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December Precious Metals Market Update - Taper Talk Again?

Fundamental Analysis:

While nearly everyone is preparing to celebrate Christmas, Hanukkah and the new year, there is not much to celebrate in the precious metals sphere. Both gold and silver seem to be eyeing their yearly lows. The majority of market commentators are pinning this on the renewed "taper talk" by the Federal Reserve. Yet, as Peter and our firm have countlessly defended, this is just empty speech. Tapering would effectively crash the party in stock markets and bond markets (As this article poignantly demonstrates). Moreover, tapering would only serve to reveal a false recovery propagated by implicit government guarantees, bailouts and artificial credit expansion which became precedent in 2008.

Think about it, are banks really better off? When choosing between banks, which question do you think comes up more often.

Is it…

Does this bank have a better capital outlay and management record than that other bank?

Or is the question rather…

Is this one of the "Too big to fail" banks?

I am guessing most are asking the latter or simply not using banks at all. This is a sign of the times. Our economy, particularly the financial and monetary spheres, are so heavily distorted that sound investment has been abandoned in favor of pure speculation in various asset classes. Government policies starting before 2008 and since have increasingly limited individual and corporate responsibility, choosing rather to subsidize losses via Government institutions who lack the profit/loss incentive that private corporations do. Add to that the Fed's commitment to buy bonds and assets that no one else will and you have an economic environment that feeds off excessive risk taking and volatility. Companies now borrow money to buy their own stock, sending the price higher and higher. And as if that weren't enough, the total amount of outstanding debt continues to rise. This shows a total disregard to creditors and leaves the average American investor scratching his head as to what to do.

With all this is it any wonder we see these articles popping up with greater frequency? Or this one. We are witnessing the beginning of the end…of the dollar. And not just the dollar, we are in the terminal decline of all fiat currencies. Some will fail sooner than others, but they will surely fail. Municipal bankruptcies like what we saw in Detroit will become more frequent. It is just a matter of time and make no mistake, the only thing the Fed is doing is buying more time. The taper talk is just to keep up an illusion of choice and power. The reality is that they have created a Financial Frankenstein and despite their most earnest efforts to tinker dials and turn knobs, they are not in control and there is no choice other than to keep the credit pumping.

And yet despite all of this, sentiment for gold and silver is perhaps at its lowest yet this year. Let's take a look at the numbers.

Technical Analysis:

The trend for gold and silver continues to favor the downside. Recent trading ranges have been established between $1244.00 resistance and $1209.00 support for gold. The figures for silver are roughly $20.00 and $19.00 respectively. Both metals are well below their 50, and 100 day moving averages. The question on everyone's mind seems to be whether or not the monetary metals will make new lows before the year is out. The lows for the year are $1180.00 for gold and $18.90 for silver. To put things in perspective, they are currently trading at about 3.75% and 3.25% off those marks.

Here is a snapshot of today's spot prices at 1:47 pm ET.

Today's New York Spot Prices:
Gold: $1,236.20 (+$4.50/.37%)
Silver: $19.85 (+$.21/1.05%)

What to look for in the news:

  • The next FOMC meeting is scheduled for the 17th and 18th of this month. You can expect to see more of the same volatility we have been charting over the course of the year. As we continue to maintain, tapering is not an option for the Fed unless they want to pull the curtain back from a phony and fake recovery.
  • Got Bitcoin anyone? Here are my thoughts…at least initially.

Bitcoin is a perfect example of what we are seeing in the broader investment community. It is a speculator's paradise. The dollar price per bitcoin continues to raise. Is it rising on fundamentals? Are there any fundamentals to bitcoin, really? Being able to pay internationally in a matter of seconds is pretty cool, but in my humble opinion, the growing popularity and price of bitcoin signals the underlying reality of a weakening dollar. It now takes over 1000 of them to buy a virtual coin. Now don't hear what I am not saying. I am not a hater of bitcoin. I have yet to buy any either. Bitcoin is not gold, but neither is bitcoin the dollar. That is precisely why I think it has such an appeal to a growing number of people. I'd love to hear your thoughts on the matter. Let me know!