This is What’s Caused Silver & Gold Buyers to Hold their Fire
Holding The Line
Since the rip-roaring good time that we stackers had in July, where silver soared from $17 to over $21, silver’s price has been taking a pause. It has(so far) been correcting through time: spending extra time around certain price points, and grinding sideways, to digest it’s very sizeable gains from the lows(in the $13’s) that we saw back in January.
During this pause however, something else has begun to be very clear: much of the big money has stepped away from the table, for now, and seems to be waiting before purchasing more silver and gold. Today I’ll be taking a key look at why that is, specifically in 2 areas, which should help shed some more light on why big-monied investors are putting on the brakes in silver purchases. Before I go into the reasons though, here’s the evidence that big money is adopting a “wait and see” approach to precious metals at the moment.
Sales Have Cratered
First let’s take a look at gold’s recent sales from the world’s largest mints. Below you will see that gold coin sales literally face-planted in the past 3 months. For instance, take the “Cadillac Coin” of the bullion world, the American Eagle. Sales of AGEs(American Gold Eagles) have declined sharply from this time last year. Ouch.
Switch gears to Perth Mint, which has seen sales of roughly 50,000 ounces of gold per month, recently drop from those levels by two-thirds(Two-thirds!) since spring-time.
Remember: the Perth Mint is the major bullion dealer for eager Chinese bullion stackers, who want quality products, reasonably close to their sphere of influence. When Perth sales go slack, it’s fairly likely that Chinese buying has also slowed.
“Well, Watchman, has mainland Chinese buying slowed at all then?”
Fantastic question, I’m glad you asked!
If you’ll take a look at the only bullion bourse left that actually matters in the physical realm(Shanghai) we can see that Chinese buying has also taken an enormous tumble in gold, in the last several weeks!
117 tonnes bought in the month of July! While that would be mind-blowing total in any other country….that’s a drop of roughly 60% in tonnage that China bought, year over year, in July. That’s the second lowest monthly tally of gold buying in the last 30 months.
It’s not just gold though. Take a look at silver for a moment:
For the first time in roughly a calendar year, silver sales at the Perth Mint didn’t remotely reach near 1 million ounces in a month. In fact, it fell nearly 50% in just one month.
US Mint silver sales have languished the same way.
So, now that we’ve demonstrated that bullion sales at major mints have languished, let’s take a look at why the big money is holding their fire for more purchases.
At the year’s beginning, bullion sales were flying high, because gold and silver’s price was quite low. Gold double tapped the $1,050 area(where India first announced they’d bought 200 tonnes).
Silver also had reached $13.50 in early 2016, in the lowest print since 2008, and millions of ounces were being consumed in bullion demand at every major mint each month. Those prices triggered furious buying, which lasted up and until July(despite silver’s price climbing higher).
Then something happened which caught even most of the major market players off guard. The Brexit vote came on June 23rd…and with it, twin, mini-parabolas in precious metals began immediately. The result was so instantaneous, that precious metals began spiking even before the vote confirmed that a Brexit had happened.
Over the next several days, silver shot up $4, from $17 to over $21: a price move of nearly 25%!
For the first time in over 2 years, silver was printing prices with a “2” on the front. This had an amazing psychological impact on stackers and investors.
Gold also spiked roughly $100 in just a few hours’ time! It was the beginning of the largest, most furious move seen since the summer of 2011.
The problem though, was those moves were too far, too fast for the buyers who are now dictating the bullion fundamentals: Asia.
India’s and Chinese bullion buyers are very smart price-wise, in that they’re very price sensitive. India has been buying gold and silver hand over fist for the last several years, but they’re bargain hunters, and a 30%+ move in gold, plus a 50%+ move in silver this year was just too much for them.
Remember: the Brexit vote produced roughly half of those gains just mentioned, in just a few weeks’ time!
Indian stackers know that such moves usually reverse somewhat over time, and have been waiting patiently for that reverse. Their strategy of buying on dips has certainly paid off, considering that last year, they were able to stack over 8,000 tonnes of silver.
China is the same story: their stacking pause has certainly, largely been a result of this huge price move in a short period of time. However, there is likely a 2nd component to all of this.
Exploding COT Short Positions
Brothers, we know that silver and gold are rigged. Never forget though that much of the big money is just as knowledgeable on that topic as you and I, especially in Asia. They know that Wall Street and London banks are at the heart of this dark con, and instead of getting angry about it, they use it to their advantage as often as possible.
That’s what they’ve been doing, as they’ve watched the COT short numbers on the Comex climb to all time highs(in silver). They’ve been waiting, because historically they know what usually happens after such extraordinary positions are taken by the banks. They know how foolish it is to fight those banks head on.
Instead they’ve decided to wait and see.
Silver’s open interest on the Comex grew to well over 1.1 billion oz, and JP Morgan and company are loading up hundreds of millions of ounces of fresh paper shorts. China and India’s billionaires know what will likely happen next, and they’re holding their fire.
That’s what I’ve been doing these past few months as well, I’m saving dry powder and waiting, just as they are. Even Mike Maloney has stated that he thinks it’s a likely thing that we’ll be able to buy more ounces for less cash over the next few months.
Now, let me make something clear: $20 silver, and $1330 gold are still excellent buys, compared to what they will be. That doesn’t change the fact though, that they’re less of a bargain than they would be at $18 or $1,250, right?
I don’t mind waiting, because I’ve already staked out a good position in silver. I don’t recommend anyone wait too long, unless they’ve already bought a decent position themselves. If you have staked a decent silver or gold position though, you’ve bought the luxury of being able to wait for price to come to you.
Here’s what I’m waiting for in the arena of price, before I go ahead with my next large purchase.
Retest of Breakout, or Breakout of Pennant Formation
The banks have built up their shorts for knocking silver and gold, that’s true, but remember, for several years, $18 was the line in the sand for the banksters. Every time that silver looked set to challenge and break above $18, it was capped hard…until the Brexit vote. After that it broke through like the Incredible Hulk.
The big challenge for silver now is to hold the line at roughly $18 on the way back down from $21. If $18 can be held, and big money sees enough value, they’ll step in, and starting buying hard around this area(or lower) again. I would certainly be loading up hard if we got even down to that range once more.
There is another circumstance that could set off a buying panic though. Gold and silver are “Giffen Goods”, that’s true, but given the standard operating procedures of our banking enemies the last 5 years, is it any wonder that big Asian buyers are waiting to pounce?
They know that gold and silver are coiling now in a pennant formation. If silver and gold can hold their ground, and begin a rapid ascent above $22 and $1,400, respectively, I strongly believe that the feeding frenzy that would begin in futures contracts would be overpowering. The effect would be a large, rapid gain toward $26 and $1,525….and lots of big money would be buying physical again, trying to lock down their supply of ounces where they could. Until that happens though, holding and waiting for confirmation(in either direction) seems the way to go.
Due to the precarious place we find ourselves, the bullion price situation remains highly explosive, and can turn on a dime. The recent price breakouts are a huge step, but for now, the next step is for silver and gold to turn old resistance into new support.
That has yet to be done, and big money is waiting patiently to see if this will happen.
Whether we retest old resistance, or we break out to the next levels, we need confirmation of the trend’s direction.
Either way, we won’t have to wait long to find out which direction they’ll move in. Until that next move however, I’ll be building up that dry powder, and waiting to fire, until I see the whites of their eyes.
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