How low can we go?

[Sparky]

First, a quick hug for anyone fretting about this most recent drop in PM prices. Gold to $1633 and silver to $31.52 earlier this evening. It's going to be okay.

Second, anyone who's turned off by technical analysis can stop reading now.

Taking a look to see how low we could go. Looking at the big picture, gold went on a beeline from $680 to $1920 from October 2008 to September 2011. That's 182% in under 3 years. Wow.

So a "normal" modest technical retracement would be to lose 38.2% of that gain. That would bring gold to a price of $1446. Also looking at trading volume, there was a high volume dip on May 5, 2011 that brought gold down to $1461. So it seems like a price somewhere around $1450 is in play. Gold didn't really suffer the summer doldrums last year, so it would be reasonable for it to attack that low price some time this summer. This could be preceded by a late spring rally to provide "hope" for gold bulls, only to be dashed during the summer. It takes something real discouraging like that to shake gold from strong hands. So don't be caught off guard.

Silver is so volatile that I hesitate to make a guess. (But that's never stopped me before!) Using the same line of thinking, silver went from about $8.50 to $49.50. A 38.2% retracement is about $34, so we've already blown that out of the water. A more severe 61.8% retracement would be near $24. The last standout high-volume down day for silver goes back to November 10, 2010; the low then was about $26.50.

Bottom line is that we shouldn't be surprised to see gold $1450 and silver $25 some time over the next 6 months, even if it this is preceded by a spring rally. This is not a prediction, so much as a big picture perspective of what would be totally reasonable price behavior following the phenomenal advances that took place from 2008-2011. So stay strong.

[Ladybugus]

Hi, I'm new to the site but not new to being a G Bug. I'm am coming up with " about" the same numbers as well as few other. One gives low numbers but doesn't seem plausible. The dollar is having its way right now and the higher it goes more room to fall. Same for gold in the inverse for the long that the lower it moves the stronger the future rally's like we saw in 08 until last year. This year is due for a fall, which were getting then wild ride next few years after IMHO. Martin Armstrong presently gives the high to come in 2017 on current trends but guessing we might have another correction around possibly mid or late can't say for sure 2015 again based on current issues then head up again. I agree not to be so troubled by this correction but welcome it as a opportunity to start a multi year up trend in both G and S in that normal corrections are a necessity. Which ever way you look at it Gold will always have value and looking back through history, can't say the same for fiat.

[Glass]

Thanks Sparky,

It always give me comfort when you post. I feel like it puts a floor under the price. My attitude is buy buy buy!!!

[madfranks]

If one dollar cost averages their purchases these drops aren't as bothersome. It's when one jumps on the bandwagon that one tends to hit bad timing.

[Twisted Titan]

The way to wealth in PM's

When up buy less
When flat buy the same
When down buy more

That "complex" strategey has beat the stuffings out of every several hundread dollar insiders investor report hands down

[mamboni]

First, a quick hug for anyone fretting about this most recent drop in PM prices. Gold to $1633 and silver to $31.52 earlier this evening. It's going to be okay.

Second, anyone who's turned off by technical analysis can stop reading now.

Taking a look to see how low we could go. Looking at the big picture, gold went on a beeline from $680 to $1920 from October 2008 to September 2011. That's 182% in under 3 years. Wow.

So a "normal" modest technical retracement would be to lose 38.2% of that gain. That would bring gold to a price of $1446. Also looking at trading volume, there was a high volume dip on May 5, 2011 that brought gold down to $1461. So it seems like a price somewhere around $1450 is in play. Gold didn't really suffer the summer doldrums last year, so it would be reasonable for it to attack that low price some time this summer. This could be preceded by a late spring rally to provide "hope" for gold bulls, only to be dashed during the summer. It takes something real discouraging like that to shake gold from strong hands. So don't be caught off guard.

Silver is so volatile that I hesitate to make a guess. (But that's never stopped me before!) Using the same line of thinking, silver went from about $8.50 to $49.50. A 38.2% retracement is about $34, so we've already blown that out of the water. A more severe 61.8% retracement would be near $24. The last standout high-volume down day for silver goes back to November 10, 2010; the low then was about $26.50.

