Just five days ago I posted Interest Rates To Soar Soon! In that post I said:
With the dollar falling, commodities moving higher, and the U.S. monetizing its debt, someone soon will demand a higher return for buying our bonds. I think that time may come within the next several weeks.
At the bottom of the post I wrote:
Barring a collapse in precious metals, expect higher interest rates soon.
In just a few days Gold has dropped from $1,575 to $1,461, Silver from almost $50 to $34.19 and Crude Oil from $115 to $98. Interest rates have fallen again to 4.26%. Why didn’t I see the collapse of PMs and Oil coming? I realized that Silver was going vertical, but thought maybe the USD is going to fail. I recommended that my sister buy Silver in August last year at $17 or so. She finally came in on Easter at about $48!
Porter Stansberry had this to say:
When central banks sold gold in the late 1990s, the metal bottomed. Now they’re buying. We think it’s proof we’re right. Since when? What else can it be but a top, even if it’s only an interim top on the way to much higher gold and silver prices (and much more central bank and pension-fund buying)?
Mexico’s central bank just bought 100 tons of Gold!
Now I think a lot of this selling was done by them, the powers that be (TPTB) who don’t want to see Gold go up and who have a huge short position in Silver. There’s also the idea that is gaining credibility that the economy is rolling over, maybe due to the end of QE, is it 2 or 3? That would explain oil dropping.
But what really has changed in a week? Silver is still in backwardation. The eligible Silver at Comex just dropped another 92,000 ounces. New jobv claims came out today and the number shows no improvement, even blew away analyst estimates by its pessimism. Housing starts were the lowest, 500,000, since records were kept and the NYT reported:
“The economy lost steam in the first quarter. Growth in personal consumption â€” the single largest component of the economy â€” slowed markedly. Business-related construction cratered and residential construction fell. Exports stumbled. The only unambiguous plus was continued business investment in equipment and software, which is necessary but not sufficient for overall growth.
In all, economic growth slowed from an annual rate of 3.1 percent in the fourth quarter of 2010 to 1.8 percent in the first quarter of 2011….”
What it all means to me is that the FED can “inflate or die.” I expect even more money to be printed and thrown into the economy to fuel more malinvestments, not just in this country, but around the world.
I quoted David Banister at Market Trend Forecast this week with his outlook for Silver. He wrote:
I expect Silver to correct to the 40 to $42.75 areas based on my Fibonacci work and Elliott Wave views, and after this 4th wave consolidation we will see a surge to as high as $60 per ounce.
Full disclosure: I own Silver, Gold and precious metal stocks and have since 2001. I hate weeks like this, but I don’t plan to reduce my holdings at all.