No one really knows, but I will share my best guess. The price of both silver and gold is strongly correlated with the price of oil. Oil is the most manipulated commodity and the price of oil, which this minute is $59.20, has been manipulated down strongly to favor incumbents this November's elections.

Enkidu

Right you are.

http://money.cnn.com/2006/10/03/markets/gold.reut/index.htm?postversion=2006100311

Crude's fall robs gold of its luster
Metal falls almost 3 percent as it loses its appeal as inflation hedge.

Gold just dropped by 20,80 to $582,50, the biggest one day drop I have ever seen. What is the cause for that?

I believe we are now in the final "capitulation" of the bulls and that this capitulation will last a few more days to even a few more weeks.

Here's the way it works. In order for a market to go up, nearly everyong has to think it will never go up again -- and so they will take their money out. Now there is a fund of money outside of the market that can re-enter the market when the herd begins to realize the gold and silver bull market is not over after all.

If everyone wants to sell and they sell and leave the market with their money, there will come a time when there is noone and no money left to buy what the remaining sellers want to sell. And the down move will necessarily stop. Then, when prices are so cheap that those who have now removed themselves from the market (because they thought it would never go up) begin to re-enter when they see the bargain hunters (you and me) beginning to buy again -- when those who have left the market return and start buying themselves, a new flood of money can re-enter the market -- enough to start the next major bull leg of gold and silver up.

Right now, the bulls are beginning to think it's all over, that the long term trend of gold and silver will probably now turn down (I think they are wrong) -- but so, in a panic, they are starting to sell at any price and get out while they still have some money left. This is the capitulation of the bulls. It must happen at some point before the next major move up can begin. I think that time is at hand.

For us, this capitulation is a great opportunity to buy at the final low prices of gold and silver perhaps for many years.

Devere, what do you think copper will do in the event of a big silver/gold rally?
I've got thirty pounds of scrap copper and want to know if I should wait (-;

Devere, what do you think copper will do in the event of a big silver/gold rally?
I've got thirty pounds of scrap copper and want to know if I should wait (-]When gold and silver resume the next leg of their upward bull trend, copper will too, very likely. Saville believes gold will, however, this next time, outperform copper -- and almost everything else. But hang onto your copper, it should grow in value during the precious metal bull trend.

There is a real shortage of copper in the world. The only thing that can hurt copper would be a major world economic slowdown or depression, if it gets bad enough -- because demand would then decrease to match or more than compensate for copper's supply shortage.

 

Weird stuff going on here, the dollar is strengthening against the Euro and the DOW is at a record level. Could the DOW be going up because money is shifting from real estate into stocks? And I suppose the lower price of oil is relieving inflationary pressure on the dollar.

I still feel bearish for US markets and the dollar for next year, there appears to be no reason why the US should not go into a hearty recession very soon, the last bastion of the consumer spending and debt binge has ended with falling house prices, what is supposed to be the next big quick money illusion that’s going to support this market?

This recent high with the DOW has me doubting gold. Doesn't gold make its biggest moves when the dollar is weakening? Doesn't the dollar weaken when our companies (represented in the stock indices) start to weaken or trail off?

Advise, advice! Is gold still going to make its big move?

This recent high with the DOW has me doubting gold. Doesn't gold make its biggest moves when the dollar is weakening? Doesn't the dollar weaken when our companies (represented in the stock indices) start to weaken or trail off?

Advise, advice! Is gold still going to make its big move?

Here is a good article that may answer some of your questions.
http://www.dailyreckoning.com/Issues/2006/DR100506.html

But let's look at them. What has changed? Have foreign competitors forgotten how to make things? No. Have foreign laborers thrown down their shovels and soldering irons? No. Has the trade deficit vanished? No. Has America's debt disappeared? No. Has the stock of U.S. debt obligations in foreign hands diminished? No. Will Ford and GM make cars at a profit next year? No. Will the workingman get a raise? No. Will Congress balance the budget and the Fed back its dollars with gold? No...and no. So what then has really improved?

This recent high with the DOW has me doubting gold. Doesn't gold make its biggest moves when the dollar is weakening? Doesn't the dollar weaken when our companies (represented in the stock indices) start to weaken or trail off?

Advise, advice! Is gold still going to make its big move?

Saville believes the dollar will continue to strengthen into and perhaps through 2007. The fact that you're beginning to question whether gold will even go up again is bullish for gold.

Saville believes the dollar will continue to strengthen into and perhaps through 2007. The fact that you're beginning to question whether gold will even go up again is bullish for gold.

This is not, BTW, meant as a personal slam against you, SBrocker8. This is, in fact, an interesting phenomenon in trading. Only when sentiment is unrealistically bearish can the next bull leg in the LONG TERM gold bull trend begin. We can monitor our own emotions as a measure of the general level of bearish sentiment. If we begin to feel bearish in what is a clearly long term bull trend in gold -- that's a pretty good sign that the time is close for us to enter our long term BULL positions.

I wouldn't have taken it as a slam, Devere. It makes good sense, actually. Keep us advised.

