Yes, gold and silver and related mining shares may bounce a bit more. But mark my words: If you’re buying them now on the basis that they’ve bottomed, you’re going to lose your shirt!

So I repeat my warnings: Gold will NOT bottom until it moves below $1,100 an ounce. Silver will not bottom until it moves below $20. Mining shares, in general, will not bottom until they lose another 30 percent to 40 percent of their value.

But I will also go on record that the devastation in the precious metals sector, though not over, will come to an end over the next few months.

So while I maintain my view that you should continue to steer clear of the sector for now, you should also start preparing to move back in to the precious metals sector in a very big way.

So how do you prepare to do that?

First, as I just noted, stay out of precious metals until they bottom. Don’t get caught in false rallies, like we’re seeing now. You’ll end up losing money you will wish you had on tap when the metals do bottom.

Second, if you do hold metals investments from MUCH lower prices, as many Real Wealth Report subscribers do, hold, BUT keep your hedges in place, largely via inverse ETFs.

Third, build up your cash! When gold and silver and related mining shares finally do bottom, the next wave up in the sector will knock your socks off and you will want to maximize your profit potential. That means having the cash to do so.

In the next bull phase for the precious metals, I see gold ultimately reaching well over $5,000 … silver over $125 … and your typical, unhedged mining share tripling and quadrupling in value.

The same applies to the commodity sector in general. Oil has not bottomed, but soon will. Copper is poised to fall much further, but will then bottom and explode higher again. Platinum, palladium, grain markets, soft commodities such as coffee, cocoa, and sugar …

Are all poised to move still lower — but important bottoms should soon arrive, and then, just like I foresee for gold and silver — new legs to the upside will be born.

So I urge you, for the next few months, save and build your cash and let the rookies get skinned alive in the commodity markets.

Then, when they’re screaming for help and dumping their investments like there’s no tomorrow, you’ll pick up the pieces, the bargains, and you’ll buy when there’s blood in the streets …

And be positioned to make more money over the next few years than you ever dreamed possible.

Now, for the rest of today’s column, I want to let you in on some questions and answers from the April issue of my Real Wealth Report. Mind you, my subscribers received my answers several weeks ago. As paying subscribers, they are entitled to my views before non-paying subscribers.

But I consider many of the questions they asked last month, and my answers to them, so important, that I am taking the rare step of publishing them here in my free column. Naturally, specific recommendations I make in my Real Wealth Report have been cut out; they’re reserved for paying subscribers only.

Read on. I’m sure you’ll find you have a lot in common with my Real Wealth Reportsubscribers …

Q: Larry, can you give us your thoughts on the conventional ratio of gold and silver (16-to-1), and today’s ratio (58-to-1)?

A: 16-to-1 comes from when silver was last used as a monetary metal. But in reality, there is NO conventional ratio between gold and silver. Historically, over the last two centuries, it has varied from 16-to-1 to over 120-to-1.

Right now, the gold/silver ratio is widening, and set to widen going forward, favoring gold over silver. That’s because, as I’ve said many times, silver is no longer a monetary metal anywhere in the world. So investors will be seeking out gold over silver, pushing the ratio higher.

Q: I bought gold and silver ETFs before I signed up for Real Wealth Report. I’m losing money now so should I still hold?

A: I can’t render personalized advice. However, Real Wealth’s current position is to refrain from buying precious metals investments, and if you do own any metals, physical or otherwise (via ETFs), to hedge.

Q: You are right as rain on almost all of these markets, from a big picture point of view, and the recent short-term moves in the markets. Bravo! What’s next for silver? It seems to be breaking down, just as you forecast it would.

A: Thanks for the compliments! Silver is set to plunge to $20.47, and then even lower. Silver will likely not bottom until we see it fall below $20.

Q: What’s with all the gold bugs out there who never say sell?

A: It takes guts to say sell, especially in a market where so many investors and analysts seem to be so emotional, as they often are with gold.

Emotion prevents them from seeing the real forces at work right now, which are international in scope: Capital flight and its desperate need to find deep, liquid markets where it can be parked without fears of confiscation and where it can generate a yield.

Q: I understand the importance of storing physical gold in allocated storage. I’d like to know your thoughts on these companies — Bullionvault, Goldmoney, Hard Asset Alliance.

A: I can only vouch for the Hard Asset Alliance at this time, where we have done our due diligence.

Q: You said there would be a pullback in the stock market and that would be the time to buy blue chip stocks, and that you would tell us. Did I go to sleep and miss it?

A: No, you haven’t missed the pullback in the equity markets. Stay alert, the pullback will come fast and it will be brief and shallow. MAJOR support is now at the 13,800 level in the Dow. I doubt we can get below that.

