July 6, 2022

Gold And Silver Gain On Week – Time Tested Indicator Says Gold Stocks Are Cheap

After last week’s major sell off in precious metals, gold and silver prices gained on the week while platinum and palladium registered small declines.   As measured by the closing London Fix Price, gold gained $19.25 on the week and silver gained $2.00.

As is typical after a major pullback, silver prices were volatile.  Silver’s sharp price increase this year had attracted many day traders and leveraged speculators who were forced to sell as silver prices declined, in large part due to the rapid series of margin increases by the COMEX on silver futures traders.

This week’s volatility in silver prices can be seen using the SLV as a silver proxy.  After almost hitting $38 on Tuesday, the SLV plunged to $32 in early Thursday trading before recovering to the $34 level in late Friday trading.

SLV - COURTESY YAHOO FINANCE

The forced liquidation of silver positions by weaker leveraged hands has provided long term investors with a buying opportunity according to the experts at Dillon Gage Metals, a major precious metals dealer.  According to Terry Hanlon, President of Dillon Gage, “This year, silver has had its biggest run in the shortest period of time in recent memory.  Profit-taking corrections are to be expected when markets rally.  This recent price correction doesn’t change the basic fundamentals, which include good demand for silver to make coins in a number of countries.”

Hanlon also noted that the recent strong dollar rally in early May lead to a broad based commodities sell off which extended to precious metals.  The increased margin deposits required by the COMEX which increased from $4,250 a year ago to $16,200 per contract was also an obvious contributor to weakness in silver prices.  Hanlon expects silver prices to remain range bound in the short term saying that “I look for investors and money managers to take a brief breather on the sidelines before getting back into the silver market on the buy side.”

No one can say exactly where silver prices will bottom out before heading higher but Dillon Gage sees “support at the $32 an ounce level”.  Silver’s 200 day moving average is currently in the $28 range which should provide solid technical support.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,505.75 +19.25 (+1.29%)
Silver $36.20 +2.00(+5.85%)
Platinum $1,774.00 -15.00 (-0.84%)
Palladium $718.00 -3.00 (-0.42%)

It is interesting that amidst a broad based commodities sell off and a major price pullback in silver, gold’s relative performance has been very strong and indicative of fundamental demand.  The recent news that numerous countries are increasing their stockpiles of gold bullion provides further proof that both individual investors and governments are seeking to preserve their wealth by diversifying out of paper currencies.

For investors who prefer to invest in gold mining companies, the K-Ratio, a time tested buy/sell indicator currently has very bullish readings.   The K-Ratio is computed by dividing Barron’s Gold Mining Index by the current Handy and Harmon gold price and reflects the relative value of gold stocks compared to gold bullion.   A reading below 1.2o tells us that gold stocks are cheap compared to gold bullion.  The K-Ratio is currently at .93 indicating that gold stocks are currently a better relative bargain than gold bullion.

Precious Metals Prices Stumble In Wild Trading Week

Commodity and precious metal prices tumbled this week, with gold and silver prices snapping a streak of four consecutive weekly increases. Following the recent run up in prices, there had been some anticipation of a correction. In addition, there were concerns that the Fed’s announcement of the end of QE2 would result in an end to the flood of cheap money which has fueled the rise of commodities.

In the precious metals group, silver was the biggest loser with a drop of almost 30% from last Thursday’s closing London PM Fix Price.  (The London markets were closed on Friday, April 28th.)  The losses in silver far outpaced the declines in other precious metals and many place the blame squarely on the rapid fire multiple margin increases by the COMEX for trading silver futures (See How The COMEX Crashed The Silver Market).

Gold, platinum and palladium also had a tough week with respective price declines of 3.19%, 2.51% and 7.21%.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,486.50 -49.00 (-3.19%)
Silver $34.20 -14.50(-29.77%)
Platinum $1,789.00 -46.00 (-2.51%)
Palladium $721.00 -56.00 (-7.21%)

Precious metals have had previous serious declines without affecting the long term upward move in prices (see Measuring Declines From The High For Gold and Silver).  Overextended markets will correct but the fundamental forces pushing precious metal prices higher have not changed.  While dollars and other paper currencies can be produced in infinite quantity, the supply of gold, silver and commodities are finite.

Despite the Fed’s promise to stop printing money and its pledge of supporting a “strong dollar”, the dollar has had only a feeble recovery and is close to its all time lows.  The markets clearly have no confidence in Chairman Bernanke’s words and the weak dollar proves it.  Every bull market experiences temporary pullbacks and the precious metals are no exception.  Long term investors should view the latest price consolidation as another potential opportunity to increase positions.

