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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is…

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Gold and Silver Currency Tactics

Graceland Updates 4am-7am
Nov 1, 2011

  1. Welcome to the month of November. Click this gold seasonals chart now to view the typical price action for this month.

  2. A lot of amateur investors think there is "free money" to be had, trading gold, based on the seasonal rally that often occurs from August/September. In normal times, that rally is fundamentally driven by the huge Indian gift giving season.

  3. In the greatest financial crisis in world history, does it make sense to bet your "gold life" on a gift giving season? I would say that strategy is likely to fail, very badly.Rather than guessing wildly about the next move for gold from $1700, I would suggest you simply stay focused on the size of this crisis. What's better, owning 1 ounce of gold currently priced at $3000 an ounce, or owning 2 ounces of gold priced at any dollar price? Embrace the scale, not the dollar, as your key to gold wealth building.

  4. Professional analysis of the gift giving season in the gold market works to a degree, in normal times. In this "over the top" OTC derivatives-fuelled mayhem, only professional market tactics can help investors emerge from this crisis financially intact. You are living an all-horrific financial roller coaster ride, one that features a few trips right off the tracks. Analyze less. Prepare more.

  5. Sadly, the typical public (aka Elmer Fudd) investor is now almost fully invested in bonds. In the 1990s, the stock market pipedream reached a point of maximum stupidity when the public began borrowing money from the banksters, to try to enhance their already-enormous and supposedly permanent returns.

  6. The banksters were more than happy to fuel these "greed machines" with high octane fuel; leverage. When you leverage stupidity, the consequences are catastrophic.

  7. That phenomenon, leveraged stupidity, is beginning to happen again, with bonds. The public is beginning to borrow money to buy bonds, to enhance their returns. In my view, the only thing these tactics will enhance is the rate that the public propel themselves to a very real bread line.

  8. As interest rates approach zero, it takes very little movement in interest rates to move the price of a bond much higher. Of course, the public ignores the fact that the situation works in reverse; when rates begin to rise from a very low interest rate base, bond prices can collapse.

  9. The public has become accustomed to a low interest rate environment. My question to the public is, why would you borrow money from the banksters to make 5% a year, when you can use patience as your prime market tool, and wait for interest rates to rise well beyond 5%, and collect that money without the risk of being blown off the leveraged map, if rates are hiked? The answer of course, is that the public has "perceived needs", not patience.

  10. What should you focus on this morning? Focus on having the ability to buy gold $100 below the current price, if it happens. Focus on the fact that silver is trading at a price that is almost 40% below the recent highs. Focus on having the ability to buy silver at lower prices.

  11. Do you really want more gold and silver, or just more dollars? The actions you took in the market on the recent $400 price sale for gold and $20 an ounce for silver, alone, define your answer to that question.

  12. In the market, never start with the gambling money, and try to build safe money from there, because odds are high that you'll be destroyed. At minimum, you have to accept 50-90% drawdowns as a given, and probably repeatedly. Start with the low risk bullion, and use a portion of what is built there, to buy high risk gold stock speculations.

  13. My suggestion is that rather than announcing a "grand gold stocks to bullion master plan", just focus on getting started today. Make gold bullion your currency, today. If you have trading profits on a gold stock, buy a gold ETF or gold futures with the dollar proceeds of your profit-booking transaction.

  14. Let's say you own 1,000,000 shares of ABC junior stock from an average price of 25 cents. It shoots vertically to 40 cents in 3 days. You sell perhaps 50,000 shares, or whatever your comfort number is. In this example, the proceeds would be approximately $20,000. Take the proceeds and buy a gold bullion ETF. Your base currency is now partly in gold, just not dollars.

  15. "I appreciate the dollar gain I just made, but there's just too much of a leap from owning my gold stock to owning dollars, so I'd prefer the less radical move of acquiring gold bullion, or a proxy for it, keeping me...in the gold game!" -You, today? Selling gold stocks for dollars is a much more radical move than selling gold stocks for gold bullion. Gold currency is much more stable than the dollar. Do you like stability?

  16. I want to expand on the "Van Gogh" head & shoulders pattern that I've laid down on the silver bullion chart. Click this gargantuan silver base pattern chart now. Notice the right shoulder that I've highlighted with the circle on the far right of the chart.

  17. The right shoulder, incredibly, was created by the 2008 waterfall that took silver down to about $8.40. A head & shoulders pattern remains in play, one that is arguably the largest in world history, as long as the silver price remains above that $8.40 price point.

  18. Attempting to flip trade your way through the crisis in the silver market can't work anymore. This base pattern is truly enormous. Just the pullback to the neckline is a move from about $50 to $26, and that destroyed huge numbers of leveraged silver traders!

  19. The price could easily drop into the low $20s, or lower, and have no effect on the overall bullishness of this "all-epic" price pattern. It could skyrocket from here. The point of the matter is that you need to accept $20 leaps and falls in the price of silver as unpredictable blips on the price grid. Few will succeed in doing so, and most will be destroyed by price volatility. Focus on the biggest picture you can envision.

  20. By early 2011, the price of silver was trading around $33, which is where it is now. To be brutally frank, the obsession with building dollars of wealth is being revealed as a mirage, and soon even those who bought gold and silver at the lowest prices may find yourselves asking if you are really any richer.

  21. Is owning one ounce of silver, with silver trading at $30 an ounce better than owning 2 ounces trading at $10 an ounce? In a dollar-based world, a crisis-free world, the answer is yes.

  22. In this crisis, the answer, sadly, is...No. Don't pay up for gold or silver, but focus on getting more, because the dollar-based mirage is only a seed right now.

  23. Just as most of you have been shocked by the various stages of the crisis that have occurred to date, I predict you will be shocked with the intensity and velocity that dollar-based wealth turns into a mirage.

  24. You've got to look at that gold price this morning, and cheer for it to break $1700. Why? You've got to get more ounces, and you want to get those ounces as cheaply as possible. This crisis is not about dollars anymore. It's about the scale. Take it seriously, before the crisis takes you!

Special Offer For Website Readers: Send me an email to freereports4@gracelandupdates.com and I'll send you my free "bond market playbook" report! Prepare now for the end of the bond bull market. How will the coming bond bear market affect gold? Learn the main themes that could dominate the liquidity flows as bond collapses!



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