Now is shaping up to be an extremely pivotal period for the precious metals markets.

Announcer:

Welcome to Money Metals Exchange's weekly market wrap podcast. Helping precious metals investors during these treacherous times. Now, here's this week's market wrap with commentary and analysis from the fastest growing precious metals dealer in America, Money Metals Exchange.

Mike Gleason:

Welcome to this week's market wrap podcast, I'm Mike Gleason.

Now is shaping up to be an extremely pivotal period for the precious metals markets. And by "extremely pivotal," I mean the kind of setup that occurs only once every few years.

The last time the market presented us with an opportunity similar to what it's presenting now was in late 2008, when panic selling hit the metals. Prices subsequently took off like a rocket from there.

Could we be on the verge of witnessing a similar outcome? Well, let's consider the evidence.

First, let's talk about sentiment. Legendary investor John Templeton made fortunes by buying assets on the cheap, against the backdrop of what he called "maximum pessimism." That's what seems to be manifesting in the gold and silver markets right now.

Jason Goepfert over at Sentimentrader.com produces a public opinion indicator for gold prices. He shows that public sentiment toward gold has plunged to multi-year lows. Everyone, it seems, from George Soros to fast-money hedge funds to John Q. Public wants out of gold.

Extremely negative sentiment measures are confirmed by extremes in the way traders on the futures market are positioned. The most recent Commitments of Traders report released by the Commodity Futures Trading Commission shows hedge funds and other large speculators piling on the short side at near record levels. They've unleashed just about everything they have to drive prices lower.

Yet from a big-picture perspective, all that the short sellers have managed to do is drive gold down toward major support levels within the sideways trading range that we've been in for over year now. No major breakdown has been achieved.

Gold still holds above major support around the $1,550 level, currently trading at $1,585 per ounce. Meanwhile silver still trades two dollars above last summer's lows of $26.50, coming in at $28.75 per ounce as we're recording this podcast on Friday morning.

In contrast to the managed funds, who are holding their smallest net long position in gold since November 2008 and are heavily short the market, the commercial hedgers are at their lowest net short position since December 2008. The setup is extremely bullish. It's basically the same one that we saw at the major panic bottom of late 2008. Once momentum shifts to the upside, the speculators who have piled on bearish bets will be forced to unload their positions, triggering what's known as a "short squeeze."

A major bottom like we saw in late '08, and an end to the consolidation period precious metals have been in since mid 2011, appears imminent. Now is an opportune time for hardy long-term investors to increase their allocation in precious metals.

We certainly realize it's been frustrating so far this year to be a holder of gold and silver. And I freely admit that we did not expect this kind of fire sale to materialize. It's purely a result of extreme lopsidedness in the futures price-setting market. Every once in a while these things happen, as selling pressure fuels negativity, which fuels more selling, until the selling reaches an exhaustion point.

What's transpired recently in the paper markets has little to nothing to do with the long-term fundamentals of physical gold and silver, and has little to nothing to do with the outlook for the value of the U.S. dollar. The fundamentals produce the major trends, not hedge funds or bullion banks. And as far as we can tell, the major trend for the dollar remains negative and the major trend for hard assets remains positive.

Years from now, I suspect that you'll be able to look back at the recent market action as just another counter-trend downdraft. Perhaps you will even be able to congratulate yourself for having been brave enough to buy precious metals in the midst of maximum pessimism.

Well that will do it for this week's market wrap podcast, thanks for listening. This has been Mike Gleason with Money Metals Exchange reminding you that we remain fully committed to getting you the most value for your depreciating dollar... with speed, with privacy, and with top notch service. Have a great weekend everybody.

Announcer:

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