accumulation….
“They do not understand that the day demand stands for full delivery at a contract maturity, even at these low prices, the fraudulent nature of the gold future, gold lease, and OTC gold hedges is revealed and therefore destroyed.
This could occur in gold at any price and need not be foreshadowed by a rise in the price of the metal. Since there is no gold anywhere and above ground supplies are now being significantly consumed by us, the physical gold market will set the price unencumbered by governments or manipulators. This freedom from manipulation by paper is the emancipation of gold.
Every time you buy one ounce of physical gold you cast your vote against the system and its masters, the banksters. These sociopaths rule by being bullies and committing fraud. Their days are numbered and gold is the ‘White Knight’ that is going to slay the evil dragon.
The biggest mistake the central planners have made is to depress paper gold, which they thought would stop the physical run on gold. They have ignored the fact that the Cyprus plan for confiscation of depositors' funds, originally at all levels of wealth, plus their clear call for nationalization of retirement accounts and funds, has gone viral around the entire world. No amount of denial will now stop the average person or the wealthiest of individuals from seeking other means to privatize and protect their wealth.
We all know that the next move of central planers can be predicted as currency controls. Consequently the trend to buying gold, seeking out of the system storage and closing down of large in the system deposit accounts and in the system retirement accounts, will now only accelerate.
The central planners in their infinite lack of wisdom have, by bombing the gold price, simply made the source of the problem more transparent and added huge short positions to the no gold behind paper fraud. KWN readers around the world have to keep in mind that the central planners have never, in all of history, succeeded in eliminating gold's role as money, or as a timeless protection of savings.
If the COT report does not reveal an enormous growth in the short position in gold then it will be revealed as being as much of a fraud as was the LIBOR rate. That is not to hard to understand when you recognize the exact people who gave you LIBOR are also the major architects of the COT.
We live in evil times wherein there will be no hesitation for the sharks to attack the other sharks when a severe weakness has been exposed. The Federal Reserve in NYC and Morgan may have a common tunnel between their precious metals depository, but given an opportunity, based on any weakness, either would attack the other for profit.
Governments annoyed by the prejudicial Cyprus 'bail-in' proposals, knowing that gold does not exist behind paper, need only accelerate their physical purchases to further expose the weakness that the now non-functioning fractional gold paper system has exposed.
This why two of the professionals that did recognize $1900 as a price the Banksters were most uncomfortable with also see this month as the culmination of an attempt to destroy physical demand by crushing the paper price. I cannot speak for Mr. Fennen, but I know that is Polny’s view. We are witnessing history here, and before this is over the physical gold buyers will crush the central planners.†".
Larry, I owe you an apology. You didn't know that Mr Bernanke was going to implement QE3 when he did. I lost some money when shorting metals at that time. But that wasn't your fault. Since then I got back into a short position a made that money back that I lost. You were right Larry. Thanks for all the good advice.
Next week, do you anticipate gold and silver to go down? The Fed is going to meet and they might print more money sending the metals higher. Would you still buy $dust? How about $nugt for the short run? Thanks for your comments.