The conditions in the market are setting up for a once in a lifetime gold trade.  Most of the participants don’t know it because they have their face and eyes firmly placed up against the television screen called the MSM — Main Stream Media.

As they focus on the manipulated information and schizophrenic Fed press releases, there’s another show taking place on a different channel very few are aware.  It’s called GOLD: Hidden Secrets of Money.  Yes, this is the video series that Mike Maloney and the folks at put together.

It is probably one of the best video series describing the fraudulent fiat monetary system run by the Federal Reserve that has siphoned and stolen wealth from Americans as well as citizens throughout the world.  Currently the ranking of this gold show on the air waves is very low, but that will change in the future.

You know we are in trouble when David Stockman, Former Dir. of the US Management and Budget interviewed on King World News this weekend, said the following on what he thought of the Janet Yellen Fed Chairman Nominee Senate hearing:

“Frankly, I thought it was appalling.  Kind of a petty fogery of a Keynesian schoolmarm that was superficial, mechanical, naive and disingenuous.”

Stockman goes on to say Yellen’s answer (from one of the members at the hearing) that the Fed was not monetizing the debt, but rather carrying out the directions of Congress was simply, “Absurd”  I highly recommend the KWN Stockman Interview if you have not heard it already.

This is where we are heading… into the end game of the fiat monetary system as the official policy and policymakers become even more bazaar, idiotic and deranged.

The Dow Heads Towards the Heavens as The Fed Flushes Gold Down the Toilet

With a great deal of QE monetization, hot air and full faith of the Fed and MSM, the Dow Jones Index hit a record new high surpassing the 16,000 level.  Traders and Wall Street applauded as the Dow reached one of the largest overextended topping patterns in quite a while.

Dow Jones Top

As we can see, the Dow Jones has moved from the 10,600 level back in September of 2011 to 16,000 in a little over two years — an amazing 51% move.  This wasn’t a one-way street as the index sold off briefly after the QE 3 announcement.

However, with a little help from our friends at the Fed and their member banks, we had a nice turn-around and haven’t looked back ever since.  The Dow has gained a cool 29% in just the past year.

On the other hand, gold was treated with the kind of monetary respect the folks at the Federal Reserve are known to show towards the yellow metal — contempt, disgust and belittlement.  In the same period the Dow increased 51% (Sep 2011 – Nov 2013), gold lost 33% of its value.

Gold to $1200 Lows

Some will say that gold was over-bought back in September 2011 when it reached $1,900.  While this may be true if technical analysis is used in charting a manipulated market, the fundamentals could have pushed gold up to much higher valuations.  Unfortunately, the fundamentals are still meaningless in a market that is totally controlled and run by the Fed.

Okay, let’s just give into the technical traders who still adhere to a system that died years ago and agree that gold was over-bought at $1900.  If we look at the two charts above, you will notice a very interesting trend.  After the QE3 announcement in September 2012, the Dow headed south, and gold moved north.  But, something strange occurred a month or so later in October… the trends reversed.

The price of gold at this time went from $1,775 to $1,275, where it sits today.  That’s a 28% decline in gold at the very same time the Dow moved up 29%.  This can be clearly seen in the chart below:

Dow Gold Difference

Of course, the charts I am presenting and the information I am writing about is nothing new.  However, it’s helpful to review the data and look at it from several perspectives.  What we are seeing in the charts here is a huge TOPPING of the DOW and a BOTTOMING of GOLD.

While I am not a technical analyst, I do see some merit in trends.  I like to follow trends.  If I see I am eating too much and gaining weight, I like to reverse that trend and let it ride in the opposite direction.  I am not always successful reversing this trend, but at least I know where the TOPS & BOTTOMS of my weight limit trends are located.

Folks let’s face it, the Dow is becoming extremely expensive.  Sure, it’s possible the Dow Jones can continue to increase for a while, but the reward vs. risk is becoming less each day as the index bloats to higher levels.

According to a Zerhodge article, Jeremy Grantham’s GMO stated the following as it pertained to the overvaluation of the S&P 500:

To wit “the U.S. stock market is trading at levels that do not seem capable of supporting the type of returns that investors have gotten used to receiving from equities.