Q: If a full-blown war breaks out between North Korea and South Korea/the U.S. — what will be the impact to U.S. stock markets and gold?

A: If anything it will be bullish for U.S. equities, as they experience more capital inflows and gain even more of a safe haven status. For gold, I suspect there would be a short-term rally. But unless gold takes out overhead resistance at the $1,760 level on a Friday closing basis, which is doubtful, then gold would resume its interim bear market shortly thereafter.

Q: Will platinum and palladium be good bets in the future?

A: Yes, once they bottom, which will likely coincide with a gold bottom.

Q: Grain markets took a big hit last month, just as you predicted in your March online event. Do you see the prices of corn, soybeans and wheat falling further? And if so, what does that mean for agricultural companies?

A: Grain markets should definitely head lower. We are in temporary disinflation. Ag companies right now remain vulnerable to a pullback in the broad equity markets. My strategy here will be to get aggressive once I see the pullback in the Dow.

Q: You haven’t written much lately about Asian currencies. What do you see happening there?

A: They should remain strong against the dollar, and even stronger against the euro. The one exception of course, being the Japanese yen, which is being aggressively devalued.

The best currency bets in Asia are the Chinese yuan, the Singapore dollar, and the Thai baht.

Q: You’ve said that the dollar will not be the world’s reserve currency in the not-too-distant future. Let’s say you own 100 shares of XYZ company that you bought for $10 (total investment $1,000). This investment is in current dollars so what happens to it when the dollar is worthless, or it loses its reserve status?

A: All asset prices float. So when the dollar loses more value, or loses its status as the world’s reserve currency, stock prices will naturally have to adjust higher to compensate.

Q: What’s your latest view on crude oil?

A: All of my models are still bearish for oil prices, pointing to an eventual plunge down to below $70 a barrel, and probably lower, to below $60.

Q: Since your publisher has moved your free weekly column to Money and Markets, are you still going to continue with your every other week video podcast as you had before?

A: I have let my publisher know that those market videos need to be reinstated on theMoney and Market’s side, so I hope to re-introduce them soon. I’ll keep you posted.

Q: Would a government-debt-induced Black Swan event take a toll on the newly forming housing bubble, even temporarily?

A: I don’t believe that housing or property prices are in a new bubble. So the answer is no. To the contrary, I think a new bull market in property prices is just getting started. U.S. property prices are very cheap from an international point of view, and U.S. property is also becoming a safe haven for capital from Europe and Japan. 

Q: Is it accurate to say that the bubbles being formed by the Fed in the stock market and housing markets are parallel … as one goes, so will the other?

A: Yes and no. Yes in the sense that the two asset classes should move higher together. No in the sense that they are not “bubbles” — they are a long way from becoming bubbles.

Q: With the Fed buying nearly all U.S. debt, why would interest rates rise?

A: Because, very simply, in the end, the Federal Reserve does not control bond prices or interest rates. The markets do.

Q: Could governments/central banks be forced to stop their quantitative easing because of its inflationary side-effects?

A: Yes, they could, the markets could force them to. Once the free markets gain back control, and they will, bond prices would plunge, sending interest rates higher — and a direct message to the Fed that inflating the money supply will not work.

But it’s hard to say whether it will come sooner rather than later, choking off inflation, or come later rather than sooner. It does appear that the bond market bubble is starting to already implode, which means the bond market is well aware of the risks in current Fed policy.

Q: When it looks like gold will bottom, would it be better to invest in mining stocks or gold bullion in storage?

A: A good combination of diversified precious metals investments will be best.

Q: I’m also a member of your Power Portfolio. And I noticed that when you gave another sell signal in gold at the $1,551 level last month, Goldman Sachs also came out and said sell gold. Is Goldman following your work? It sure seems like they are.

A: Not that I know of. But it sure seems like the firm has been somehow getting my signals! However, Goldman’s sell signal is a bit late, as I turned bearish quite some time ago.

Q: Is the bull market in gold and silver over?

A: No, not by a long shot. It’s merely correcting now.

Q: Do you think the euro will survive?

A: No, not in its present form. At best, it will survive but only with Germany and perhaps a few other northern European countries that will use it.

I don’t see Greece, Spain, Cyprus, or many other European countries staying in. They will ultimately have to pull out and go back to their own currencies and devalue them to get out of the mess they’re in. My hope is that they can do so without bloodshed.

Best wishes and stay tuned,

Larry

P.S. There’s so much more my subscribers receive with my Real Wealth Report. Webinars, recommendations to maximize profits, money management tips, diversification, and more. Why not join them? For a mere $89 a year, it’s a bargain. Pure and simple. Join now by clicking here.