Precious Metals Soar – Thank You Ben Bernanke

As predicted on Monday, the Federal Reserve policy meeting and subsequent press conference by Fed Chief Ben Bernanke had the potential to cause an explosive move up in the precious metal markets. (see Federal Reserve May Cause Stampede Into Gold and Silver This Week)

At the conclusion of the Bernanke press conference it became clear that the Fed would maintain its policies of cheap credit and debasement of the dollar.  Subsequent economic reports showed a slowing economy, rising food and energy prices and a slowdown in consumer spending.  This was all the markets needed to hear and precious metal prices exploded upwards on the week.

Silver reached an all time high of $49.75 on Monday before pulling back on Tuesday to $44.60 and then resuming its upward streak after the Bernanke press conference.  The closing London PM Fix Price for silver settled at $48.70 on Thursday.  The London markets were closed on Friday, but in New York spot trading silver ended the week at $48.00, up from last week’s close at  $46.26.

Precious Metals Prices
Thurs PM Fix Since Last Recap
Gold $1,535.50 +31.50 (+2.09%)
Silver $48.70 +2.44(+5.27%)
Platinum $1,835.00 +23.00 (+1.27%)
Palladium $777.00 +12.00 (+1.57%)

As measured by the London PM Fix Price, gold closed Thursday at $1,535.50.  London markets were closed on Friday, but in New York trading, gold ended the day at $1,566.70, soaring $29.90.   From last week’s London Fix Price close of $1,504.00, gold exploded upwards for a gain of $62.70.

As precious metal investors racked up huge gains on the week, many were probably thinking of sending a thank you note to Ben Bernanke.  The reality is different.  Most investors, no matter how bullish they may be on precious metals, are probably diversified and do not have a 100% portfolio allocation to gold and silver.

Investor gains on precious metals, while helping to preserve wealth, may have only partially offset the wealth destruction caused by zero interest rates and falling home prices.  The majority of Americans have the bulk of their wealth tied up in their personal residence and bank accounts and  have seen major declines in their home equity and close to a zero return on savings.  Fed policies are driving more and more investors into the precious metals markets and soaring prices are proof of that.

As noted the London markets were closed on Friday, April 29.  Precious metals prices soared on Friday in New York trading with gold ending at $1,566.70, silver at $48.00, platinum at $1878.00 and palladium at $777.00.

Gold At Record High As Silver Price Soars Towards $50 – Why The Rally Will Continue

As government spending spirals out of control and the Federal Reserve perpetuates a deliberate strategy of currency debasement, precious metals prices continued to soar. Gold, as measured by the London PM Fix Price, closed at $1504.00, up $27.25 on a shortened four day trading week .

Gold has gained $86 during April and $185 from its January low of $1,319.  The price acceleration in April comes in the aftermath of the government’s dismal failure to reduce deficit spending, even as S&P warned of a credit ratings downgrade for the U.S.  The great budget compromise reached by both parties was soon exposed as a shameful hoax by the Congressional Budget Office, which said that government spending would actually be higher after the “budget cuts” due to gimmicks.

As unsustainable government debt continues to balloon and the Fed continues to print money, the dollar is getting trashed. Governments worldwide are taking steps to protect themselves from the Fed’s explicit policy of dollar debasement and this means selling dollars.  The US dollar has fallen almost 10% since the beginning of the year.  Gold and silver are becoming the de facto reserve currency, as the flight from dollars intensifies.

US Dollar- COURTESY STOCKCHARTS.COM

Silver has continued to confound the bears with another standout performance, gaining $3.65 or 8.57% on the week, after gaining $2.39 in the previous week. The closing price for silver as measured by the London PM Fix Price was $46.26.   Silver is rapidly closing in on its all time closing high of $48.70 hit in January 1980. The current price momentum in silver could easily push silver into new all time highs next week.

The huge rally in silver prices has some wondering if there will be a pullback soon.  Silver has gained $8.63 per ounce this month for a 22% gain.   Since the January low of $26.68, silver has gained a spectacular $19.58 per ounce for a huge gain of 73%.  The question is not one of if, but rather of when there will be a pullback – a routine event in every bull market.

