As discussed earlier, today’s price-action in the paper Comex gold market is nothing that a reflection of the Fed’s desperate attempt to keep the price of gold from breaking out above $1300. The reason for this is that a break-out above $1300 would trigger a lot of computer-generated buying and likely catapult gold in the $1500’s rather quickly. If you notice, since the end of April the Fed has slammed gold as it traded above $1290. $1300 was rejected on May 2nd and 3rd. It’s similar to when gold was punching on the ceilings set at $400, $500, $600 etc back in the mid-2000’s.
Silver is a much smaller market and is used for more than just a currency and wealth preservation asset. Depending on the relative strength of the economy, up 70% of all silver is used for industrial applications. At the margin, a small incremental shift in the demand curve for investment silver has the potential to bury the issuers of uncovered paper silver (Comex futures, OTC derivatives, LBMA forwards, etc).
When the Fed/ECB/BOE/BIS loses control of the precious metals derivatives markets – an event which could easily occur this year – silver’s rate of appreciation will stun most observers/commentators. The SGT Report invited me on its podcast show to discuss the precious metals market and the insidious corruption that has engulfed the U.S. system.