With continued volatility in the gold and silver markets, today King World News is pleased to share a piece of legendary technical analyst Louise Yamada’s “Technical Perspectives” report.  Yamada is without question one of the greatest technical analysts Wall Street has ever seen.  This information is not available to the public and we are grateful to Louise for sharing her incredible work with KWN readers globally.

…..read the commentary to this chart, the entire report and view more charts HERE

Shortages of physical Gold & Silver everywhere – Gold and silver bullion coin and bar shortages continue. Now is the time to be very careful what you are buying. 

Avoiding fake silver and counterfeit gold products

If you have followed gold and silver market news over the past few years, it is likely you have seen various reports on fake gold and silver products.

In March 2012, a 1 kilo tungsten gold bar turned up in the United Kingdom.

Then in September 2012 there were reports on a slew of 10 oz tungsten gold bars bought and sold in New York’s jewelry district.

The big problem with these news reports is that they have given little to no solution on how the public at large can avoid fake bullion products.  

We would like to raise the general awareness of this issue both with our customers, our industry, and the general gold and silver investing public at large.  With more than a year of hands on research, we have identified some of the biggest fake silver and gold counterfeit threats facing the investing public today.

This Special Report on the growing threat of fake silver and counterfeit gold products will arm you with solutions on how to best avoid being ripped off by sellers of phony bullion products.

For many years in the silver bullion industry, rebuttals downplaying counterfeit product concerns would go something like this:

It is less likely that counterfeiters will make fake silver coins if they could make fake gold products or larger fake silver bars.  It would also be very difficult to make high quality fake silver coins with exact weighting.  Also the US gov’t has very strict laws against counterfeiting making the production of private mint product fakes far more attractive for counterfeiters ( the punishment being less severe for producing private mint fake products vs gov’t mint fake products ).  Finally, there’s just not enough profit in it for crooks to make counterfeit silver coins.

None of these arguments hold water now.

The fact is high quality fake silver coins and small fake silver bars are being produced in high volumes in China.  In particular there are fake silver eagle coins being struck and distributed priced as low as 50¢ a piece ( with capacity of wholesale production lots of 100,000+ pieces ).   

“As long as China allows these manufacturers to produce these ( fake ) legal tender coins, it is an act of war when one country counterfeits another country’s legal tender currency.  So this is very, very serious.”  states Mike Maloney, author of the “Guide to Investing in Gold and Silver.”

High quality fake silver coins and bars are a serious threat to your local coin shops, online bullion dealers everywhere, and to all physical bullion investors. 

Many high quality silver fakes have exact weighting and dimensions, and to the untrained eye (or to the dealer without counterfeit proofing technologies) fake bullion products can easily be passed off (mistakenly or knowingly) as bonafide bullion products.

How bad is the counterfeiting problem?

You name the bullion product, we can most likely find a Chinese wholesaler making fake versions of them.  

• The US Mint
• The Canadian Mint
• The Perth Mint
• The Mexican Mint
• The Austrian Mint
• The Chinese Mint
• The South African Mint
• Many Private Mint products  
• Collectable Numismatic Coins ( Fake silver morgans, walking liberties, old fake coins from Great Britain, old fake Spanish & Austrian, etc. )

Governments Cannot Protect Bullion Investors – Example: HR 5977 Hobby Protection Act 

In 2012, the Industry Council for Tangible Assets (ICTA) unsuccessfully lobbied to have HR 5977 passed in the U.S. Congress.  The proposed bill has since died (referred to committee).

How are these fake bullion products being produced?

There are basically two methods being utilized in fake gold and silver coin and bar production:

• There are plated gold and silver coins and bars, consisting of a thin layer of gold or silver covering base metal alloys underneath.  
• Then there are hallowed out gold and silver bars and coins with thicker covers of gold and or silver, filled with tungsten, lead, copper, and or nickel.

How to avoid fake bullion products!

• Know your bullion dealer.  
• Make certain they have counterfeit proofing measurements in place to assure they never accidentally introduce fake bullion products into their inventories.  
• Make certain your bullion dealer guarantees the authenticity of every product they sell.

The vast majority of bullion products we sell are new, freshly struck products which move through a chain of integrity.  Meaning the bullion is moving from mints and refiners, to us, then to our customers.  

Any secondary bullion products we sell are assayed and verified authentic utilizing multiple noninvasive, proprietary counterfeit-proofing methods to verify the authenticity of evert product we buy and sell.