Bottom line is that we shouldn't be surprised to see gold $1450 and silver $25 some time over the next 6 months, even if it this is preceded by a spring rally. This is not a prediction, so much as a big picture perspective of what would be totally reasonable price behavior following the phenomenal advances that took place from 2008-2011. So stay strong.

Good observations here and a good reminder that we have to accept these price gyrations and not lose track of the long term bull picture vis-a-vis gold and silver. Personally, I think trying to time these markets is futile. So I've parked all my paper capital in 80% gold/silver and 20% mining shares and I sit tight and let it ride and put my faith in the believe that the fundamentals will win over the long term. But long term can be very long, like years and years. I think market fundamentals are largely dead, and price is a function of government/Wall Street manipulation. If you consider my premise correst for argument sake, then consider the following:

I am a large bank and I can borrow virtually unlimited cash from the FED interest free. Therefore, I do not need to be profitable in the traditional sense. I can sell silver shorts naked forever if I choose, because I can always bankfill any shortfall in income with interest-free FED money. I can cover my silver shorts for profit during times of weakness. I therefore can never go out of business because the FED can expand it's balance sheet to feed me free money.

Presently, the FED is satisfying this need for free money vis Operation Twist. But once the FED runs out of long term bonds, they will have to monetize (create high power money out of thin air). That's when their balance sheet will explode higher. I don't know if this paper debt Ponzi will end in hyperinflation or deflationary default. I do know that only physical gold and silver will survive the financial holocaust. Everything else is up for grabs.

[EE_]

Many of us like being our own central bank by holding PM's
Many of us like not having greedy Jewish bankers watching over our money
Many of us like knowing our money can't be easily seized or locked up by any numerous reasons
Many of us know the Ponzi scheme will end one day
Many of us like knowing we can pass on wealth to loved ones without someone's greedy hands taking a big slice.
Many of us like knowing we have no counter party risk holding PM's
All of us know PM's have value, are real money and that the dollar is only a promise and a unit of debt.

[palani]

Had me worried for a while. I had to run and check my single $5 gold piece. Sure enough. It still weighs 1/4 oz and is still marked $5.

I don't know what I was worried about. It is only the fictional value that has shifted a little.

[Neuro]

Had me worried for a while. I had to run and check my single $5 gold piece. Sure enough. It still weighs 1/4 oz and is still marked $5.

I don't know what I was worried about. It is only the fictional value that has shifted a little.
Don't finger it too much, it will wear thin!

[madfranks]

Had me worried for a while. I had to run and check my single $5 gold piece. Sure enough. It still weighs 1/4 oz and is still marked $5.

I don't know what I was worried about. It is only the fictional value that has shifted a little.

I hate to tell you this, but a $5 gold piece isn't 1/4 oz, rather 8.24 grams of .900 gold, or .2384 oz.

[MarchHare]

Is the ticker on the top of the page missing for anyone else?

[Sparky]

Did anyone else catch this:

By Amanda Cooper
LONDON (Reuters) - Gold steadied on Friday but was still set for its largest weekly decline in three months, after top consumer India said it would double import duties on bullion and upbeat U.S. data this week fed optimism over the global economy, boosting risk appetite.

Customs duty on Indian imports of gold and platinum will rise effective March 17 after Finance Minister Pranab Mukherjee announced the move on Friday as part of measures to cut the deficit in his 2012/13 budget.

The bullion market relies heavily on Indian jewelry demand. Last year, the country imported a record 969 tons of metal. Mukherjee said on Friday the strong growth in imports had played a key role in widening India's current account deficit.

http://finance.yahoo.com/news/gold-edges-lower-heads-third-004339006.html

[Neuro]

Did anyone else catch this:

By Amanda Cooper
LONDON (Reuters) - Gold steadied on Friday but was still set for its largest weekly decline in three months, after top consumer India said it would double import duties on bullion and upbeat U.S. data this week fed optimism over the global economy, boosting risk appetite.

Customs duty on Indian imports of gold and platinum will rise effective March 17 after Finance Minister Pranab
Mukherjee announced the move on Friday as part of measures to cut the deficit in his 2012/13 budget.

