Silver 2012…….and Bernanke’s sneezes

  • Posted March 1, 2012

Precious metals have been on a hell of a run to start 2012. Silver in particular was up about 30% in the first 60 days of the year! Over that time, an ounce of silver (in US dollars) steadily rose from $27.79 to $37.23. As with anything else, profit taking should be expected after such a run, resulting in a pull back in the price. Well, on the last day of February, we saw that pull back, and then some.

Gold gave back $100 at one point and finished the day with its biggest daily drop since December 2008. Silver at one point was down around $2.50 and lost 6% when all was said and done. Was this merely profit taking? End of month book balancing? A combination of reasons?……There were even rumors of large volume sells, one of which saw 1 million ounces from a single seller! Are these flash crashes natural when no fundamentals have changed?

The interesting thing in all of this was the ‘timing’ of the drop. These violent swings coincided with the Congressional testimony of Fed chairman Ben Bernanke. During testimony, Bernanke suggested that no decisions have been made about another round of quantatative easing, or QE3. Is that what triggered the drop? If so, oil missed the memo as it remained relatively stable. So we are to believe that if Bernanke so much as sneezes, a ripple will be felt throughout the markets?

Besides the fact that its troubling that one mans voice carries such weight…It speaks volumes to how fickle the markets are. It also shows how fortunes can be crushed within minutes. Especially when taking into account, in our opinion, that the market is not truly indicative of the physical supply of the metals anyway.

All things considered, the fundamentals have not changed. The governments in the US and abroad still have mountains of debt, unfunded future obligations, and possible foreign intanglements to fund. Their fiat currencies are on life support.

Going forward, there will be several opportunities this year in which silver and gold will take major steps back. The situation in Greece, a fall of the Euro, and future war with Iran probably all would result in an initial deflationary period lasting anywhere from days to months to years. While deflation remains a threat, these also could be intermediate term reactions within a long term inflationary age.

You could make big profits by timing these events. You could Sell your metals just before an event and then buy them back on the dip following the event before the eventual run back up. However, this requires skill and a certain insight into global trends and technical analysis.

For most people, the best and safest way to protect oneself is to just accumulate ounces when they can. Once you have the physical metal in your possession, you have a tangible asset that has been regarded as such for thousands of years. Its not some paper backed by ‘faith’ or even a paper laying claim to something you don’t actually possess. Its real, and its yours to use however you see fit.

Though we still see unnatural occurrences in the metal markets, whether it be through outright manipulation, downward pressure from government officials, or Ben Bernanke sneezing, metals are still a great way to prepare yourself for future uncertainties. If you can time the market, great! But, if you have no physical metal at all right now, by all means, acquire it!

Procinctu believes gold and silver are still two of the best insurance policies for global tumult. If you want to start protecting what’s yours, contact us to set up an accumulation program and we can ship to you our own Procinctu half ounce silver round. Its a great way for beginners to build up their inventory. If you enroll in a program, you can have the 1/2 silver rounds for only $2.00 over the spot price! (shipping and insurance not included)

Dislcaimer: the author is long gold and silver