In the last seven months or so we have seen the Gold Bugs index, HUI, fall from 520 in October 2012 to 283 today 01 May 2013, registering a loss of 45% in the value of its constituents. The last four weeks has seen the HUI drop 100 points followed by a bounce of 23 points. Many are of the opinion that the bottom is in and are hopeful of a decent rally from this point in order to restore some normality to this tiny sector and repair their investment accounts. The chart below depicts the plight of the gold miners and the severity of the recent carnage that has decimated the stock prices at a time when they need all the friends they can get.

The HUI Chart:

Their fortunes are predicated on the gold and silver prices and unfortunately they have been put to the sword in what might be seen as a final capitulation as disgruntled investors throw in the towel and take their hard earned cash to more favourable pastures. The stock market in general would be an obvious candidate as it heads relentlessly higher as the S&P500 flirts with the 1600 level.

The Gold Chart:

….continue reading about:

The FOMC and the ECB

This week ushers in the FOMC meeting where policy remains pretty much unchanged as they will “increase or reduce the pace of its purchases” as necessary. We also have the latest unemployment report due, should the figures be as expected at around 150,000 new jobs then QE will continue as is, maintaining the status quo. This would do little for gold prices as it is more or less factored into analysts’ expectations. A very poor number might raise the spectre of QE being increased, but we doubt that this will happen.

We also have the European Central Bank meeting on Thursday and given that the Eurozone is up against it with rising unemployment causing great difficulties for many of its member states, a rate cut is a strong possibility. Gold prices may get a small boost should this reduction eventuate as the interest earned on the Euro becomes less attractive. Then there is the long dark shadow of a ‘bail-in’ by depositors when the next member state pleads poverty. Investors looking to avoid such events have many alternatives to consider, and the precious metals space is one of them.

Beyond these two events it is difficult to see just what will be the ignition for gold prices to go higher. The world is already a dangerous place and we are aware of the friction that exists at the pinch points and therefore the geo-political situation is already accounted for in the current price.

Physical market and the paper market

From what we understand from the dealers there is increasingly strong demand in the physical market with various mints running out of some products, however, the paper market currently determines the price so we do need to keep a watchful eye on the COMEX. Should the COMEX falter and be unable to deliver, then this could be a game changer. However, if they settled the account in cash, then the blow would be softened, after all we are living with the ABN AMRO banks decision to make cash settlements on requests for gold withdrawals. A precedent has been set and others will no doubt adopt a similar stance when investors decide to take physical delivery of their gold.

Acquisitions:

Acquisitions are good for the pipeline but not so good for the bottom line, if the newly acquired production doesn’t come on line in the next year or two. A lot can go wrong in the design/permit/construction phase and it requires an enormous amount of cash to bring a project to fruition. It’s too much to ask an investor to wait three to five years for a potential return on such an investment. Miners have to decide which the highest priority is, the interests of the investor or the expansion of their empire

The US Dollar:

The US Dollar appears to be rolling over having formed a recent double top and it has also failed in its attempt to form a higher high. The dollar had rallied largely on the fall of other currencies such and the British Pound and the Japanese Yen, however, that rally is now fading. Should the dollar’s decline accelerate then gold prices should improve in dollar terms.

Conclusion

The producers are between a rock and a hard place; faced with falling prices and rising production costs. This squeeze on their operational ability makes it difficult for them to pay a reasonably attractive dividend; in fact many do not pay a dividend. So we have a situation whereby some producers pay no dividend and their stock price has tumbled, a recipe for disaster.

It is now more important than ever to select the quality producers in this sector, a well-managed mining company, operating in a mining friendly jurisdiction, with low cash costs, generating sufficient revenue so as not to need a loan, etc.

On the surface it looks as though the bottom is in and stock prices are cheaper now then they have been for some time. However, that does not mean that they can’t go any lower as disgruntled investors sell into any rally that presents them with an opportunity to exit their positions.

The HUI could be the next dead cat on the block so investors must exercise great caution at this juncture as the short term will continue to be volatile as this white knuckle ride gathers pace.

With gold and silver stocks being out of favor one must decide if this is a problem or an opportunity. We have steadfastly refused to buy gold and silver mining stocks for the last two years and as evidenced by the HUI we feel that our decision to hold back has been vindicated. The damage done to the mining sector may not be over yet but this demise is starting to offer up some exciting opportunities in my view.

Take care.

Bob Kirtley

If you would like to sign up for our premium options trading service, SK OptionTrader, you can do so by clicking  Sign-Up via PayPal  HERE – URL: www.skoptionstrading.com

URL: www.gold-prices.biz

Email: bob@gold-prices.biz

Sign-Up for Gold-Prices.biz HERE

Disclaimer: www.gold-prices.biz or www.skoptionstrading.com makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents our views and replicates trades that we are making but nothing more than that. Always consult your registered adviser to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this letter. Options contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. Past performance is not a guide nor guarantee of future success.