The bullion market relies heavily on Indian jewelry demand. Last year, the country imported a record 969 tons of metal. Mukherjee said on Friday the strong growth in imports had played a key role in widening India's current account
deficit.

http://finance.yahoo.com/news/gold-edges-lower-heads-third-004339006.html
Great, that will put a floor on this market! Last time, when they deregulated gold in India, back in 1990, gold plunged like a rock, cause Indian gold smugglers got rid of their hoards. Now they will start building them again. I don't think the Indians appetite for gold will decrease one bit, just because the government decides to try and take a cut from it, it will just take a different route...

[Glass]

Just thought I'd poke this thread. Hows things looking now Sparky? perhaps the Indians found that other route for gold.

[Horn]

This is not a prediction, so much as a big picture perspective of what would be totally reasonable price behavior following the phenomenal advances that took place from 2008-2011. So stay strong.


2829

Like 33% increase in 3 years?

That's like, slightly inflationary.

[Xizang]

SPOT is now $26.85 and I would love to see it go down another $7

[gunDriller]

Is the ticker on the top of the page missing for anyone else?

yeah, it was missing for a while there.

the URL for it is

http://www.kitconet.com/images/sp_en_6.gif


i hesitate to speculate too much. it's tempting but it might be a waste of time.

Dan Norcini said in one recent interview that he thinks a fall below $26 will take silver to $24/ $24.50.

i think that the gold market & the silver market are liable to exhibit more 'default' behavior this year. i.e. where it can't deliver. MF Global was one example, customer funds ended up being transferred to JP Morgan, senior member of the Cartel.

central banks are consuming gold at a rate of about 2 x annual world production. and that rate is increasing, while production yields are dropping. i don't have enough information to calculate when that will run into a brick wall. but my feeling is, 3 to 6 months, and there will be a more overt default, as opposed to the sneak default of the MF Global collapse.

same for silver.


by 'default' i mean the paper price is whatever it is, but there ain't none in stock, and the spread goes to ballpark 30% instead of the more typical 5% to 10%.

[Plastic]

SPOT is now $26.85 and I would love to see it go down another $7


It just might...

From the turd.

Look, I can assure you that silver is in very tight supply and it is increasingly difficult for Buyers of Size to get timely, price-efficient delivery. This condition of the physical market will make it very difficult for silver to break down through $26. Difficult, yes, but not impossible. On a very short-term basis, it's certainly possible for silver to be run through $26. There has to be a considerable amount of buy-stops under that level. "Harvesting" them alone could drop price below $25 and, after that, selling momentum could take price all the way to $22. Heck, maybe even $20.


A very good read imo at link.

http://www.tfmetalsreport.com/blog/3940/lookout

[Sparky]

I think the retracement lows of $1446 and $24.00 described in the OP still look like rock solid floors, and we're heading into the time of year for the final test of this long consolidation. I'd look for the low to happen within the next 50 days. That looks a long way down, but it would set up quite a shakeout to clear the way for the next stable rise. Getting these shakeout lows to technically sound levels is actually a good thing for setting up the next plateau. At those low levels, fear sellers are knocked out of the game, shorts cash in, and fund managers show up with big money. Any price manipulation then flips to the long side.

[Xizang]

What kind of fool sells physical silver when prices are so low? I mean, anyone with any sense at all is joining the shark pack and is smelling blood. But who in their right mind sells at these prices ???

[Horn]

What kind of fool sells physical silver when prices are so low? I mean, anyone with any sense at all is joining the shark pack and is smelling blood. But who in their right mind sells at these prices ???

The poor.

[Xizang]

The poor.

I qualify as poor. But I'm buying what little I can afford right now.

[Horn]

I qualify as poor. But I'm buying what little I can afford right now.

No, no the rich poor.

[Xizang]

Buying with the crowd when prices are up, and selling in panic when prices are low, is a great way to go from rich to poor. Buy high, sell low, lose money and curse the metal, eh?

[Neuro]

No, no the rich poor.
Exactly! Margin calls for this class is a bitch!