…Combining the current P/E of over 19 for the S&P 500 and a return on sales about 42% over the historical average, we would get an estimate that the S&P 500 is approximately 75% overvalued.”

Full Article Here

As the valuations of the broader stock markets move further into bubble territory, the price of gold is falling closer to its cost of production.

While I realize there are some analysts who would certainly say, “The price of gold is not derived by its production cost, but rather its supply and demand forces”, my reply would be, “if anyone is still paying attention to those forecasts, you need to check yourself into the nearest MRI clinic and get a brain scan.”

We must remember, Bear Stearns and Lehman Brothers  went belly up virtually overnight.  You could say the technical analysis of the supply and demand forces of these companies share prices went from a relatively HIGH DEMAND to NOTHING in a very short period of time.

That’s how I see it taking place in the gold market — one minute you got some clown pointing to a gold surplus chart and the next moment there isn’t a physical ounce of gold to be found anywhere at any fiat dollar price.

The Dow-Gold Ratio Should Wake Up the Dead

There’s not much that gets me excited today.  After researching the details of the coming dire global energy situation, everything else seems quite trivial.  However, this chart should help wake the living dead.

Dow Gold Ratio Top

I don’t know how many people watched the comedy, “Monty Python and the Holy Grail” (during the time of King Arthur), but there was this scene where these guys pulling a cart went around yelling “Bring Out Your Dead.”  The scene takes place during the Plaque and these ghastly characters were going around collecting all the dead in the town.

Now I know it sounds a bit morbid, but for some odd reason… this Dow-Gold ratio chart made me think of it.  Instead, I look at it as “Waking up the Dead.”  Here we can see that this Dow-Gold Ratio chart is also forming a TOPPING pattern.  In just a little more than two years the Dow-Gold ratio has doubled from 6/1 to 12/1.

Even though the ratio could still increase, the trend is asking for a reversal at some point in time.  If investors can’t see the GOLD TRADE OF A LIFETIME being set up right in front of their eyes, then they might as well lay down and wait for the Monty Python cart to come pick them up.

Investors need to realize that when the Fed can no longer prop up the stock indexes, bond markets, and the overall economic system, we will have an implosion of paper assets and explosion in the value of gold (and silver).  Once this trade takes place, it won’t happen again.

Regardless, we are presently sitting at two market extremes…. a bloated blue chip stock index that moves higher from the very QE gas emanating from the Fed, while gold has been pushed down like a huge balloon underwater.  At some point in time, the popping of one will release force of the other.

Very few know it… but the Once in a lifetime Gold Trade is being set up right now.

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  1. And the delightful moment in that ‘bring out yer dead’ scene, where some old relative/in-law being dragged out to the cart says “I’m not dead yet. I’m feeling much better.”

    That, probably, would be gold’s protestation.

  2. Having a geology degree I remember decades ago one of my geology professors talked about peak oil [at a time the mention of that was cause for questioning sanity].

    From a standpoint of the cost of the energy, salaries, overhead, etc. required to mine, refine, transport, security, wholesaler’s profit, and retailers profit, it amazes me I can buy two ounces of pure silver for about the cost of one tank of gas. It makes no sense.

    I suspect price suppression “strong arm tactics” [like unwritten price controls] must be reaching the miners of gold and silver, or they would demand a higher price for their product. Hard to believe they don’t price higher. But any industry-wide agreement to raise prices by even 5% would probably result in charges of illegal collusion.

  3. I follow some of the larger online bullion dealers daily, mostly looking and inventory and pricing. Sometimes, I find so deals and make a quick buy, but mostly dollar cost averaging every month. This year I have been buying and more frequent intervals and more silver and gold with each order.

    What I want to bring up is that with gold and silver so low in price and demand, supposedly, down from its high in April of 2011 I have never seen such a shortage of most coins not minted in the current year.

    Listening to the MSM you would think everybody is trying to sell their gold and silver and move into equities, but it is becoming harder and harder to find certain coins, such as, older year pandas and a lot of the Australian lunar series coins from reputable dealers.