Precious Metals Prices
Fri PM Fix Since Last Recap
Gold $1,504.00 +27.25 (+1.84%)
Silver $46.26 +3.65(+8.57%)
Platinum $1,812.00 +25.00 (+1.40%)
Palladium $765.00 -7.00 (-0.91%)

But perhaps the bears will have to wait a while longer for the much anticipated pullback.  The volume in put options on the silver ETFs has seen numerous days of record volume, implying that some big players are betting on a significant decline in silver prices.  Does the record put buying on silver reflect speculators betting on a silver plunge or merely long time silver investors hedging long positions?  Either way, the implication is that the expectations for a silver pullback seems to be growing, but markets rarely accommodate investors’ perceptions of when a market is truly overbought – expect higher silver prices to shock the put buyers in silver.

Long term, any price pullback in silver should be looked at as a gift.  Financial players should never “fight the Fed”  and in this case, both Federal Reserve and Government policies guarantee higher precious metals prices (see Why There Is No Upside Limit To Gold and Silver Prices).

Gold and Silver Reach Record Highs While Ron Paul Weighs In On Spending Fiasco

Silver was again the star performer in the precious metals group, hitting a new yearly high of $42.61.  For  the second week in a row, silver has added over $2 per ounce as measured by London PM Fix Price.  After soaring $2.59 in the previous week, silver capped another standout week with a gain of $2.39.

As a long time patient investor in silver, the moves over the past couple of years have been nothing less than amazing.  In the early 1990’s, a one ounce silver eagle  did not cost much more than $5 per coin.  In just the past two weeks we have witnessed silver increase in value by $4.98 per ounce.  Am I nervous about the rapid appreciation or worrying about a correction that the main stream press is calling for?

Not in the least – I am in silver for the long term and the policies of our government and central bank virtually guarantee much larger profits in the future (see Why Gold and Silver Have No Upside Limit, and Budget Fiasco Sends Wrong Message To Creditors and The Perfect Storm for Gold and Silver).

Any price corrections in the precious metals (and yes they will happen) should be viewed as opportunities to increase positions.

Precious Metals Prices
Fri PM Fix Since Last Recap
Gold $1,476.75 +7.25 (+0.49%)
Silver $42.61 +2.39(+5.94%)
Platinum $1,787.00 -16.00 (-0.89%)
Palladium $772.00 -26.00 (-3.26%)

Gold, as measured by the closing London PM Fix Price, hit another all time high, closing at $1,476.75, up $7.25 on the week after running up $51.50 in the previous week. After breaking out of its base in the $1,450 range, gold could be getting ready for a substantial move upwards.

Paper money is all about confidence and, to anyone paying attention, last week’s “budget compromise” proved conclusively that our government is absolutely incapable of reducing spending.  After threatening us with a government shutdown and terrifying half of the citizens of this Nation with a potential cutoff of entitlements, both political parties proclaimed victory with an inconsequential  spending reduction of $38 billion.  Keep in mind that this year’s deficit is almost 37 times the proposed spending cuts.

The problem with the “compromise cuts”  is that both political parties lied to us and they were called out by the Congressional Budget Office (CBO) which said actual spending would be reduced by only a laughable $352 million.  Futhermore, the CBO noted that when “emergency spending” and the cost of multiple wars is factored in, actual spending would actually be $3 billion higher than the 2011 budget forecast.  It is not by accident that gold and silver have been soaring.

Ron Paul, one of the very few courageous and honest politicians that this country is lucky to have, said the following in a commentary about the latest events in Washington.

Last week, Congress and the administration refused to seriously consider the problem of government spending.  Despite the fear-mongering, a government shutdown would not have been as bad as claimed.

A compromise was struck at the last minute, but until Democrats agree to rein in entitlement spending, and Republicans back off the blank checks to the military industrial complex, it all amounts to political gamesmanship.

Unfortunately, the compromises always seem to be just the opposite.  Instead of the left agreeing to cut social spending and the right agreeing to cut military spending, the right agrees to more welfare and the left agrees to more warfare.  In spite of all the rhetoric, we will go deeper in debt, the Fed will print more money, and the value of the dollar will continue to plummet.  How long will it be before foreigners stop buying our debt, and hyperinflation arrives?  Throughout history, empires have always overextended themselves through conquests and wealth transfers leading to eventual collapse, from the Roman Empire to the Soviet Union.  We are headed in the same direction and it seems only the chaos of the collapse of the dollar will stop the spending spree.  Arguing over funding for Planned Parenthood and NPR, though important, only shows that leadership in Washington either won’t face reality, or don’t understand how serious the problem is.

