Saturday, June 21, 2014

What's up in the gold and silver markets?

We have identified the gold and silver markets as one of our keys to watch. When gold and silver move higher (and especially if they move sharply) it usually means the US dollar is losing value. It can also be a foreshadowing that something is happening that may be a shock to the system. What we watch for here.

Gold and silver made sharp moves higher right after the FED press conference. It caught many by surprise because most were expecting the FED to hint that they might tighten a little sooner due to some recent signs of inflation. Instead the FED comments were interpreted as more dovish and showing a lack of concern about inflation.

At this point we really can't know why gold and silver reacted so strongly this week. It could be the market senses inflation is coming. It could be due to the geopolitical instability around the world (oil supplies in the Middle East and ramping up of tension in the Ukraine). It could be just that gold and silver have been somewhat oversold on a technical basis and are correcting for that. Maybe it is a combination of all of the above. Or even some unknown event is coming that some market insiders know about and are trying to get in front of early. Jim Sinclair listed 30 reasons he thinks gold will go higher on his web site this weekend.

Whatever the cause, gold and silver are signposts to watch. If they continue to move sharply higher the rest of this year it could mean some system changing events are being anticipated.

We can't know the future, but the move this week has really stirred up a lot of interest and has many technical analysts proclaiming that gold and silver are preparing for a longer term move higher over the next year. These are the people that follow charts to make forecasts.

We won't even try to make any market forecasts here. But we will offer you an interesting prediction you can follow if you like (for fun if nothing else).

Bo Polny is a precious metals technical analyst who sometimes offers very specific predictions to the public. He runs a subscription service for investors that is very expensive; but now and then he will put out a few very specific predictions in terms of price and timing to attract potential subscribers to his service. 

A lot of people do this, but Mr. Polny has made some incredibly accurate public forecasts in the past. And when he puts out a forecast he is very specific so you can follow it and see how it turns out. We should mention that we are not promoting using his service. He is just someone that has gone public with these very specific predictions that can be tracked to see if he is right or wrong over time. We do this with Jim Rickards predictions on various things as well (he has a very good track record overall).

This month Mr. Polny offered his latest free public predictions. You can see them here on his website. Interestingly, in May 2014 he did this interview with Kitco and made some specific predictions at that time for May and June 2014. So far he has hit those with incredible accuracy. You can follow his predictions and see how they turn out. 

Here are the free comments he made during June on his web site that all were accurate (I followed them as he posted them). He called the exact moves gold made just before and after the FED press conference a few days ahead of time.

On June 5th (repeats general Kitco interview predictions)

On June 10th  (makes FED call before FED news)

On June 16th (repeats FED call before FED news)

Bottom line for 2014 is that he says gold will hit $2000/oz before year end and expects silver to come close to $50 in the Kitco interview. He posts the $2000 gold forecast on his website. He expects gold to hit a high for the summer in June, pull back for awhile after that, and then make a very strong move up into the end of 2014 to reach $2000.

Why do we mention this? For one thing his accuracy so far makes it interesting to see if he hits the big forecast for the end of this year. It is something we can easily track.

More significantly to what we follow here, if gold hits $2000 by the end of this year it will mean something very significant in terms of possible monetary system change has happened. Something we don't see right now.

Mr. Polny does not base his forecast on events (he uses cycles) so he does not offer any ideas on what events could cause this. But something big would have to happen to cause a huge move like that so soon. Since gold is one of our signposts to follow, we can have some fun at the same time and see if Mr. Polny turns out to be right or wrong by the end of this year. If he is right, we can expect the US dollar index will be much lower than it is now by year end. And that might mean the dollar is losing status as global reserve currency. Let's see what happens.

update 6-25-14: Today Bo Polny posts this update to his web site stating that tomorrow (June 26th) will be the high for gold for now. He then says not later than July 1st gold will start into a pull back and hit a summer low before later starting into a very sharp move higher to $2000. This will be pretty easy to track. Either he will be right about gold going into a pull back by July 1st or he won't.

update 7-1-14: It looks like Bo Polny may have missed his peak date for gold (July 1st) as it has yet to begin the pullback he predicted. Overall, his public calls  for May/June were pretty good and if gold were to start into a pull back this week he would still have hit his call pretty well. If gold does not pull back or rally from here, I think we can say he missed his turn date for the pullback however. We'll check it again in about a week to see how it turned out. 

update 7-2-14: Bo Polny posts this update on his web site. He says he still thinks June is the temporary high with a pullback to begin now for the summer. Then a sharp move up later this year. You can see if ends up being right or wrong. If gold is above or near $2000 by year end, he will have been right. But something significant related to the monetary system will probably also have taken place.

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