    I won’t buy my bullion coins of ebay because I feel the fakes are getting really good and even the pros are getting scammed these days. The large online dealers guarantee their product with money back so I’m more inclined to buy from them. Back to my point, the 2014 silver pandas just came out and they are already going fast.

    What is your opinion Steve on the fact that physical supply for small investors is getting harder and harder to acquire, to say nothing of large investor who could potential buy up the whole physical market with a few billion dollars. Do you see shortages coming in the next 12-24 months and I mean even for orders of 500 oz or less?

    Great article, keep faith and continue stacking.

  4. YAWN

    Haven’t we all heard this over the last few months or couple of years how the price of PMs is going to recover etc etc etc and then the price just keeps on declining?

  5. I like to look at these things from a longer point of view. A 10 year chart of GOLD or longer shows we are very close to reaching its final bottom. Could be all coming down to Yellens confirmation tomorrow. Stop worrying.

  6. Anyone who claims this is a once in a lifetime event hasn’t lived very long and their advice should be treated accordingly.

    • Stu & Steve,

      First of all, I don’t look at the values of gold and silver in trading terms, I follow them over the longer term. If an individual understands the energy situation, then it becomes much easier to see why there will be much higher valuations for gold and silver in the future.

      Second, the charts were included to show just how out of balance the two markets have become. The REAL GOLD TRADE that I am talking about is when the world finally loses faith in fiat currency. This will be the ONCE IN A LIFE TIME GOLD TRADE.

      Lastly, I try to put as much energy information in front of the readers because it is the basis of my forecasts for the precious metals as well as the mining industry and overall economy.

      It is very important that the investor understand the complex energy issues, or they are going to find one day that their supposed wealth has evaporated.


  7. Steve, I concur whole heartedly!

    The weak will continue to fall by the wayside, while the strong continue on. That is to say, gold being held in strong hands versus weak hands. The gold price manipulations of these past two years, have greatly ‘whittled’ down the amount of gold held in weak hands.

    The GOFO rate being negetive proves this. Gold is increasingly in short supply – at present price. To free up supply, the price of gold must rise to levels that lure it out of hiding and persuade those strong hands holding it to sell.

    To those of weak conviction, I would say you are close to joining the weak hand set! Holding fist fulls of fiat paper, searching for anyone to sell them some gold, with none to be found! Do not be tricked into losing faith in the eventuality, that gold and silver will be highly valued going forward.

