Goldand silver are strange things. They have been used for centuries asmoney and only in the last 40 years have they been shoved aside by thefinancial communists - yet they still exist as a free market monetaryasset despite the force of all the government's guns.
Thestrange thing about gold & silver, however, is that while they arethe last vestige of a money that is not in and of itself able to bemanipulated by the political criminal class many people still tradeinstruments in gold and silver which are easily manipulated by theaforementioned.
Wecan't speak for the marketplace but we, here at The Dollar Vigilante,buy gold and silver as a way to protect ourselves from the easilyforeseeable collapse of the current non-free market monetary system. Tous, to try to protect ourselves from the collapse of the monetarysystem by buying instruments (futures) which are a part & parcelwith the current monetary system makes as much sense as buying shares ofEnron in late 2001 because you had inside knowledge it was a fraud.
Wesuppose at this point there are probably two types of precious metalsinvestors. Those that are blissfully unaware of the reasons to own themetals and are just bandwagon jumping the bull market and those thatunderstand what is going on and who are buying gold and silver asprotection and a way of preserving their assets through TEOMSAWKI (TheEnd Of The Monetary System As We Know It) to come.
Welive in a literal financial house of cards. It is all paper. Thathouse of cards has been in the process of collapsing since 2008. Astutemarket participants realize this and are buying bullion, one of theonly financial assets with no counterparty risk, as a way to protectthemselves from the coming storm.
Thosewho think this is just a bull market to trade likely buy highlyleveraged futures that have little or no direct connection to actualgold or silver bullion.
So,what happened with silver? It more than doubled since Ben Bernankebegan his high level terrorist attacks against the US dollar with"Quantitative Easing II" announced in August of last year, rising from$18 to just below $50.
Therise in gold and silver was likely making Bernanke feel a bituncomfortable about his "there is no inflation" story and a phone callwas likely put into the COMEX. Five margin increases in rapidsuccession later and the COMEX had increased initial marginrequirements by a substantial 84%.
Anyonewho had bought silver futures using leverage and without a substantialcash holding was forced to immediately sell their silver futures. Theresult was a drop in silver futures prices from near $49 to below $34 ina matter of hours.
So,what's the first moral of the story? If you are buying gold and silverto distance yourself from the highly manipulated and rapidly failingmonetary system then don't buy gold and silver in forms that are underthe control of the central planners.
Silver Bubble?
Theaction in silver has most of the world saying that silver was in abubble and now that bubble has popped. Those who say this don't knowwhat a bubble is and have been blinded by the inflated dollar nominalprices.
Ifyou look at the silver price in US dollar terms it does look like quitea parabolic, bubble-like rise. However, when you just discount thesilver price by the US Government's own CPI Index - which they say is aproxy for inflation - the silver price looks like it has not done muchat all. And when you take Shadowstats.com'sCPI - which just calculates the Government's CPI the way they used tocalculate it in the 1980s before they learned how to hedonisticallyremove the inflation - silver has been in a long bear market since 1979.
Thisjives with the following chart as well, taken from the May issue of TheDollar Vigilante, where we looked at the price of a number of disparateitems in 1980 and in 2010. Can you spot which one of these items is ina bubble?
What'sthe second moral of the story? You take your investment life into yourown hands if you pay attention to the price of your investments in USdollar terms. In nominal dollar terms silver looks like it has been on aludicrous rocket ride. When looked at discounted to 'inflation' asdefined by the US Government's CPI or when compared to other assets overthe last thirty years, silver has been a long bear market and has donerelatively nothing compared to any other assets.
Andcompared to the growth in US Federal Government debt, silver hasunderperformed by a factor of five. One bubble is about to pop... andit isn't silver.
Subscribe to The Dollar Vigilante today,where we publish research and data like this regularly to subscribersto help them avoid the mirages and misinformation often repeatedthroughout the mainstream media about the true state of affairs in theeconomy.