Today. gold was down by nearly $100 and silver also declined by nearly $3 in one time. Although many people are panicking what's going on, I am so used to this kind of smash that I just check and pick up some facts. In this blog, I would like to share what's actually happened for gold and silver today.
LTRO (Long Term Refinance Operation) to the EU member banks through Federal Reserve
Through the aid of Federal Reserve, ECB injects the liquidity to the member banks so that they can purchase the bond for Greece and Portugal (Almost bankrupt nations). Amount was staggering $720 billion. This is one of the biggest global QE from the Fed.
Then, why gold and silver price smashed? Central banks and big banks dumped over 225 million oz worth of paper silver just prior to Ben Bernanke speech. Then, what helicopter Ben said was "We may not need QE since unemployment figures are slightly better". On top of that, main stream media just ignore the fact what Federal Reserve is actually utilizing the swap line to inject the liquidity to the ECB. Instead, they are focusing on Ben Bernanke's comments and gold and silver raid by saying "Gold bubble burst" (Whenever gold and silver are smashed, some mainstream economists say this kind of comments in every single time without fail... Just amazing how main stream media is part of the system..). These two factors ignite price of both gold and silver to tank.
If some people believe what main stream media preached and panicked because of this, then you don't understand the core reasons why we need to put the money in gold and silver. Therefore, not ready for investing in precious metals. I am saying this many times over. I can assure that nothing and I mean absolutely nothing has changed in fundamentals of this economy. In fact, situation is getting worse and worse. Look at Greece (short term rate is higher than 800% ). Once Greece defaults and exit Euro, what can you expect for other PIIGS nations like Portugal, Italy, Spain etc do? They will do the same thing by claiming "Greece defaulted and get huge hair-cut", then why not we will do the same thing too". That is the reason why central planners implemented LTRO to try to hold those bankrupt nations remain in Euro zone as long as possible. Once they default and leave the euro zone, game is over and all the credit default swap will start to explode. Although there are many other positive factors for owning gold and silver, those reasons above are enough reasons for gold and silver to possibly go up in parabolic.
As always, those price declines are just the noise. In every time decline occurs, ask yourself "Is there something fundamentally changed?". To me, absolutely nothing has changed every time I ask this question. My advise to you is to understand the fundamentals (Economic fundamentals and fundamental reasons for owning gold and silver etc). Once you start to understand the fundamentals, you will quickly notice that what happening right now is outright charade.
Related Blogs and Articles
Published: 01 March 2012