    • Steve- I also agree wholeheartedly!! The negative GOFO rate is analogous to a negative interest rate given by banks. Would you EVER consider giving your money to a bank and PAYING THEM TO HOLD IT?? Bullion Banks act just like fractional reserve banks, and thus the analogy. The tightness of the Physical supply of BOTH Gold AND esp. Silver, given that AG’s total market size is just $20Bn, compared to AU’s Total Market size of $15.5Tn, we are likely going to see negative SIFO rates in the near future (The last time we saw them was in fall of 2010, when silver went from $20 to $49+!). The reason that the Equities markets have surged while the PM markets have tanked while Monopoly money has been printed to the tune of over $4.5Tn since 2009, [and not a single dollar printed has actually been printed, as we keep trending towards a cashless society, we currently have over 86% of all the US GOVT Dollars in binary Ones and Zeros and not a single new BILL has been created since mid-2009, and the calculus of transforming all of our money cashless is speeding up] is the egregious CFTC is OWNED by WALL STREET, which also OWNS and RUNS the SEC just as BIG PHARMA runs the FDA. The despicable Lobbyists/Special Interests are the Fourth Branch of GOVT and CLEARLY wield the MOST POWER, no doubt about it! It’s been extremely easy for the 6 Bullion Banks to naked short the ANTI-FIATS e.g. Precious Metals over the last couple years because the derivatives market is some 140X larger than the PHYSICAL market! Now, however, with China and India both buying REAL Money at absurdly discounted prices while the MSM keeps inculcating these mooncalfs (IDIOTS) in the West-MAINLY AMERICANS, that Gold is just a ‘barbarous relic’ with no purpose and no real value, it has given those with even a modicum of prescience the buying opportunity of a lifetime! Personally, I prefer Silver to Gold, given the fact that it’s available just 3:1 vs gold, geologically it’s available just 7:1 vs gold, yet it trades for over 61:1 in the GSR (gold:silver ratio!). The ratio used to be 12:1 and I’m certain that it’ll come back down to that in the next 7 years and in the next ten, SILVER will be WORTH MORE THAN GOLD!!! The world we know would literally sputter back to the 1960’s w/o silver, yet, the USA has not one ounce of Silver for strategic supply purposes, and the quality of ore is shittier than ever before. This brings me to the fact that the current price of Silver is BELOW $20/oz!!! Yet, the top 5 primary Silver Miners reported in F.Y.E. 2012 that All-In Production cost per ounce of Silver were, on Average, $26.70!!! You have to think that all in costs have gone up, not down during this upside down year when Gold was smashed on Tax Day and dropped $200 and ultimately fell from $1550 to just under $1200. It stayed there until guess when….GOFO went negative in August for about 28 days and Spot Gold soared from $1282 to $1440. The only reason it didn’t continue to climb was because we (being the central -planners from America, Europe, and Britain), forced India to stymie some of it’s voracious demand for gold and let loose some 320 tons, which worked for a couple months, knocking Gold back on its ass and now that the 320 Tons of gold have been spoken for, we’re back to negative GOFO and additionally, JP Morgan, the manipulator in chief who was largely responsible for its’ takedown, now is going long gold as it’s flipped its’ position and made a complete 180! It was holding NET SHORT FUTURES CONTRACTS totalling 75,000 contracts. All Summer, they were NET SHORT GOLD FUTURES, but in JULY they abandoned their Over 75,000 NET SHORT GOLD contracts to OVER 75,000 NET LONG GOLD CONTRACTS, and they did this back in the beginning of the 3rd quarter, during which time they also bought AT LEAST $39.9M of physical gold bullion for their House Account, so expect gold to pop this fourth quarter. Additionally, Goldman Sachs has told its clients to stay away from gold, meanwhile, it’s been buying up massive amounts of physical for its’ house account! The fact that Asia now has its own version of the COMEX, the PAGE (PAN ASIAN GOLD EXCHANGE), and are encouraging their citizens to buy gold, and combine that with the fact that they had just 1,054Tonnes of Gold in April of 2009, and this April, they Will announce their holdings, which according to my math, they have at minimum 5200 Tons of Gold (THEY IMPORTED 299 Tons through Hong Kong JUST in the Month of August!!!), this will send bankers, economists, investors, and central planners all in a tailspin as China will use this Gold as a EWMD, economic weapon of mass destruction, aimed directly at the US and it’s FED run Ponzi Scheme. Consider why the FED is buying WELL over 90% of all USTreasuries… It’s because the only buyers DUMB enough to purchase bonds in a ZIRP environment are our FEDERAL RESERVE, and the acting Ponzi is our United States Treasury, who, with a keystroke, debits the Fed $85Bn of so called ‘money’ a month. The Equity markets here are addicted to QE, and Yellen will NEVER Taper, and in my humble opinion, she’ll actually Pump Up QE just as a heroin addict needs more