Controlling the Beginning Stages of Hyperinflation by Manipulating the Precious Metals

The tactic by the Fed and Central Banks is to inflate the stock markets while manipulating the price of gold and silver lower.  This achieves two goals, 1) it reassures the public’s faith by pumping up stock prices while the economic indicators continue to deteriorate and 2) it elevates the dollar while it destroys market sentiment in the precious metals.

So far, the strategy has worked.  Some of the toughest gold and silver bugs are becoming extremely frustrated and downright bearish.  You can’t blame them as this is typical human psychology.   Although, extremes and manipulations never last forever and at some point in time they reverse.

If we look at the next series of charts, we can see just how extreme the gold & silver markets have become.  In typical inflation-hyperinflations, stock and commodity asset prices rise together.  However, since the Fed announcement of Q3, only certain asset classes have risen — mainly stocks, real estate and to a lesser extent, bonds.

Dow-Silver Ratio

In August of 2011, you could buy 250 oz of silver for the Dow Jones Average, however today, it takes over 650 oz of silver to purchase the Dow —  an amazing 160% increase.  Furthermore, you can see just how extreme the Relative Strength Index has become.

Let me clarify my position on Technical Analysis.  Most of those who read my work, know that I have stated that technical analysis is meaningless in a rigged market.  I truly believe this to be true as it pertains to forecasting short-term moves in the prices of gold and silver.  On-the-other-hand, using charts to show trends and extreme patterns is useful.

The disconnect of silver after QE3 really takes place around Nov 2012, when the Dow-Silver ratio had fallen to 375 oz.  This is the same for gold below:

Dow Gold Ratio

In this chart we can see when the price of gold peaked at $1,900 an ounce, you could buy 5.7 oz of the yellow metal for the Dow Jones Average.  Today it takes 10.7 oz of gold (85% increase) to equal the value of the Dow.   As I mentioned above in the case of silver,  if you look at chart in Nov 2012, you will see how the Dow-Gold ratio fell to approximately 7.2 oz.  Both gold and silver disconnected from the Fed’s inflationary program at the very same time.

Even though Dow-silver ratio has nearly declined twice as much as the Dow-gold ratio, the HUI index has suffered much worse:

Dow-HUI Ratio

Here we can see that in Sept of 2011, you could have bought 17.5 shares of the HUI compared to the Dow Jones Average, but it takes an amazing 58.5 shares today.  Thus, the Dow-HUI ratio wins the extreme trend award by losing 234% of its Sept 2011 value compared to the Dow in less than two years.

Anytime there is an extreme trend in a stock or commodity, it always reverses.  We cannot give a date when the trend will reverse as many using technical analysis have tried and failed, but we can safely say… it’s just a matter of time.

Precious metal sentiment is not only in the toilet, its down all the way in the cesspool.  Again, the Fed and Central Bank policy is working.  They have deluding the public into believing their 401ks, pension plans, stocks and etc are safe investments in a deteriorating economy, while at the same time destroying the faith in owning gold and silver.

I would like to remind the reader,  all bear markets follow the same trend.  At the top of the market there is huge volume of buying, but when the bubble bursts and the market declines, volume disappears.

However in this supposed MSM touted gold and silver bear market, the opposite is taking place.  As William Kaye spoke about this in his interview on KWN, when the price of gold and silver were taken down, physical buying in the Asian countries increased 4-5 times.  How can buying increase in a bear market?  It can in a disconnected manipulated market.

Many frustrated gold and silver investors today are searching for any articles or any information that validates holding onto their precious metal investments.  This is the simple rule of thumb — if you feel euphoric, it’s time to sell, and if you feel sick to your stomach it’s time to buy.

Lastly, the fundamentals for the precious metals are better than ever even though  it is not reflected in the paper price.  The most important aspect in understanding the true value of gold and silver is their ability to be STORES OF TRADE-ABLE ENERGY VALUE.

More on this in upcoming articles and posts.

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32 Comments on "Controlling the Beginning Stages of Hyperinflation by Manipulating the Precious Metals"

  1. Great article. Hold. Stack…wait…. rinse repeat.

    GUY

  2. Excellent article and analysis (as usual). Please keep them coming!

    Well done.

    – N

  3. So arrest all the criminal bastards and the truth will come out about all of the manipulation by the fed and the bullion banks.
    Me thinks that is what is ready to occur. Are you ready????

