Conditions are Deteriorating at an Alarming Rate

With gold down $35 and silver trading $1.25 lower, today John Embry told King World News that current economic conditions around the world are deteriorating rapidly.  Embry, Chief Investment Strategist at Sprott Asset Management, also said that in the midst of these deteriorating conditions we are seeing aggressive manipulation.  But first, Embry had this to say about what is happening in the gold market:  “You are seeing gold take out some short-term technical support levels.  I guess the next one of significance is at $1,650.  If gold were to take $1,650 out, that would get more of the hedge funds and the algorithm traders shorting.”

“But it’s all just paper.  I can assure you that there is very little physical gold being sold at distressed levels here.  Any transaction in physical is probably being motivated by the buyer who is taking advantage of these low prices.

I would also note that the open interest is coming down quite sharply in gold.  It’s always uncomfortable in the short-run when the open interest is dramatically increasing because you know they are setting it up for another takedown.

In the end this action is totally meaningless....


“I have said this before but every time this happens, and it’s been going on for 11+ years, buy the weakness.  That’s all you do here and don’t worry about it because the fundamentals for gold have gotten better with each passing day.

As we are doing this interview, the Dow and gold are trading down exactly the same in terms of percentages.  If the Dow is going to head lower, they will knock gold down initially.  They will not let gold be seen as the alternative when the Dow runs into difficulty, at least initially.  Eventually gold will come to the forefront, but in the early stages we are going to have to endure this.

What I’m most concerned about is the big picture for everything because I think conditions are deteriorating at an alarming rate.  All of this is being obscured by bogus statistics, hype and mainstream promotion.

I don’t believe anything has gotten better and the fact is this will manifest itself in most markets, which will be hurt by the action, whereas gold and silver will be the ultimate beneficiaries.  But in the short-term you have to go through a little pain and I think that’s exactly where we are. 

There is no question that Eastern central banks are using opportunities like this to diversify away from US dollars.  I think it’s amazing the dollar has been firming recently when you see what the Chinese have been doing.  It’s not just that China is not buying US Treasuries, they are actually getting rid of some of their existing holdings.  Longer-term that is going to be a huge development.  

Jim Sinclair makes a great point when he noted people are beginning to not use the US dollar for various international transactions.  That is an enormous negative for the US dollar.  One of the reasons for the dollar’s strength has been that so many transactions around the world took place in US dollars.  That’s changing.”

Here is what Embry had to say in closing:  “Just to reiterate, we’ve gone through these corrections, which I call counterintuitive corrections.  The very idea that a ‘risk off’ trade should knock gold and silver down is preposterous.  The bottom line is gold and silver are being manipulated aggressively.

For those people that don’t have enough gold and silver, this is a wonderful opportunity to buy.  Don’t worry about the short-term price, worry about how many ounces you own.”

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