Approaching a turning point?

Posted by Peter Grandich -

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“I think lots of things that have changed since 1984. Despite metal prices being substantially higher than they were 10 or 20 years ago, we’ve really haven’t seen those prices reflected in mining equities”. Peter Grandich

Peter Grandich, author and publisher of The Grandich Letter, which can be read by, says the bottom is close and that the 180-dregree turning point could be at hand. In this exclusive Mr. Grandich says the market odds are stacked against the retail investor but still names a few companies that he owns and believes are completely undervalued in this incredibly bearish market for junior resource equities.

Peter, in late April during an interview with the Korelin Economics Report, hosted by Al Korelin, you said that certain entities are manipulating or “influencing” the gold and silver markets. Obviously, the gold market, given its sheer size, is more difficult to influence, but the silver market is relatively small and has been manipulated in the past. Should retail investors be alarmed?

Peter Grandich: They shouldn’t be alarmed, but I can’t think of any financial market that hasn’t had at least had one person convicted of some form of market manipulation. So why do people think that doesn’t happen in the gold and silver markets?

I don’t believe it happens hour-to-hour or even day-to-day but I think that there are people who try to take advantage of the market and move it in a certain way. And while they likely don’t all get together and discuss it on the phone before they actually do it, there are certain groups that know when other groups are attempting something. And within the silver market it tends to happen more because the market is much smaller in size and thus more easily manipulated.

SmallCapPower: What are some of the ways these larger players move precious metals markets?

Peter Grandich: They tend to move it at certain times. For instance, there are certain dates when options are about to expire. And the vast majority of time on option days, in the metals market in particular, markets tend to go down below those option prices because so many of the option writers are the professionals who dominate the market, therefore wrote with the hope of not having to deliver. If they can pressure the market below a certain strike price, then they don’t have to deliver or cover their sales. And because that happens, most buyers refrain from buying around those known timeframes; and those who are trading the market kind of push it lower because they know it can almost become a self-fulfilling prophecy.

It also seemingly tends to happen around big announcements like the monthly employment numbers. If someone were to look back at a chart monitoring the gold and silver prices 24 hours before those announcements, I would say three out of four times those markets go down. When in reality it should be more like a 50-50.

I think there are other periods of time, too, but I don’t think it’s every day or every hour.

SmallCapPower: Would you avoid trading when those U.S. economic numbers come out?

Peter Grandich: If I was strictly a trader and certainly from the long side, I would refrain from that. I would actually look to buy any sell-offs because the market almost inevitably rebounds shortly after that.

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