  4. Glad to see we aggregated this article at GoldSilver.com – nice work!

    – james

  5. Everyone… I appreciate the comments.

    James… thanks for stopping by and yes I also appreciate you posting the link to the article on GoldSilver.com. You all do a great job over there.

    steve

  6. sick to your stomach??? I am actually LMFAO especially when this all falls apart all the real men who withstood this obvious manipulation will still have their PM,s and be glad they weren’t deceived

  7. Ground control to Archangel, that isn’t going to happen. Most of us are living on mother earth.
    The best we can do is prepare ourselves and our family’s.
    Don’t be scared mother earth need’s a good culling of the herds.
    .

  8. SRSrocco said, “The most important aspect in understanding the true value of gold and silver is their ability to be STORES OF TRADE-ABLE ENERGY VALUE.”

    So True, I am enjoying your quality outlet of truth and the EROI view of things as always!!!

  9. I’m thankful to the Banksters for allowing me to purchase more PM”S at a discounted price.
    After that they can be lined up against the wall and shot.
    Steve.

  10. Deathtothecreature | May 15, 2013 at 7:44 pm | Reply

    SRSrocco,

    I have been reading your articles for some time now and very much enjoy your work. I appreciate the time and ENERGY you put into your work. Really great stuff!!! Also, congratulations on your new site. I find it very comfortable to navigate and read. Well done Sir!!!

    -John

  11. For those of us with income streams and extra fiat at the end of each month, is it best to place that in a paper market of a physical asset? I trust the latter.

  12. Thumbs up and kudos to SRSrocco for the Articulate, concise and extremely unique way to present this information.

  13. I’m thankful to the Bamksters for allowing me to purchase more PM’s at a discounted price.
    Steve.

  14. Thank you for all your hard work and informative articles SRSrocco. The info you provide always re-affirms my convictions in stacking.
    All the best,
    RG 😉

  15. I tried to explain the PM manipulation to a Circuit Court Judge who is a dear friend, and she siad she is dead set AGAINST PM even though I showed her two sets of coins, 1965 and later worth $1.35 and the other $.85 pre 1965 and the latest print out from Coinflation and the KNW reports. She is comfortable with her 600K IRA and her State pension. I gave up! She should have been intelligent enough to gather the facts before making a decision. Thoughts??

    • Stacker… I know your frustration. Most people cannot get their mind around precious metals and what they mean. You see precious metals do not offer any rate of interest. In a falling energy environment — which is coming, receiving interest on investments will become increasing difficult

      steve

      • I am working on my Masters Degree in Monetary Economics through MIT and cannot understand why seemingly intelligent people can not set aside their preconceived notions to consider the new and ever changing paradigm. Antal Fekete is right, despite his age of 81. I am saving my Dad but my friends don’t listen. History is being made, and the AU, in my opinion, is never coming back to the US.
        Enlightened and frustrated.

  16. I wonder, when did they start High Frequency Trading? The reason I ask doesn’t have much to do with algorithms or technicals. It has to do with the old concept Time is Money.

    What I mean by that, is I believe HFT is simply the latest way TPTB are Leveraging Time, and if you understand that Gold is Money and Time is Money, perhaps you see the correlation that Gold is Time.

    The bottom line is, you can’t pull on a flower to make it grow, it requires time. Of course, technology has allowed mankind to enter this warp zone of time and if anyone knows anything about relativity, there is a warping that occurs as a mass approaches the speed of light.

    I would say, all these delusinal things we are observing, is this Warping occuring. The problem is, mass can NEVER reach the speed of light. Mass goes to infinity as it approaches that speed. The only thing that can go at the speed of light is something that has been converted from a mass object to pure energy.

    How does that translate to what we are seeing? I would say everything will be forced to a complete stop. “Time will stop”. Not literally. Wouldn’t that be the same thing as being eternal? Unfortunately, in that new world, when that happens, Gold and Silver will not have the value any of us think it will.

    It may just be a shiny piece of metal.

    The point I am making is Gold makes little difference to a person that is dead or that is eternal. If you have everything you need, what value is Gold? Gold only has a value in a world that has finite resources where you can gain an advantage over another.

    Just thinking out loud.

