Markets Faint as Fed Pretends It Will Cut Stimulus

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.

Well, the almighty Fed spoke, and markets didn't like what they heard. Federal Reserve Chairman Ben Bernanke issued a statement Wednesday telegraphing a potential tapering of the Fed's $85 billion in monthly bond purchases before the end of the year.

The mere hint of a withdrawal of some Fed stimulus sent all asset markets careening on Thursday. Bonds sold off and the Dow fell more than 350 points to close below 15,000.

And as for precious metals, boy did they get smacked down – first in overseas Asian trading, then in the U.S. when the market opened here. All told, gold fell $75 – nearly 6% – on Thursday, finishing at $1,280. Silver suffered a single-day drop of over 8%! Prices for silver closed below the $20 level for the first time since September of 2010, some 33 months.

As of Friday morning, both metals are recovering some of the carnage, with silver coming in at $20.02 per ounce and gold at $1,296.

Not surprisingly, platinum and palladium also got hit this week, though platinum fared relatively better than the other metals. Platinum is down 5% on the week and currently trades at $1,369, $73 above the gold price.

The inability of the precious metals prices to hold above their lows from the April smash means that the charts are once again technically broken. Panic selloffs like the one that began Wednesday and picked up major steam yesterday can inflict massive damage – but they generally end in a very short order. So while more heavy selling in the futures markets is possible, the panic will be short-lived and may even already have concluded. Time will tell.

However, silver's plunge below $20 does raise some longer-term concerns. Frankly, we must now reassess whether silver is still in a major bull market or whether the 2011 highs near $50 were the top of the bull market and won't be revisited for many years to come.

Although the huge move down in silver certainly qualifies as a cyclical bear market, it is important to note that there can be cyclical bear markets within secular bull markets. In fact, it's quite normal. Gold and silver in the 1970s suffered a two-year cyclical bear market mid way through the secular bull market.

Gold prices fell 43% from high to low between 1975 and 1976. A lot of people thought the major bull market was over, but it wasn't. The biggest gains were yet to come, as gold went parabolic – rocketing from close to $100 an ounce to its 1980 peak of $850.

Since gold's 2011 cyclical peak at $1,900, prices are now down 33%. That's not out of the ordinary, and prices could even fall a little further into a final cyclical bottom before the secular bull resumes.

Yes, it does remain our view that this bull market isn't over and that the Fed won't actually stop inflating, despite its rhetoric and analyst pronouncements to the contrary.

The fact that all the precious metals bulls have been humbled and that even we atMoney Metals Exchange have had to question whether the bull market is still intact may be the ultimate contrary indicator. There are seemingly no true believers left in this market. Bullish sentiment this year has gone from bad to worse to non-existent.

This is truly unprecedented. Not even in 2008 did we see this kind of damage done by the Fed and the leveraged paper traders.

What's also unprecedented is the divergence between the futures market, which sets prices, and the physical market, where real demand is. For instance on Thursday Money Metals Exchange experienced its most active and biggest sales day of the year, both in terms total orders placed and total ounces sold.

I touched on this in last week's podcast, and if the strong retail purchases and central bank buying of physical metal holds up, we're going to see shortages at these prices. And shortages are an indication that the price-setting mechanism could be malfunctioning.

Though today, Money Metals Exchange is still able to offer the Australian silver kilo coins at a super low premium – and ship them immediately. We've extended our sale of these gorgeous coins – currently just $1.69 over spot per ounce, regardless of how small your order is Prices are low on our other silver products, including silver bars, silver rounds, Eagles and Maples, but there could be short delivery delays.

Premiums are likely to move higher if we see a further drop in gold and silver prices and/or if demand for physical metal stays at current levels. This type of smash in the paper futures market is likely to bring about a return of higher premiums on physical gold and silver as it has in the past.

If you want to take advantage of this unprecedented buying opportunity just visit our website www.MoneyMetals.com where you can place orders online through our secure shopping cart 24 hours a day 7 days a week. Or you can give us a call at 1-800-800-1865 and one of our no pressure and knowledgeable Specialists will be happy to about the silver kilo coins, or any of the other low premium products we sell – or answer any questions you may have if you're not yet ready to buy.

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 accuracy and with top notch service. Have a great weekend everybody.

Announcer:

Thank you for joining us for this edition of the Money Metals Exchange Weekly Market Wrap. Be sure to come back next week, and don't forget to subscribe to our weekly podcast through iTunes. For answers to all of your questions, or to discretely and securely buy or sell gold or silver coins, bars, and rounds, call 1-800-800-1865. Our knowledgeable and no-pressure specialists are standing by between 7:00 a.m. and 5:30 p.m. mountain time, Monday through Friday. Visit us at www.MoneyMetals.com or call 1-800-800-1865.