This Will End In Disaster

With gold and silver plunging, the US dollar strengthening, and oil still above $100 a barrel, today Marc Faber told King World News this will “end in disaster.” This is part I of a series of written interviews that will be released today on KWN in which Faber discusses the end game, government theft, how investors can protect themselves, gold, silver, bail-ins, central planner actions, global markets, and much more.

Eric King: “Marc, you were talking there about the endless printing of money. Obviously it’s going to end in disaster, but when is that going to end?

Faber: “I agree with you, it’s going to end in disaster. But it’s not going to end at the hand of central bankers because I know very well how they think….

“They are not going to tighten monetary policies any time soon. They are in the driver’s seat in the sense that they will always find an excuse to print more.

They will say, ’OK we have to increase the purchases of assets because now the yield on Treasury bonds has gone up substantially, from less than 1.5% on the 10-Year note a year ago, to 2.68% as of today.’ So they will say, ‘That may damage the economy, so we have to buy more assets.’


As Gold & Silver Plunge Here Are Two Remarkable Charts

With gold and silver plunging, top Citi analyst Tom Fitzpatrick spoke with King World News about what to expect next, and also sent KWN 2 remarkable charts. Gold has now reached Fitzpatrick’s price objective in the mid-$1,200s, which he called for after gold pierced the key $1,520 area to the downside. What Fitzpatrick had to say about gold and silver will surprise KWN readers, along with the two powerful charts he sent.

Eric King: “Tom, remarkably you called the rally high on gold at $1,791 in October of 2012, you then turned bearish on gold and it proceed to come down significantly in price. After gold recently breached the key $1,520 area you called for a target around the mid-$1,200s, and once again, almost like a magnet, gold has made its way to your target zone. What are your thoughts here Tom?”

Fitzpatrick: “Yes, it looks as though this correction may be nearing the end now that the objective we had been targeting has essentially been satisfied. It’s possible that gold may trade a bit lower because of momentum, but certainly we have now achieved the target I gave to you when we broke the double-top on gold.

This also gave us a high-to-low down-move on gold of approximately 34%….

“We found this interesting because it was virtually identical to the high-to-low down-move that we saw in gold in 2008 (also 34%). While we certainly haven’t seen anything yet to say we are about to head up dramatically, we believe that we may be bottoming here in gold.

We’ve also had a significant move in silver which is virtually identical to what we saw in 2008. The down-move in silver is now at roughly 60%, and, again, that is what the silver market experienced during the 2008 meltdown. This makes us reasonably comfortable that both gold and silver are nearing the end of this corrective phase since they have followed the same path as the 2008 corrections. We are now looking for signs that this is a bottom, despite the weakness, and that we may turn from here.”

Eric King: “As I mentioned earlier, you nailed the top of the counter-trend rally in gold near the $1,800 level in late 2012, after calling the rally off the lows in the $1,500s. Now you have made another nice call with the plunge we have seen here in gold. How did you know we would see another round of weakness in gold?”

Fitzpatrick: “Better to be lucky than brilliant any day of the week. At the end of the day, we originally thought the $1,520 level would hold on gold. But once we broke that support level, it set up a very clear target in the mid $1,200s on gold for us.

Now that we’ve essentially achieved that target, our feeling has always been that a healthy trend gets healthy corrections. This is yet another healthy correction like we saw in 2008. The interesting thing is because of where we’ve come from, if we were to now follow, over the next three years, the move after we put in that 2008 low in gold in terms of magnitude, it actually suggests something in the region of $3,400 to $3,500 for gold (see chart below).

As you know, in our bigger picture that has always been our long-term target in terms of where gold may go. So we haven’t deviated from that way of thinking. If anything this just solidifies our view that a host of markets are following the 1966 to 1982 pattern, which means this cycle will ultimately culminate around 2016. So what’s happening here now is actually pushing us into a target for gold that fits nicely with our big picture view of a host of key markets.”


Physical Gold Market In Disconnect As Premiums Hit Record

With gold and silver getting smashed, today John Hathaway told King World News that premiums for gold have now hit all-time record levels as the physical market has completely disconnected from the paper market in gold.  Hathaway also spoke about the gold and silver smash and provided an incredible chart as well.  Hathaway, of Tocqueville Asset Management L.P., is one of the most respected institutional minds in the world today regarding gold, and his fund was awarded a coveted 5-star rating.  

Eric King:  “John, we have this smash continuing in gold and silver, your thoughts here?”

Hathaway:  “Right now it’s just piling on by momentum players.  Remember, it’s also the end of the quarter so this is window dressing in reverse.  People want to show big profits in short positions.

All along this has just been naked shorting by the usual suspects — trading desks, the big banks, and hedge funds.  There is very little physical gold that’s being sold.  The mechanics (of shorting) are basically you post margin, and you short X amount of gold….

“Some of these (down) days you have seen volume that equals more than the annual mine production of the global (gold mining) industry.  That’s ridiculous to think that much gold could be acquired, positioned, and then shorted in such a short space of time.

It (the manipulation) is being done by the same guys who were messing around with LIBOR and are now being prosecuted.  There are allegations they are doing the same thing in FX (currency trading).  You know gold is a big, liquid market, so the capacity for a lot of players get into it and exploit technical weakness, which is what they are doing, is great.  So that’s what appeals to these same people.