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May 08, 2005

Gold to $200, Silver $3.50
by Steve Moyer

I'm not going to mention any names here but you gold and silver bugs (and columnists) just crack me up.

You are so "certain" that gold, silver, the HUI and the XAU are heading to the sky, you refuse to be objective or to use a reasoned approach in your analysis. You seem incapable of being able to step back.

As soon as gold and silver prices drop, as they continue to do as we speak, the conspiracy theories begin. Enter the court jesters, the jugglers, the monkey grinders and the clowns with the pants that fall down. You fellows really should take a step back and read your own stuff. It's downright vaudevillian.

IF "they" (the "They Brothers?") are so hell-bent on controlling the price of gold and silver; IF, as you allege, the They Brothers are willing to use all of these underhanded and illegal market means to shoot your precious metals investments in the foot; IF these markets are so easily manipulated by the Darth Vaderian forces that exist in the shadows, furtively obsessed with the price of these particular commodities, working at all times and in all places to KEEP THE METALS DOWN, WHY ON EARTH WOULD YOU SIT HERE TELLING US DAY AFTER DAY THAT WE SHOULD PUT OUR HARD-EARNED MONEY INTO THESE INVESTMENTS?

You have got to be kidding!

Your camp is making the strongest case of all to sell and to sell now! I certainly wouldn't want to risk my money if it could be so easily lost for reasons that have nothing to do with the purity of the marketplace and which even you metals bugs flat-out admit would be beyond my control.

If this is the way these markets actually work, as you constantly suggest, let me just say what I think about pushing my valuable chips over to that part of the gaming table.

Uhhhh, no thanks.

If the conspiracy theorists would take a valium and relax for a minute, they might learn that Robert Prechter, Jr., Steve Hochberg, Pete Kendall and everyone else at Elliott Wave International have been quietly, steadily tracking the price action of the metals during the recent, lovely metals run. Fact is, they've pretty much nailed it thus far. They are calling for a significant downturn, and they've made no mention of conspiracies or of secret central bank meetings or of men in dark trenchcoats lurking in the shadows of a Washington, D.C. parking garage. And despite the rally that got everybody's hopes of $3000 gold back on the front burner (and pushed Anna Kournikova fantasies over to the side for a while) the Elliott boys have been calling for the metals to take the same hit other assets will in the coming credit contraction and liquidity crisis (gold to just over $200, silver to $3.50 or below), which type of credit crunch/liquidity crisis deflation is consistent with what has occurred post-investment-mania each and every time over the past, oh, 500 years or so.

Like clockwork.

The sluggishness in the world economy is representative of a coming, slow-moving deflationary elephant, not hyperinflation. Money supply contraction points to deflation. The flattening of the bond yield curve points to recession and deflation. The Alan Greenspan "Conundrum," as to why interest rates are not following the Fed's 200 basis point-raised lead, points to deflation. Lack of pricing power for producers, squeezed by a rise in commodity prices, is a symptom of deflation. The breakdowns in the HUI and XAU anticipate metals price drops, which would be indicative of deflation. Even rising oil and gas prices point to deflation, as producers and consumers get squeezed and the economy bears the brunt of it. (Interestingly enough, however, now even the energy markets are taking their hits as deflationary forces show even broader signs of taking hold).

The handwriting isn't just on the wall. It's a virtual graffiti-fest.

If deflation is soon to be upon us, which I certainly believe it is, there is little to no chance the metals will avoid taking the same hit all other asset classes will. That's what a post-bubble shakeout does, my friends.

So sell your metals. Sell your metals stocks. Put those chips in your pocket for the time being, then whip them out in a few years when few others have much cash to buy much of anything. The good news is, when the time comes, those same Elliott boys are calling for gold and silver to go through the roof.

I'm looking forward to it.

Steve Moyer,
PonderThis.net

Steve Moyer is a columnist and assistant editor of the monthly newsletter, Ponder This.... (www.ponderthis.net). He has been an investment real estate broker since 1982. Contact Steve at StephenLMoyer@aol.com.

Copyright © 2005-2009 Steve Moyer

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