As I stated yesterday, ‘I believe that this current correction in gold and silver stocks will provide a window for a few more days to weeks to get on board at a good price for the first half of 2017.’ Yesterday, gold and silver stocks corrected further as I believed they would, but they also sold off an inordinate amount considering the slight pullback in the underlying metals themselves, with gold only correcting less than $5 an ounce and silver down less than half a percent. These minimal pullbacks in spot gold and spot silver prices shouldn’t have triggered the much larger percent sell-offs in gold and silver mining stocks that occurred in yesterday’s markets, so are the larger price sell-offs in the PM stocks predicting imminent future sell-offs in spot gold and spot silver prices?
I believe several factors are at work here. Number one, the big banks were heavily short in gold futures going into the end of this month and were unable to take spot gold prices down, so they lost a considerable amount of money in their short positions. To balance this mistake, they could have shorted the gold and silver mining stocks and initiated the sell-off yesterday to recoup some of their losses in the PM derivative markets this month. Regarding the mechanism by which they could have taken down the stocks, I’ve written plenty of articles describing the very plausible mechanism by which bankers can execute such schemes with the aid of HFT algorithms, so I’m not going to rehash that explanation here.
In addition, there are a couple of very important geopolitical/economic events happening next month that could cause bullishness in gold and silver asset prices. We know from history, that it is extremely rare for bankers to allow gold and silver price rises to go unopposed. Consequently, the desire of Central Bankers to offset any bullishness in gold and silver asset prices that may materialize next month likely has contributed much to the probability of a mid-March US Central Bank fed funds interest rate hike soaring from a mere insignificant 13% just two weeks ago to 34% one week ago to the present 51% as of today. Besides US Central Bankers talking up a good game and threatening to raise hikes, which they always do, whether or not they really are sincere about the execution part of the equation, the probability of a US fed funds interest rate hike next month has soared from 13% to 51% in just two weeks due to trader psychology as much as any other factor. I believe that US Central Bankers understand the possibility of bullish geopolitical/economic events happening in mid-March.
This post was published at GoldSeek on Wednesday, 1 March 2017.
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