Of course, an actual government collapse would create serious problems for many people who have come to depend on government payments for healthcare, retirement income, their children’s education, and even food and housing.  However, these so-called entitlement programs are unconstitutional to begin with and have engendered a culture of dependence on wealth transfer payments that is out of control. It concerns me greatly that instead of dealing seriously with our situation, so many in Washington would rather allow the chaos that will ensue when all of the dependent people are suddenly cut off.  Better to look reality squarely in the face and tell people the difficult truth that government is simply not capable of managing people’s lives from cradle to grave as was foolishly promised.  We face trillions in deficits with any of the budgets under consideration.  Keeping those promises is, sadly, just not one of our options in the long run.  Better to admit the nanny state is coming to an end and we are no longer working on “compromises” but a transition – to a sustainable way of life, one that respects the constitution, the rule of law and property rights.

In a sign that perhaps the economy may not be as strong going forward as some seem to think, industrial metals platinum and palladium both sold off on the week.   Platinum ended down $16 at $1,787 while palladium lost $26 to $772.

Gold Hits All Time High and Silver Breaks $40 as Precious Metal Demand Soars

Anything but paper dollars was the theme this week as investors rushed into anything of tangible value.  Gold, silver, oil and commodities of all types have been skyrocketing since last August when the Federal Reserve announced its second round of quantitative easing.

Gold closed at an all time high of $1,469.50 as measured by the London PM Fix Price and silver hit a 31 year high closing the week at $40.22.  Some analysts cautioned that the rapid rise in gold and silver prices could lead to a pullback, but overbought markets tend to defy such logic.  Gold has decisively broken through resistance at the $1,450 level and silver looks ready to challenge the all time high of $48.70 reached in 1980.

Precious Metals Prices
Fri PM Fix Since Last Recap
Gold $1,469.50 +51.50 (+3.63%)
Silver $40.22 +2.59 (+6.88%)
Platinum $1,803.00 +30.00 (+1.69%)
Palladium $798.00 +26.00 (+3.37%)

The surge in precious metals prices reflects the obvious conclusion that developed nations of the world are on a trajectory with a potentially devastating debt crisis.  The budget antics in Washington make it clear to any impartial observer that spending will not be cut and the parabolic growth of debt will continue.  No one knows how the looming debt crisis will ultimately play out for the Nation, but one certain outcome is that the dollar’s purchasing power is likely to diminish greatly (see Ron Paul Talks About Horrendous Currency Debasement).

Gold rose by $51.50 on the week and is up over $300 per ounce over the past year.

GOLD - COURTESY STOCKCHARTS.COM

Silver has been the standout performer over the past year, increasing by over 122% since last August.  This week was no exception with silver sprinting past the $40 mark and gaining 6.9% on the week. Despite the large increase in the price of one ounce of silver, the Silver Institute reports that both investment and fabrication demand soared last year.  During 2010, world investment demand for silver increased by 40% and fabrication demand (which accounts for 83% of total silver demand) rose by 13%.

Platinum and palladium also rose on the week, recouping the price correction experienced after the Japanese earthquake.  Platinum rose by $30 on the week to $1,803 while palladium rose by $26 to $798.

Gold and Silver Consolidate Recent Gains As Threat Of Sovereign Defaults Grows

Gold and silver prices, as measured by the London PM Fix Price, were largely unchanged on the week.  Gold slipped by $18 per ounce while silver declined modestly by $.05

Gold has rallied almost $100 per ounce since late January but has failed to decisively break out to new all time highs.  Silver, the standout performer in the precious metals sector has rallied furiously since late January, gaining $10 per ounce for an increase of 36%.

SILVER - COURTESY KITCOSILVER.COM

Despite the current attempt by Congress to implement very modest budget reductions,  fewer and fewer people seem to have faith in the long term value of the dollar.  The value of gold has not gone up for 10 years straight by accident – it is the result massive increases in debt and the looming threat of paper currency depreciation as governments resort to the printing presses to avoid defaulting.  (See Why There Is No Upside Limit for Gold and Silver).  Recent comments by two prominent individuals reinforce the view that the potential fallout from the debt crisis will be severe.

Bill Gross of Pimco, the world’s largest bond investor, writes in his April 2011 Investment Outlook,  “Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates”.