  17. I am prepared for next stack, when the price of gold will be attack 1300-1290 USD/oz.
    Thank you, for your web.

  18. Regarding ROR. Wasn’t it Will Rogers that said, “The return of your money is more important than the return on your money.” ?? Regarding the “waiter” or “whener”, would you rather be early to the party, or late, by even a minute, after the door is closed? A person who claims they always buy at the bottom and sells at the top is a liar. Just trying to help those interested in listening and learning.
    Stirred, but not shaken. Cheers!

  19. If one has followed gold since the seventies and seen the economic cancer swell from the THATCHER/REAGAN switch to irresponsible economics, then this “correction” in gold is long overdue, expected, and, normal.

    Reminder: When the United States was a balance sheet healthy nation in 1980, gold peaked at $875 and the DJIA closed that day at 871. (Gold has inverse relationship with stocks.)

    Today, the United States government is insolvent and the Central Bank is trying as a last resort to keep the boat afloat by printing money, a motal sin in macro economics.

    So do not be concerned about the drop in gold. Be concerned about the effects of global hyperinflation and what that could lead to.

  20. Let`s keep in mind that crimes are being commited and they will ultimately pay for bringing down the economy. Actually maybe the world economy. Everyone will do whatever it takes to save themselves
    .Economics including technical analysis of metals stocks bonds are bulcrap at this point .
    Holding paper won`t save you. First food ,water ,shelter ,whikey toilet paper and some silver and gold coins may keep you functioning.l.

  21. Accepting that Energy=Money then gold would in tangible form not be replicated. Unlike the fractalization of paper money which was based on the belief in unlimited supply of a commodity such as oil, gold has a limit and this limit in and of itself sets a boundary on all currency exchanges thereby creating a measure of value and a hedge against debt. Anyone who owns gold especially in a debt based currency has been essentially extricated from cyclical waves, markets and of course potential hyperinflationary events.

    • RRoss… very true. Most analysts fail to understand certain important aspects as it pertains to the oil market.

      1) the decline of net oil exports

      2) the falling EROI – energy returned on invested

      First, even though the world has added more oil supply for the past several years, net oil exports peaked in 2004. Since then, the price of a barrel of Brent Crude has nearly tripled.

      Second, Shale oil and tar sands has help offset the decline of convention crude oil production. However, these two oil sources suffer from extremely low EROI. Shale oil has an EROI of 4-5/1 and tar sands about 2-4/1. Modern societies need at least 8-9/1 to survive and probably 10/1+ to sustain itself.

      Lastly, peak oil and the decline of net oil exports will destroy the growth of global gold and silver supply. However the falling EROI will make a bad situation much worse.

      steve

  22. I live in Bangkok and with the fall in price of gold yet again many of the small gold shop have removed ALL their gold barrs for sale. People are buy what evers in the shops. It truly is a constant free for all. At some point the shops will be enpty of gold bars. Here owning paper money is only for trading. NO ONE keeps their wealth in paper only gold.

    After the weekend trade in the many businesses here the chinese traders are queuing to exchange their Bahts for gold. Many traders put $300,000 at a time on the counters of the hundreds of gold shops here in the city.. Buying gold is about as difficult as buying a hot dog from a vender on a street corner in America .. NO name is asked for. NO asking where ya get the money from, NO ,where ya live , NOTHING WHATSOEVER.
    No paperwork . The ONLY words from the shop keepers is Thank for using my shop.

    This is the land of the free.

    • Roger… thanks for sharing your experience over there in Bangkok. For sake of clarification… did the owners of the gold shops removed the gold because the price was so low, or it is because everyone is buying and there is not gold left?

      Very interesting.. India is also dealing with the same shortages as their Banks and Trading Houses only can get 10% of their orders filled.

      steve

  23. Wow, what a great article…….. tuned like a steinway!

  24. Another excellent article have forwarded it on to my friends the non believers that is!!

  25. I agree with this article and think the Central Banks know how to “fix” the charts (by manipulating their paper money and Gov’t. numbers) to give those that use charts a false picture of reality, that is designed to protect paper money!

    Behold: Fiscal Propaganda through the use of Twisted Charts – SeniorD

  26. I still think we are seeing a “full court press” on PM’s by the Central Banks who are using all their fiscal power to push the PM market lower, while at the same time acquiring PM for themselves.
    The key indicator for me is the availability of PM’s, when dealers are awash in PM’s then I will believe that the “value” of PM’s has really dropped, until then we are just seeing PM’s being “PLAYED”.

    +

    Where is our 9 Trillion Dollars ===> http://www.youtube.com/watch?v=1QK4bblyfsc

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