One Way Forward By Craig Hemke for Sprott Money
It has been a very challenging year for precious metals investors, and our struggles may continue a while longer. However, all is not lost and we are not yet doomed to repeat the pattern from 2013-2018.
And it has been particularly challenging since the June FOMC meeting. Sentiment shifted toward an eventual “taper” of The Fed’s current $120B/month QE plan, and this sent the U.S. Dollar Index soaring, which in turn sent the COMEX precious metals plunging.
Many important technical levels have been breached and traders have shifted into a sell-the-rally mode, which mutes every bounce in price. Further, overt manipulation by the Bullion Banks continues unabated, even after the recent convictions of two Bank traders.
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The most recent deliberate event occurred last Sunday evening at 6:45 EST. The futures markets had just reopened for the week, and the hours before the Monday Asia open is typically the lightest volume period…which makes price particularly vulnerable to smashes.
Note below that over 18,000 Dec21 COMEX gold contracts were traded in less than 20 minutes Sunday evening. That’s the physical equivalent of 1,800,000 ounces or about 56 metric tonnes that *someone* HAD TO IMMEDIATELY SELL at 6:45 on a Sunday evening, during the most illiquid time of the week.
I could write more about this today, but I wouldn’t do a better job than Ronan Manly at BullionStar has already done. If you want to learn more about the mechanics of this type of price smash—or if you want to learn more about the how and why of it—please be sure to check the link below.
Unfortunately, what’s done is done. So let’s take time today to instead map out where prices may be headed from here and what factors could cause things to eventually improve.
Again, this current washout period began at the conclusion of the June FOMC meeting, where taper was first discussed and, perhaps more importantly, The Fed began to pay a nightly rate of five basis points on excess reserves. This has served to drain some liquidity and, in turn, has crunched gold, silver, and most of the commodities.
After last week’s announcement by Vice Chair Clarida that a QE taper schedule is pending, prices turned sharply south and have yet to show any significant bounce.
