Regular Joes know where Another Joe stands on this issue. But, even though we’re still bullish on gold and silver, what the blazes is going on here?

Wednesday’s markets were a mess for those of us who appreciate intrinsic value. We saw silver and gold both take a hit, silver by over 5%. And Thursday started out much the same. What to do? Run? Walk? Buy dollars with our precious metals? Buy stocks? But which ones?

We try to assess the fundamentals often here. What is true and what is not? What is real and what is merely perceived? So that’s where we’ll go today.

What’s true? Well, it is true that the perceived value of gold, silver, platinum and palladium are all diminishing today. But, what is today? And is perceived value any indication of true value?

Is Europe recovering? Despite spins that their efforts have any hope of succeeding, as a Union, they’re upside down. It’s like owing $350k on a house that’s only worth $200k, only worse. At least a house has intrinsic value. The wealth stripping machine that the ECB has become has no intrinsic value at all. The debt is on nothing tangible. It’s just…. debt. It’s like owing for a vacation your grandparents took before you were born.

But it’s not just Europe. The U.S. is every bit in as much trouble. Our problem is that, as the world reserve currency, we keep getting propped up by fear, lack of perceived alternatives and the fact that so many nations hold a lot of dollars in their coffers. If the dollar fell it would hurt every nation that holds them. So, who wants to see it fall?

But these fundamentals are present regardless of the world’s perceptions. The truth is that there is immense downward pressure on the dollar. And these very dynamics have put extreme upward pressure on many commodities; perhaps those that represent true money most of all.

What many of the gurus think is happening is that the heavy traders are taking this lull in the markets, which always happens this time of year, as an opportunity to hammer metals hard. Let’s face it, why not? They can short them, manipulate them, make a profit, scare people into selling and make even more profit by doing so. And all these mechanisms tend to make people turn toward the fiats as they fail to understand the difference between true value and empty promises.

Okay, so, gold fell Wednesday by about 2.26%, silver by about 5.5%. Ed Steer is always helpful with this kind of information. Shouldn’t we expect these pullbacks? I admit, I wasn’t expecting to see $26 silver ever again.

But what do we do about it? I have to remind readers here that I can’t give personal advice. But I can share what I’d most desire to do right now.

  • First, because the ratio between gold and silver is growing (1/57 currently), I’d concentrate on silver. In fact, Another Joe is considering trading some of his gold holdings for silver for this very reason.
  • Second, as mentioned before, Another Joe has some Morgan rolls that just haven’t performed well. But they are holding steady during this drop (an advantage of semi-numismatics). Perhaps this would be a good time to swap some rolls for bags.
  • Third, we just don’t have much money right now, but if I did I’d be buying silver bags, rolls or other forms that are close to the spot price.
  • Fourth, perhaps this would be a good time to buy some SLV shares. If someone is of the mindset, maybe some July or later SLV calls would be in order. It’s a good way to gain some serious leverage, though not everyone is able to handle the challenges of holding options. If SLV doesn’t perform, all investments can be lost when the option expires.
  • Fifth, the last thing Another Joe is considering right now is selling. Our confidence is in created wealth, not printed pseudo-wealth. We’re confident that gold, silver, platinum and palladium will have their day.

This brings up some other thoughts to consider, though I really don’t know what would be best. Platinum is much rarer than gold, and yet the price, while historically higher, is lower today, by over 10%. This quite possibly could make it a masterful play. And palladium has at times reached parity with platinum. Could it happen again? Perhaps.

Remember, these are just ponderings to help readers think, not specific advice. Do your research. See what you think. Then act accordingly. John Embry offers some personal insight in this regard as well.

I would be very surprised if gold weren’t up at least 60% from current levels.  Silver will be more explosive.  What they have done to silver is astounding.  In the longer-run it just ensures even greater physical shortages and when that manifests itself, I think the silver price will easily double.

Remember this too, holding dollars, euros or whatever other fiat currency you prefer, is taking a position. Some claim that it’s sitting out for the time being. But it’s not; it’s investing in fiat currency. So, keep in mind, no matter what you decide to do, you are necessarily making a decision. We merely attempt to influence you to dig into the truth and make your decision accordingly.

A final thought on this: It’s possible that this is a low. January tends to be a slow month. Markets are fickle. And it really seems that manipulators are having their way this week. Could the new year bring in higher prices immediately? Some think that 2012 will see meteoric jumps in precious metals, especially with this recent pullback. Again, do your research and take action accordingly.


Enjoy your New Year celebration, and be safe.
Another Joe