Painting the Tape with Gold and Silver

Ed Wener

For those of us who have been watching the PM sector for awhile what happened these past few days was entirely predictable. How many times in the past have we seen Sunday night Asian spikes in the metals reversed with a vengeance on Monday morning? It’s one of the cartel’s favorite ways of Painting the tape.

Look at this table:

If we remove the Asian paint job we are currently 40c below Friday’s close in Gold and 80c below in Silver. Yet there is supposedly “panic” in the PM market as silver just had a “parabolic blow off”. The cartel apologists are out in force knowingly or otherwise falling for the made in Cartel-land chart. Typical is this piece by Puru Saxena (my comments in red)

“On Monday, the silver market experienced a key intra-day reversal. During Asian trading, the price of silver surged to almost US$50 per ounce (+5% intra-day), however during European trade, selling came in and the metal struggled to stay firm. Thereafter, when the US market opened, the price of silver plunged to below its previous close. In other words, the silver market experienced a classic intra-day reversal, which usually markets the end of a parabolic move.

As you know, we were expecting a serious pullback (very serious so far: 80c since Easter began) in the price of silver and it seems as though the medium-term correction is now underway. A dispassionate review of silver’s weekly chart shows the metal’s parabolic rise, which always (tu exagere, n’est ce pas) ends with an equally spectacular reversal. Although the silver bugs will argue with our assessment, we want to make it clear that there is no shortage of physical silver (of course there’s no shortage! Why else would the price rise from $17 to $47 in 9 months?) and the world is not running out of the metal (it obviously did at $17). Anybody who says otherwise is only engaging in propaganda and trying to separate you from your money.

At this stage of the game, there is no way of knowing how long silver’s correction will last (my guess til 1PM Thursday) but when you take into account the fact that less than a year ago, silver was trading at US$17 per ounce, you can be sure that the pullback will not be mild. Accordingly, if you are a trader and/or have significant exposure to physical silver of the related mining stocks, now may be a good time to book profits. (Puru, the silver stocks have already priced in $25 silver see tables below)”

One has to give the cartel credit for the ingenuity and profitability associated with the Asian Paint jobs. This can best be seen with respect to the PM shares. The PM shares do not, of course, trade during Asian trading so when the “key intra-day reversal” occurs they fall not from a high linked to the Asian high but rather from the previous high on the weekend close. Thus we see gold down 40c and the HUI shares down a whopping 4.1%. Anyone who shorted the Silver shares on Friday has made a lot more than 4% since then.

Now with respect to Puru Saxena’s advice to sell your silver stocks take a look at these sorry charts comparing Silver Standard and Hecla to the silver price. Neither one is anywhere near their normal potential:

Do these shares come close to pricing in $45 silver? Looks to me as if they are stuck at $25 Silver and should be double their current prices.

Cheers from Auckland, Ed Wener

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