Gold and Silver: Are The Precious Metals Really Losing Their Luster? (GLL, ZSL, GLD, SLV, IAU)

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December 19, 2011 3:06pm NYSE:GLD NYSE:GLL

Larry Edelson: Gold (NYSEARCA:GLD) has plunged through many of the support levels I’ve previously provided you.  It’s dropped through the $1,730 level … the $1,610 level … and has thus far  reached as low as $1,564.

Once it closes below $1,610 on a Friday, which it will likely have done before you even  read this column — the stage will be set for gold to collapse to at least $1,435 and, very possibly, as low as the $1,100 mark.

And  silver, precisely as I’ve been warning you, has started to crash again — losing  more than $4 last week and shattering support at the $30 level … then the  $29.16 level — and is now ready to make a beeline down to $25 and, very  possibly, much lower to $22 to $23 an ounce.

As a  result, suggestions I made previously to purchase inverse ETFs such as the ProShares UltraShort Gold (NYSEARCA:GLL) and the ProShares UltraShort Silver (NYSEARCA:ZSL) are now paying off very nicely. GLL has already soared as much as 29.8%. ZSL, as  much as 37.8%.

I’ve  taken a lot of flak over the last couple of months for being bearish on commodities, especially because of my forecast for much-lower prices for gold (NYSEARCA:IAU) and silver (NYSEARCA:SLV). Some even treated me as if I were some kind of traitor.

But  that’s OK. I will never succumb to the crowd that believes markets can go up  forever and that bull markets always have blue skies overhead. I’ve been around  too long to fall into that trap, which causes nothing but blindness and losses.

And  most importantly, I will never, ever tell you anything but what I believe … or  what my indicators tell me. I can assure you that I’ll never report on what  anyone wants to hear.

There  are way too many pundits in this business who tell you what you want to hear,  all in the hope of keeping you as a customer or a subscriber. Not me. I refuse  to do anything but report on what I see … and what I would do with my own  money.

Are the Precious Metals Really Losing Their Luster?

So why are gold and silver falling? Why could they fall much more? Why are they  plunging in the face of a crisis as bad as Europe’s?

This is  where you need to separate fact from fiction, and use critical thinking skills  to understand markets. And the truth is that most gold (and other metals) bugs  don’t have a clue when it comes to what really drives the precious metals.

They  figure gold and silver are all about inflation. When inflation is escalating,  gold and silver do well. Sounds good, right?

But  nothing could be further from the truth! Inflation is a very minor force driving the prices of gold and silver. And at that, inflation isn’t even a  force. Rather, it’s a symptom of a much-deeper issue, which is none other than  what I call a “crisis in confidence.” That’s the true underlying force behind  the precious metals’ behavior.

Simply  put, when confidence in government or in fiat currency is falling, precious  metals do well regardless of whether inflation is at hand or not!

Once  you understand that, then you have a better understanding on what really drives gold and silver.

But  that’s not nearly enough either. You have to delve deeper and determine where  the crisis in confidence is manifesting itself.

Right  now, the crisis in confidence is clearly in Europe. Though the United States  certainly has many problems — many of them bigger than those affecting Europe —  right now, it’s all about Europe, and it’s making the United States look like  an island of safety.

Put  another way, plunging confidence in Europe is bolstering the United States and,  most importantly, the U.S. dollar. Since the euro is NOT the world’s reserve  currency, that means that the capital that’s fleeing Europe right now is  heading, guess where?

To the  U.S. dollar, for safety and liquidity … which is, by default, bearish for the  precious metals.

Should You Get Sold On Selling Silver, Gold?

So you  see, plunging gold and silver prices are not so hard to understand when you  delve a little deeper and view the world in international terms and with no  biases.

No  biases about inflation, one currency or another, what markets can or cannot do.  Just pure, simple, logical reasoning — unaffected by emotion. That’s all it  takes.

Don’t  get me wrong. There will come a time when a massive crisis in confidence hits  the United States. The time is coming, and that is when you will see the next  leg down in the U.S. dollar and the next big bull market in precious metals.  But it is not here yet!

Which  is precisely why I continue to recommend that all precious metals investors be  very careful now. Gold and silver can fall much further than you think  possible.

And  odds are they will. Because their next bull market legs higher will likely not  form until most gold and silver investors have thrown in the towel, and there  are very few left to sell. That’s when the precious metals will violently turn  back to the upside, leaving most investors in the dust.

If  you’ve acted on my suggestions to hedge your gold holdings, or take outright  speculative positions in inverse ETFs like those mentioned earlier, hold those  positions. There’s a lot more downside potential in gold and silver right now.

Ditto  for most commodities. As Europe continues to go down in flames, capital will  pour out of Europe and into the U.S. dollar for cash and liquidity purposes …  boosting the dollar higher, and forcing the prices of nearly all commodities lower.

My Real  Wealth Report members have been way ahead of these moves, and I’ve had them hedge up their gold holdings and take some speculative short positions well  ahead of time, and they’re doing great.

My more-speculative  service, Resource Windfall Trader, is doing fantastic. Every one of my closed trades over the last 12 consecutive months has seen an average  45% gain in market price. That includes all seven of my losing trades over the  last year.

The average  hold time for those trades is just 44 days — or about a month and a half. Some  examples include big wins such as 233.3% gains on a bearish gold position …  118% and 354% on a bearish silver bet … and much more, including 101.85%  gains on a bearish S&P 500 play.

You  might want to consider cranking up your profit potential by becoming a member  of my Resource Windfall Trader. You can do so now at a full 30% off the regular membership price by clicking here to read my special report.

Best  wishes, as always …

Written By Larry Edelson From Uncommon Wisdom Daily

Uncommon Wisdom (UWD) is published by Weiss Research, Inc.   and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid   conflicts of interest, Weiss Research and its staff do not hold   positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not  guaranteed. Performance  returns cited are derived from our best  estimates but must be considered  hypothetical in as much as we do not  track the actual prices investors  pay or receive. Regular contributors  and staff include Andrea Baumwald,  John Burke, Marci Campbell, Selene  Ceballo, Amber Dakar, Roberto  McGrath, Maryellen Murphy, Jennifer  Newman-Amos, Adam Shafer, Marty  Sleva, Julie Trudeau, Jill Umiker,  Leslie Underwood and Michelle  Zausnig.

This investment news is brought to you by Uncommon Wisdom. Uncommon Wisdom is a free daily investment newsletter from Weiss Research analysts   offering the latest investing news and financial insights for the stock   market, precious metals, natural resources, Asian and South American   markets. From time to time, the authors of Uncommon Wisdom also cover other topics they feel can contribute to making you healthy, wealthy and wise. To view archives or subscribe, visit

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