With Federal Reserve Uncertainty Out of the Way, the Gold and Silver Bull Will Now Resume
By JS Kim
Last year, we were consistent in stating all year that every dip in the price of gold and silver assets was a trap and false buying opportunity that would just precede lower prices. This year, we’ve been consistent in our message that every significant dip has been a true buying opportunity and would precede strong rebounds in the price in gold and silver assets. For example, on 25 August, we wrote a piece titled, “Don’t Worry. Falling Gold and Silver Prices Equals Big Opportunity”, and well before that, on 21 June 2016, we penned a piece titled “Three Charts that Show Much Higher Gold and Silver Prices are Still Ahead.”
This time around, we informed our members that it didn’t matter what the Federal Reserve announced yesterday, that either announcement would turn out to be long-term bullish for gold and silver. However, I made it very clear that I believed the “do nothing” Fed would indeed do nothing a couple of days ago, and that such a do nothing decision would likely lead to an immediate spike in the price of gold and silver mining stocks, which is exactly what materialized. At the very start of this month, I provided concrete price levels to our Platinum Members at which I believed the gold and silver correction would reverse, at which time gold and silver stock prices would also reverse. Silver bottomed exactly in the narrow zone where I stated it would bottom, about 10% lower in price from its price at the start of this month, and gold bottomed less than $6 an ounce from the price point at which I stated gold would bottom. However, when the weakness that we predicted would happen this month indeed materialized, many were understandingly misled by bankers that “painted” a head and shoulders pattern in both the HUI Gold Bugs Index and the Global X Silver Miners ETF, into interpreting such a pattern to mean that an imminent significant further drop in gold and silver stock prices was on the way.
However, as all of you that have followed me for a while should know, I always state that technical chart patterns can never be interpreted in a vacuum because bankers often “paint” the charts in an attempt to influence future price behavior. Despite head and shoulder patterns that existed with both gold and silver stocks before the Fed Reserve bankers’ announcement this past Wednesday, I discounted the meaning of both of these patterns as highly suspect and unreliable as I believed that these charts were being “painted” in order to try to trigger further significant price drops in gold and silver assets. Still, I warned my Platinum members to expect further gold and silver stock price weakness last Friday, 16 September, many hours before market open in New York, and at a time gold and silver prices were still flat for the day. I alerted my Platinum Members that “it would not surprise me one bit…if bankers used their HFT algorithms to drive gold and silver prices down after NY open today [on 16 September 2016] and drove gold and silver stock prices lower.” Indeed, gold and silver stock prices were driven lower that day. However I countered that negative immediate-day prediction with optimism regarding price movements for this week, and a belief that there would be no further significant sell-off or follow-through after last Friday’s decline, by stating, “if Yellen does nothing on Wednesday, as I expect her to do, then a decent rebound in gold and silver stock prices should materialize on Wednesday [on 21 September 2016] , or later [in the same] week.”
Then, to reinforce my stance with our members, on 20 September, one day prior to the Federal Reserve announcement day during which gold and silver stocks spiked higher, I sent a bulletin to our CIO newsletter members, stating, “I believe there to be little chance of Janet Yellen announcing an increase rate hike on Wednesday, even though Goldman Sachs bankers have been trying to sell this to the public as a real possibility in addition to the “hawkish” statements issued by US Central Bankers since the start of this month. It is this propaganda and so-called “uncertainty” that created weakness in gold and silver asset pricing last week. I, however, believe that the chances of the Feds announcing an interest rate hike this coming Wednesday are slim… If [ ] I am right, and the Feds stand pat and do nothing, then I expect the rebound in gold and silver and the accompanying PM stocks to be quite robust, and perhaps even immediate, as I feel that the “uncertainty” of their decision has been the cause of this latest downturn.”
If you notice above, I put the word uncertainty in quotes to emphasize the fact that, despite Goldman Sachs analysts announcing the possibility of the Feds hiking interest rates this past Wednesday at over 50% at the start of this month, I believed there to be little uncertainty about their decision. And when the “do nothing” Feds did nothing, many of our gold and silver stock picks rebounded by 5%+ this past Wednesday, with our junior gold and silver stock picks rebounding even further by 10% and more very rapidly. With all that said, the reason I was bullish gold and silver in the immediate, short and long-term aftermath of a “do nothing” Federal Reserve announcement this past Wednesday and still bullish gold and silver in the short and long-term, even if the Feds announced a rate hike, was due to my belief that the main factor that created temporary weakness in gold and silver asset prices this past month was the so-called “uncertainty” surrounding the Fed’s decision. Even if the Feds shocked us by announcing an interest rate hike, then gold and silver asset prices would have dumped a little further, but not by a significant amount, and I still expected a strong rebound to materialize shortly thereafter in this hypothetical scenario after people came to their senses and realized that an insignificant 0.25% rate hike was not a real reason to dump gold and silver assets.
However, with the uncertainty over a possible US Central Banker rate hike now out of the way, gold and silver are now free to resume this year-long bull. Of course, I say this a bit tongue-in-cheek, because I never believed that there was any “uncertainty” over this Fed Reserve decision. Furthermore, as I stated above, even if the Feds had shocked and raised interest rates, that certainly would not have been a reason to dump gold and silver assets either. Remember, earlier this month, in our free newsletter, I stated, “Obviously buying at high, but fairly valued prices, is not a good strategy whereas buying at high, but still undervalued prices, can still be a low-risk, high reward strategy. It’s just a matter of identifying which gold and silver stocks, even with the current significant dip, still offer great value…And this is what we seek to do in our SmartKnowledgeU Member services.” In fact, we had an immediate opportunity to help our most recent new Members that joined us this month accomplish the above, and many of our newest members are now sitting on some very healthy several week gains.
Recall that I also stated in the last issue of our free newsletter, the following: “I believe we have a very special situation in 2016 whereby the risk of junior gold and silver stocks is not that different from their larger cap PM stocks.” I still believe that to be true, especially after observing the price behavior of the best junior gold and silver stocks versus the behavior of the best major gold and silver stocks during this most recent correction. For the best junior gold and silver stocks, the price pullback continued to be less during the most recent period of weakness, and in some instances, nearly non-existent with our best junior gold and silver stocks, while the price recovery among our best junior gold and silver stocks was stronger this past Wednesday than their larger capitalized gold and silver stocks. In conclusion, with the Federal Reserve interest rate hike “uncertainty” now out of the way, banker propaganda can no longer be used in the short-term to keep gold and silver prices weak, and the gold and silver bull should resume again in short time. For those that may find it hard to understand how I can state that gold, silver, and gold and silver stock prices are all still heavily underpriced, even after the strong run of gold and silver asset prices year-to-date, remember that gold at $1,338 an ounce is barely higher than its 2015 high price of about $1,308 per ounce, and silver, which I consider to be even more heavily underpriced than gold, at under $20 an ounce now, is still only a dollar and change over its 2015 high of $18.50 an ounce.