A break down on the current drop in precious metals

Harold,

I recently asked our precious metals adviser to get me a break
down on the current drop in precious metals and asked him to
provide our RTR membership with some insight. Below is his
response.  I hope it helps you to navigate the collapsing dollar.

- Gary

This is the greatest Silver and Gold buying opportunity of
all time, or is it the end of a bull market?

The bull market is far from over. To say the precious metals
bull market is over is as foolish as saying there was never a
bull market in the first place. It's a documented fact,
throughout history, all bull markets last 14-19 years. This
bull market has been going since 2001. So we still have at
least, another SEVEN years to go. Commentators, who believe
that the commodity bubble in silver and gold has popped, don't
understand what drives them in the first place.

Remember, if the fundamental reasons that drive a market don't
change... The market direction has No reason to change.

The fundamentals have not changed! High energy prices,
government over spending, the under-water banking system,
the credit-mess, inflation and especially the mass production
of the FIAT based U.S. Dollar.

The key fundamental reason that drives Gold and Silver is the
mass production of the U.S. Dollar.

Silver, especially Gold are not commodities; they are money
and nothing else.

Intelligent investors and main street people, whom have piled
into gold and silver, have done so for protection.  They are
not buying metals because they think that the demand for
electrical conductors or jewelry is going to go through the
roof. They are buying it for protection against the devaluation
or outright devastation of the U.S. Dollar.

Ask yourself; is the devastation of the U.S. Dollar over?
Not even close! Wall Street has always used the old smoke
and mirror trick of currency index markets, where they trade
one currency against the other. 

Think of it like a wrestling match, they pin two equally bad
FIAT based currencies against each other to see who's worse
off.  The recent rise in the dollar index does not mean
inflation has slowed or stopped, nor does it mean the Federal
Reserve stopped printing money. Bottom line, inflation is
caused by a devaluating dollar. The devaluating dollar is
caused by the mass production of paper currency.
 
The un-Federal Reserve can never stop printing money. More
and more worthless paper money has to be pumped into the
system in order to keep the "ponzi scheme" going. Like all
schemes, they always come to a devastating end.

The real question is, how close are we to that end? You
can do the math, since the 1913 inception of the Federal
Reserve; the U.S. Dollar has lost over 97% of its purchasing
power. Every time the Federal Reserve bails out another bank
and "adds liquidity" to the tune of Trillions of dollars; it
creates money out of thin air, creating more inflation. In
turn, the purchasing power of your money lessens, despite
what the U.S. Dollar Index is saying.

Currency index markets are manipulated. Don't believe it?
Look at the Japanese Yen; everyone knows it's artificially
suppressed by its internal government in order to make their
goods more affordable for the rest of the world to buy. Japan
is a net exporter... They need the income!

The recent drop in gold and silver, resulting in the rally
of the U.S. Dollar, is nothing but a short term manipulation
caused by the unwinding of hedge funds and central banks that
are notably walking away from the U.S. dollar.

The U.S. Dollar is now seen across the world, as a liability,
not an asset.

All markets swing like pendulums. Many times, they swing too
far one way and then too far the other. Gold and Silver prices
became overbought, they went up too high, too quick. The same
market funds that were short dollars, betting the dollar down,
were long silver and gold. Once major hedge funds started
unwinding their short dollar positions, they also took profits
in their net long metals positions.

This created a snow ball effect. Meaning, the drop in gold and
silver were "technically-based". Futures traders who leverage
the market price of gold and silver, saw the volume and open
interest swing from net long (higher forecast) to a net short
(lower forecast). Plus, the charts and indicators, indicated
sell signals which added to the sell-off.

What does it all mean?

The market pendulum has gone too low, too quick: gold and
silver are now extremely oversold.
 
Look at the numbers: Silver, which is always more volatile,
is down 37.4%. Gold, on August 15th, was down to $787.50,
that's a 21% correction, If you're in it, I know this can
seem harsh and hard to stomach, but these numbers are not
eccentric, they are quite normal. The dollar amounts may
seem out of the ordinary however, the percentage moves are
quite common.

In the world of technical trading and charting, all traders
use one key technical indicator called the "Fibonacci
Retracement" which states that in any bull market there will
always be a 38% retracement and up to a 50% retracement,
before the market begins its next "leg-up".
We are here!

Take a look at silver prices, from the recent high, down to
November 2001 at $4.025, a 50 percent correction would mean
silver prices would be priced at $12.30, which was practically
seen on August 15th.

On the other hand, if gold and silver prices are correcting
the 2006 to 2008 price gains, then gold hit its 50 percent
correction level on Friday August 15th at $782.60, and to give
you an idea of how oversold silver really is, silver now
finished its 75% correction.

If that sounds absurd or just plain crazy?  Think about
this....Five years into a bull market in 1987 the Dow plunged
more than 30 percent in just four days. Some called it a crash
and the end of a bull market.... those commentators were wrong! 
Remember, all bull markets last 14 to 19 years, that's why the
stock market rose more than 10 times in the following 12 years.
Meaning, the stock market is now in its 17-18 year run. Again,
bull markets runs only last 14-19 years!

Bottom line: Gold and Silver remain in a powerful bull market
with another seven or more years to run to the upside.

The bull market gods are handing you a gift: Buy!

We have probably seen the bottom. You can expect gold and silver
markets to trade in a range, in the following days, up a couple
of days and down a couple of days..... That's a good sign. That
means the market is holding its support levels (floor).

The last thing to consider is that the U.S. Dollar is suppose
to go up in August, gold and silver are suppose to go down in
August as well.  We have seen this pattern every year for the
past 34 years. You can also see for yourself, that same
seasonal chart indicates, gold is about to make its largest
move to the upside for the year.

In 34 years it's never been wrong!

Take a look: http://www.goldworthfinancial.com/html/seasonal.php

In closing, the fundamental reasons that have driven gold and
silver prices to exponential highs for the past seven years
have not changed, therefore the market trend/direction will
not change.

Gold and Silver will continue going higher and the U.S. Dollar
will continue to devalue.

The FDIC, expects a run on the banks, the question is not "are
more banks going to fail" the real questions are how many and
how bad is it going to get.

The "wild card" is our government's hidden or not so hidden
agenda against Iran. If and when we take any action, the stock
market will plunge and the U.S. Dollar will Crash.

For or against wars, no one can argue, we can't afford them!

In my professional and personal opinion things are going to
get worse before they get any better.

If you agree, start protecting yourself.

Accumulate Gold and Silver, before prices go up again.