John Lipsky of the International Monetary Fund warned that the level of debt by developed nations is unsustainable, having reached levels last witnessed after the end of World War II.  According to Mr. Lipsky, “The fiscal fallout of the recent crisis must be addressed before it begins to impede the recovery and create new risks.  The central challenge is to avert a potential future fiscal crisis, while at the same time creating jobs and supporting social cohesion”.

The reality of a democracy is that we elect those who promise to provide us with the most benefits and entitlements.  Under these constraints, the temptation by elected officials to use printed money to meet promises that cannot be kept is irresistible.  Yes, the promises will be kept but they will be paid for in dollars that have little purchasing value.

Precious Metals Prices
Fri PM Fix Since Last Recap
Gold $1,418.00 -18.00 (-1.25%)
Silver $37.63 -0.05 (-0.13%)
Platinum $1,773.00 +21.00 (+1.20%)
Palladium $772.00 +18.00 (+2.39%)

Platinum and palladium both gained on the week, continuing a rebound from recent sell off lows reached during the height of the panic related to the Japanese earthquake.  Since mid March, platinum has gained $73 per ounce while palladium has gained $60 per ounce.  In late February palladium was at the $860 level while platinum traded in the $1850 range.

Gold and Silver Prices Push To New Highs, Gold Silver Ratio Drops To 28 Year Low

Gold and silver prices, as measured by the London PM Fix Price, moved to new highs on the week.

Gold, as measured by the closing London PM Fix Price, gained $16 per ounce on the week and hit an all time high of $1,447 on Thursday.  After soaring 30% last year, investors still have plenty of reasons to allocate part of their portfolio to precious metals.

Precious Metals Prices
Fri PM Fix Since Last Recap
Gold $1,436.00 +16.00 (+1.13%)
Silver $37.68 +2.53 (+7.20%)
Platinum $1,752.00 +32.00 (+1.86%)
Palladium $754.00 +27.00 (+3.71%)

Silver was once again the standout performer among the precious metals, gaining $2.53 per ounce on the week.  The price of silver has now risen by over 10% in the past two weeks and is up from a yearly low of $27 in late January.  Silver has far outpaced the gains in gold, which has resulted in a decline in the gold/silver ratio to 38, which is the lowest since late 1983.  A return to the long term historical gold/silver ratio would result in silver prices approaching $100 per ounce.

SILVER - COURTESY STOCKCHARTS.COM

The surge in silver prices caused the CME to increase margin requirements on silver futures, which contributed to a pullback in prices on Thursday.  The move by the CME was seen by some as a manipulation tactic to bring down the price of silver, but increased margin requirements are common when prices are rapidly increasing.  Small and underfunded speculators may have to liquidate, but in the long term silver will merely move from weak hands to strong hands.  Increased margin requirements on highly leveraged positions can produce a short term sell off, but it does nothing to change long term fundamentals.

Platinum and palladium, which both lost over 3% last week, gained on the week as fears of reduced industrial demand were eased by estimates of the huge reconstruction cost in Japan.  The rebuilding of Japan is likely to result in higher prices for all types of commodities and an increased rate of global inflation.

Gold and Silver Prices Gain on Week

As measured by the London PM Fix price, gold and silver prices gained on the week after declining approximately 1% each in the previous week.  Gold gained $8.50 per ounce on the week to $1,420.00.  Silver was the stand out gainer on the week with a 3% or $1.05 per ounce gain.   As the situation in Japan and Libya stabilized somewhat, the recent panic selling in financial markets subsided as bargain hunters moved in, although in late trading, stocks gave up much of their gains.  Gold and silver also pulled back slightly in New York trading with gold at $1417.80 and silver at $35.10.

As market analysts worried about the potential for slower economic growth due to the disaster in Japan, classic industrial metals saw further price erosion after significant losses in the prior week.  Platinum fell by $57 on  the week and palladium dropped by $27.  Over the past two weeks, platinum has declined by $108 or over 6% while palladium was off $84 for over a 10% loss.

Precious Metals Prices
Fri PM Fix Since Last Recap
Gold $1,420.00 +8.50 (+0.60%)
Silver $35.15 +1.05 (+3.08%)
Platinum $1,720.00 -57.00 (-3.21%)
Palladium $727.00 -27.00 (-3.58%

As discussed last week , the fundamental forces propelling gold higher remain intact.  The devastation in Japan will require massive amounts of additional borrowing by a government already reaching the limits of its borrowing ability.  Expect Japan to follow the policy of the Federal Reserve with massive amounts of quantitative easing.   The currencies of Japan, Europe and the United States all face a loss of real purchasing value as governments engage in money printing to meet spending and borrowing needs that have spiraled out of control.

