Technicals on Au

Murph:
I have been trading gold-related securities since 1979. Sometimes I trade futures and sometimes I trade senior golds and sometimes I trade options on gold but never - repeat - NEVER - do I use traditional T..A. to trade ANYTHING related to gold. The reason is that over the past 32 years in the investment business, I have learned to BUY "breakdowns" and SELL "breakouts" but until I joined GATA in 2007, I never actually understood the reason for it. It was simply an acquired observation that prompted such trading behaviour. After reading the superb commentary night after night for the past thirty months, it has slowly dawned upon me that the manipulations of the Cartel actually prey upon followers of T.A. in order to carry out the raids. If spot gold was being "spun" as having "major support" near some magical number, you could rest assured that gold would get hammered down through it. If there was "major resistance" at some other magical number, you could simply wait until it cleared "resistance" and then sell it because lo and behold, some mysteriously entity would put a punctuative HALT to the advance. This action is uniquely sinister.

An old pit trader I used to talk to back in the 80's told me that T.A. worked perhaps 50% of the time in the futures markets but, in his words, "It don't matter what system you use, in gold, you BUY breakdowns and you SELL breakouts...".

I go a step further in this assessment. If you think that recent trading in the gold futures pits has been frenzied, I would submit that in thirty years of battles in markets, I have NEVER seen more bizarre behaviour or "action" than in the SILVER futures pits. The move in gold from earlier this year from $880 to $1000-plus took SILVER to over $22 but the recent gold move to $1225 was accompanied by a move in SILVER barely above $19. I am astonished that the price action alone did not evoke a stronger cry of protest from the masses. You have a massive concentration of shorts all using JPM as the custodial broker and every $20 upward jolt in gold is accompanied by day after day after day of thump! thump! thump! as these thieves let all of the spotlights targeted on gold create the finest of all diversionary tactics (and that is what it was - a TACTIC) as they surgically manipulated the silver price and prevented the explosive move to $25 that would normally accompany a $200 advance in bullion.

Nothing in the text books of Technical Analysis 101 could ever explain this action. Nothing in Fundamental Analysis 101 could either. It CAN, however, be found in the playbook of the JPM's of the world. When they realized they were stuffed by the raw physical demand in the gold pits, they turned to its smaller, weaker schoolyard sibling (silver) and bullied it with both fists and hobnail boots.

There ought to be a law...

Whatever...
MB

National Inflation Association

NIA Declares Silver Best Investment for Next Decade

We are less than three weeks away from entering the next decade. The most important thing you need to know entering 2010 is that silver is the single best investment for the next decade. In our opinion, investing into silver is the only sure way to tremendously increase your purchasing power over the next ten years.

Throughout world history, only ten times more silver has been mined than gold. If you go back about 1,000 years ago between the years 1000 and 1250, gold was worth ten times more than silver worldwide. From year 1250 to 1792, the gold to silver ratio slowly increased from 10 to 15 and the Coinage Act of 1792 officially defined a gold to silver ratio of 15. The ratio remained at 15 until forty-two years later when the ratio was increased in 1834 to 16, where it remained until silver was demonetized in 1873.

The gold to silver ratio remained between 10 and 16 for 873 years! It is only over the past 100 years that the gold to silver ratio has averaged 50. History will look back at the artificially high gold to silver ratio of the past century as an anomaly, caused by the dollar bubble and the world being deceived into believing that fiat currencies are real money, when in fact they're all an illusion. Next decade, the fiat currency experiment will end badly in a currency crisis. The wealthiest people will be those who bought silver today and were smart enough to research and pick the best silver mining stocks.

While the vast majority of the gold ever produced remains sitting in vaults, 95% of the silver produced has been consumed by industry for thousands of applications in such tiny amounts that most of it will never be recycled and seen on the market again. Nobody knows the exact above ground supply of silver today, but most likely it is somewhere in the neighborhood of 1 billion ounces. That's a total worldwide market value of only $17.4 billion, when the world has over $7 trillion in foreign currency reserves, mostly in fiat currencies that they will need to diversify out of due to rampant inflation.

Besides the fact that the world has been ignoring the monetary value of silver, silver prices are artificially low due to a large concentrated naked short position. It's not a coincidence that the day silver reached its multi-decade high of over $21 per ounce in March of 2008, was the same day Bear Stearns failed. Bear Stearns was a holder of a massive short position in silver. In our opinion, this was likely a naked short position because there is nobody in the world who owns such a large amount of silver for Bear Stearns to have borrowed.

The reason why we believe the Federal Reserve was so eager to orchestrate a bailout of Bear Stearns, is because Bear Stearns was on the verge of being forced to cover their silver short position. Because the silver market is so small and tightly held, if Bear Stearns was forced to cover their short position, silver prices could've potentially rose to $50 per ounce or higher overnight. The world would've seen how economically unstable our country is and confidence in the U.S. dollar would've rapidly deteriorated.

JP Morgan still holds the silver short position they inherited from Bear Stearns. The concentrated naked short position in silver today is the largest short position in the history of all commodities, as a percentage of its market size. Eventually, JP Morgan will have to cover this short position or it could jeopardize their existence.

The best evidence that the short position in silver is naked and not backed by real silver, is the differential between what silver trades for on the Comex and what real people are willing to pay for physical silver on eBay. Every hour on eBay, there are dozens of one ounce silver coins selling for approximately $25. That's about a 43% premium over the current spot price of silver. With so much demand for physical silver, we doubt the silver shorts in the paper market will be able to manipulate prices downward for much longer. A major short squeeze could be right around the corner and silver could take off in a way that shocks even those who are most bullish.