dope to get high after tolerance builds up, so too do our markets need MORE LIQUIDITY in order to keep the positive impact on our Stock Markets. But doing so will ineluctably (inevitably) result in massive downgrades to our credit and further discredit to our country and further “de-Americaniationing” of the world. While our banks are stronger than say, Deutche Bank or Barclays, both of which I’ve heard from sources will be Lehmanized, along with Citigroup, the world already has dumped our bonds [65.5Bn were sent home in JUNE, but you didn’t see that on TV, did you?] Japan and China, the two countries we count on most for financing our debt based economy, have stopped buying our bonds and China is now ardently supporting Europe as it would rather have some diversification out of dollars and into Euros, but the bottomline is that with China spending all their worthless dollars on Precious Metals, Art, Real Estate, Advanced Weaponry, etc and the days of the USA benefitting from the PetroDollar in its’ secular bull market for the last 42 years are COMPLETELY and Utterly OVER!!! Back to Silver, with prices selling for around $7 less than what it costs Miners in labor, Smelting, Machinery, and ultimately, as Steve said, EROI costs, SILVER IS AN investment that I KNOW I’ll NEVER SEE AGAIN IN MY LIFETIME WITH SUCH PROMISE. Furthermore, as if Silver didn’t have enough tailwinds, because the price is so far below the cost of production (roughly 29% off the producers price for crying out loud!), NOW over 25% of Ag Miners have either gone out of business or halted production, as it’s far easier to slow production and then ramp it up than to turn it off and back on again. On top of that, India has been buying fantastic quantities of Silver, due to the $100 over spot price for gold on the black market, which apparently isn’t going to stop it from importing 1000 tons AGAIN this year! India did purchase 18% of WORLD DEMAND for Silver in just ONE MONTH this year, however, due to the fact that the US, UK, and Europe coerced them to keep raising the tariffs on Gold until they reached 15% and gold trade became illegal! As I Alluded to, because silver is 99% consumable, and we in the industrialized world have ‘CONSUMED’ over 50Bn Ounces between 1942 and 2004, and ever since have been running annual deficits, the worlds most important element on the periodic table aside from say Oxygen, Ag WILL BE EXTINCT within 20 years, and some models suggest that the calculus of it’s use, due to the rapacious demand in industry, suggest it will be extinct in 15 years!!! Aside from the Streamers SANDSTORM GOLD and SILVER WHEATON, tickers (SAND), and (SLW) respectively, NOTHING WILL BEAT THE PHYSICAL METALS…. However, the prices of (SAND) , a young and phenomenally managed Gold Streamer whose DNA comes from SLW, costs just $5.25, and SLW, the pioneer of streaming from miners, the idea being that they act a V.C.’s for potentialMiners and get to buy their metals, usually 20-35% of that which is mined, for a fixed cost. (SLW) has over 2 Bn Oz of Silver and pays just $4.14/oz, so they are the strongest Silver pay by miles in the equity sector and shares trade for UNDER $22 currently, an ABSOLUTE STEAL!!!!. That’s not to say Goldcorp (GG), Barrick Gold(ABX) who holds some 267,000M oz of Gold and is now the second largest Miner as they’ve trimmed off lots of fat and sold 7 of their 27 mines to mainly Chinese buyers, aren’t going to make for fabulous investments when the market cracks and falls IMHO about 40% with or without any taper! Warren Buffet has accumulated Tons of Gold, literally, and recently bought 129.9M oz of Silver, George Soros is Long GOLD with GDX Options again, John Paulson had trimmed his position in GLD and is now put a huge stake into it, Eric Sprott, no dummy, has said that “This is the decade for Silver!” Many Billionaires can read the handwriting on the wall, and the facts are facts:The Stock Market is now some 75% OVERVALUED, and I expect the collapse to occur when YELLEN is anointed, sees continued anemic growth, and decides to raise QE to $100 or EVEN $125Bn/Month!!! Then, those holding Gold and Silver will see and EXTRA ZERO NET TO THE PRICE OF THEIR METAL, and if not in Februaries FOMC meeting, then April’s, when China shows the world just how powerful it is, meanwhile, questions about how the heck they could have attained so much gold unless….WE, The USA, are caught with our pants down and actually have near ZERO Gold, as the Emperor has No Gold! Why else couldn’t we repatriate Germany their 300 tons in less than SEVEN YEARS??? How else could China have imported just under 2500 Tons over the last 5 years, UNLESS….. THE AMERICAN GOVT SOLD FORT KNOX’S GOLD ALL OFF Fractional Reserve Style, and it ended up in Hong Kong, as they listed imports over the last 5 years totaling about 2460 Tons thus far…… China will Get what they’ve been after for about 10 years now, THE TITLE OF WORLDS RESERVE CURRENCY!!! So, Tell me Gold/Silver are still a Bad Investment.

  8. I have been thinking of a long gold, short DJI trade. But it’s not time yet.

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