The toxic combination of  low economic growth, weak personal incomes and public resistance to additional tax increases have left governments with no other choice than to engage in massive expansion of the public debt.  As constraints on governments’ borrowing ability have grown, the last resort option of money printing will continue to result in the debasement  of currencies.  Increases in the price of precious metals have no upside limit under this scenario.

Silver remains the primary investment choice of many as the metal reasserts itself in relationship to the price of gold.  If the very long term historical gold silver ratio reasserts itself as many expect, the price of silver could easily close in on the $100 per ounce level.

SLV - Courtesy yahoo finance

Gold and Silver Prices Hold Gains, Rise in Late Trading

Gold and silver prices declined slightly on the week, as measured by the closing London PM Fix prices.  Gold finished the week at $1,411.50 for a loss of $15.50 while silver declined fractionally by 33 cents to close at $34.10.  However, as markets assessed the impact of a slowing world economy, higher inflation, higher oil prices and the massive earthquake in Japan, prices for gold and silver saw significant price improvement in late Friday New York trading.  Gold moved up $9.20 to $1,421.30, while the silver price rose $.60 to $35.90.

In a week of tumultuous economic and political news, platinum and palladium saw significant declines on the week as investors worried about reduced industrial demand in the face of a slowing world economy.

Precious Metals Prices
Fri PM Fix Since Last Recap
Gold $1,411.50 -15.50 (-1.09%)
Silver $34.10 -.33 (-0.96%)
Platinum $1,777.00 -51.00 (-2.79%)
Palladium $754.00 -57.00 (-7.03%

The minor price consolidation for gold and silver over the past week are impressive considering the strong gains of the previous month.  Strong bull moves are never straight and price corrections should be seen as an opportunity to increase positions.

None of the concerns that have propelled the precious metals higher have been resolved.  There is a strong probability that one or more of them will blow up putting major financial pressures on governments that are already staring into the abyss due to untenable levels of debt.  Which event will trigger another financial crisis is impossible to predict, but here’s a quick rundown of the obvious suspects:

1.) The final implications of the massive Japan earthquake will take weeks to assess but is certain to add huge financial stress to a country already overwhelmed by the highest debt to GDP ratio in the world.  The Japanese central bank has already indicated it is ready to loosen monetary conditions to calm financial markets, which may be a signal that they will follow the U.S. Fed’s lead and engage in a significant amount of quantitative easing or money printing.  The cost of credit default swaps on Japanese government debt widened significantly reflecting the need for increased borrowings by a government already overwhelmed by indebtedness.  As investors become increasingly alarmed at the prospects of default on government debt and currency debasement, the flight to gold will accelerate.

2.) The sovereign debt crisis in Europe continues to spiral towards a crisis as the European Central Bank attempts to solve a debt crisis with more debt.  Monetary authorities worldwide are out of standard policy options and will follow the lead of the U.S. Fed by printing money.   The implications of money printing on a global basis removes all constraints on the appreciation limits of the precious metals.

3.) The largest bond fund in the world dumps all longer dated U.S. Treasury securities. Bill Gross, manager of PIMCO, the largest bond fund in the world warns that when QE II stops in June, there will not be enough buyers for government debt, leading to a funding crisis for the U.S. Government.  If one of the planet’s smartest and biggest bond investors thinks it’s time to sell U.S. Treasuries, the risk of contagion becomes substantial.  Foreign governments currently purchase half a trillion dollars of U.S. debt every year and are becoming alarmed by Fed policies which make their debt investments look riskier by the day.  How long will it be before other major investors in U.S. debt decide to follow Bill Gross’s lead and initiate a massive sell off in U.S. treasuries?

4.) Oil prices have pulled back in recent days but the situation remains volatile.  A small group of protesters in Saudi Arabia were immediately dispersed with a hail of rubber bullets from security forces, an action that can only further inflame the passions of those who feel repressed by regimes in Saudi Arabia and other oil producing countries.  Chaos in Saudi Arabia would quickly put the world economy back into an economic meltdown that governments may be unable to contain.

SILVER - COURTESY STOCK CHARTS.COM

The last upward move in silver last four months from September through the end of 2010 with a price gain of over 70%.  After a brief correction early in the year, investor and industrial demand pushed silver to a new yearly high.  A rally equivalent to that of last year would drive silver up to the $50 level by June.