Turk: “Both gold and silver have been showing tremendous strength, Eric. With each passing day, the odds improve that a major low was made in June. Therefore, we have to set our sights on much higher gold and silver prices in the weeks and months ahead.
What continues to amaze me is that gold is still in backwardation....
“It is truly stunning considering that gold has remained in backwardation even though the price has jumped from $1,200, when the backwardation started, to $1420 today. That's an 18% jump in price, and it occurred in only 37 trading days.
I have no other way to express this development other than to say that it is truly historic, Eric. The fact that gold remains in backwardation is remarkable. Everybody needs to be paying attention to this because the jump in price has not induced enough holders of physical metal to sell. This shows that people are afraid of paper. They want a tangible asset because they know and understand the protection provided by physical gold and silver.
As the backwardation makes clear, there is, in effect, a shortage of physical metal, and this has occurred even though I know a lot of people have been selling bullion in order to buy the mining shares. They are making this switch in the expectation that the mining shares will finally start outperforming bullion. In other words, they believe that the price of the mining shares will start climbing more rapidly than the price of gold, which may in fact be true.
But remember, owning bullion or the mining shares are two entirely different things. Physical gold and silver are safe havens. They are money outside of the banking system, and do not have counterparty risk. In contrast, the mining shares are not money -- they are an investment.
The important conclusion to draw from these observations is that physical gold is now in exceptionally strong hands, meaning that much higher prices are needed to convince enough holders of physical metal to part with their gold and hold some national currency instead.
It also means that things are spinning out of control for the central planners, Eric. In this regard, even though the Fed is buying $85 billion of paper every month, interest rates are still rising. This is clearly a sign that we are now at a tipping point. The market senses that the risk of dollar debasement is too great, consequently, conditions are looking much better for everyone who owns physical gold and physical silver.
The last couple of years required a great deal of fortitude and guts for buyers of gold and silver, Eric. Nerves were tested, but now our patience is starting to be rewarded. The big rallies since June in both in gold and silver have been nothing short of spectacular, but this is just the beginning. The moves higher in gold and silver will be absolutely breathtaking in the future. And as I said earlier, what we are witnessing right now in the gold and silver markets is truly historic.”
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