It is likely that the price of Gold will come down to trade the last year's lows at $1540. It is also likely that Silver will trade down to about $27, also last year's lows.
What could change that â€“ and this is the reason why I don't think it will change â€“ is that the principal central banks of the G-20 governments could actually be successful in their desperate effort to create inflation. However the likelihood of that happening is, I think, somewhere between zero and none. It has never occurred before in this stage of an economic cycle.
Also it is unlikely that no matter how much you cheapen currencies that you can create inflation because as we have written before â€“ and the Unwashed have to be continuously reminded -- inflation does not occur simply because governments crank up the printing press.
If that were the case, there would be hyper-inflation on the planet already insofar as the principal central banks like the ECB, the BoE, the Fed, and the Bank of Japan have quadrupled the money supply in the last six years, so if inflation were simply a function of printing money, the rate of inflation on the planet would already be somewhere up in the double digits -- instead the rate of inflation continuously declining, which is occurring now.
This also happened during the Great Depression of the 1930s. What Gold Touts will point out is that the price of Gold did rise from 1933 to 1943 during a time of a pernicious deflationary cycle.
However what they're not saying is that the price of Gold could not begin to rise until 1935. At the very depths of the Great Depression, initially when deflation was still raging, the price of Gold and Silver actually declined, Silver proportionately even more so.
It wasnâ€™t until the deflationary cycle that the Great Depression of the 1930s was generating, stabilized in 1935, that you began to see the price of Gold and Silver rise again.
The importance of this is the fact that the price of Gold and Silver is declining, despite global efforts to create inflation tells you that the likelihood of successfully creating inflation to defeat what is after all a deflationary trend will not work.
Gold and Silver prices are signaling that there is more deflation to come, that we are in the grips of a deflationary cycle. That global governments and central banks will be unable to create artificial inflation, i.e. non-consumption-driven inflation. Gold and Silver are telling you that won't occur.
The implications are that the dark clouds on the economic horizon of this planet are growing darker. And this is how the prices of Gold and Silver fit into the greater equation. The day of the bears is coming.
As we have mentioned before, we are principally short sellers. A good short seller should be able to take one dollar out of the price of Gold for every dollar the price of Gold rallies. I've been able to do it. All short sellers can because nothing rallies in a straight line.
For the rest of this Exclusive Analysis by Independent Political/ Economic Analyst Al Martin, click here -- Al Martin Raw.
* AL MARTIN, author of "The Conspirators: Secrets of an Iran Contra Insider," is an Independent Political-Economic Analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. He is also currently trading the commodity futures market day and night and has a teleconferencing service to facilitate transactions in the markets. This is a service for independent experienced traders.
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