Here are honest dealers on line to buy and sell. http://www.silvertrading.net http://www.scpm.com/goldsilverbullion.php http://www.cmi-gold-silver.com/

http://www.tulving.com/bullion_sales.html

Let's say you've now bought a straight Dec 2007 gold call or a Dec 2007 gold bull spread. (This would be a pretty good time to buy your long position, although gold may go still somewhat lower during the next month.) It's wise, if your investment money is important money to you (as it is to me), to protect yourself in case gold doesn't do what we expect. We expect gold to not go down much below $550 ($510 at the most) and to start up on its next intermediate bull leg within two or three months (Dec '06 or Jan '07). But what if it doesn't do this?

Here's a PM response I gave to someone regarding this question. I post it here in case others might be interested in how to deal with such a situation.

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You can buy an inexpensive put, in addition to your more expensive call position. That way you will have both a bull position and a bear position. Your primary position will be your bull position -- because you are realisitically expecting gold to begin its next move up, not down, in a significant way over the next few months.

If you decide to protect yourself on the downside with a put, get one that will give you a realistic chance of your making a decent profit on the downside -- should gold decide to really drop. The greatest risk of a real downturn will come over the next month or two. To deal with this risk, you could buy a $500 strike price April 2007 put for about $500 premium. That would protect your downside for about 5 1/2 months, which should be more than enough. If gold starts up in earnest, sell this put for whatever it is worth at that time. If it's worth $200 at that time, your net cost for this more realistic downside protection will have been $300. If gold has started up by this time, you'll way more than make this back. If gold doesn't start up in this five month time, you will lose a maximum of $500 for your insurance.

Or get a Dec '07 put spread closer to today's price for the same cost, as you yourself suggest. That might actually be best since the odds of gold dropping much below $550 even are slim.

You have a possibility of making money both on the downside AND the upside -- should gold go down significantly first and then start up on its next major bull leg within the next year. When it goes down, sell your bear position -- but keep your bull position. When it later goes up, at the right time, sell your bull position. Your downside insurance has made you money, not cost you money -- and you end up getting your longside profit as planned.

The greater risk, actually, is that gold will go sideways for another year before it starts up in earnest -- but your Dec 2007 spread should (just) outlast such a happening. That's why I suggested a Dec '07 option position. If we get to, say, October '07, and gold is still going sideways, here's what you should do.

1. Buy back your short side position -- it won't be worth much by then -- leaving you with only the straight call (a stronger bull position anyway).

2. Roll over your long position call to a February or April 2008 position -- your broker will know how to do this. It's very unlikely gold will not start up by Feb or March '08.

Both gold and silver remain -- based on recent trends of lower highs and lower lows -- in a downward move. However, both are now looking more bullish and it is possible that the lows are in and further downward moves will not go below them.

This is, of course, not a certainty. But I think the bullish signals are strong enough that, if you intend to have a long term position in gold and silver and do not yet have them, you should place them now -- today or over the next few days. In coins, I recommend Canadian Gold Maple Leafs and one ounce Silver Rounds. In options, I recommend a long term call. Here are yesterday's prices (they're higher today because gold and silver are up today):

Gold: December 2007
$600 Call: $5,180
$620 Call: $4,330

Silver:

December 2007
$12.00 Call: $9,245
$15.00 Call: $5,955

July 2007
$12.00 Call: $6,785
$13.50 Call: $4,870
$15.00 Call: $3,615

Silver prices have become very inflated and for that reason it makes sense to buy an 8 month call (July 2007) rather than a 13 month call (December 2007). Then, if by May 2007, silver still has not yet definitely started up, you could "roll over to a farther out call": sell your July 2007 call and buy a December 2007 call at the same strike price. This will cost you more money -- but, if silver goes up at this time, that extra investment will be quickly made up for.

In silver, you could also buy a farther "out of the money" December or July 2007 call -- say, a $15.00 call or a $16.00 call or even an $18.00 call.

In general, it's best to buy as "close to the money" as you can afford on these long term options -- because that lowers your risk. But the best returns will come from "far out of the money" calls, if silver prices reach and go beyond your strike price. A July 2007 $18.00 Call would have cost yesterday $2,185. Of course, silver may or may not reach $18.00 by July 2007 -- that's a long way from where July 2007 silver is now (yesterday): $11.53.

No easy answer for silver. Gold is less inflated -- and perhaps, for that reason, a better trading vehicle. However, if silver goes up, it will probably go up faster and farther than gold. No guarantees, of course.

Another way to deal with the inflated price of silver is to buy a silver December 2007 bull spread.

For instance in yesterday's prices:

December 2007 Silver closed yesterday at $11.64. A $12.00 call would be "close to or near the money."

Buy 1 Silver December 2007 $12.00 Call (near the money): -$9,245
Sell 1 Silver December 2007 $18.00 Call (farther out): +$4,200

Net cost............................................................... -$5,045

You will be long the $12.00 call and short the $18.00 call. If silver goes up, you will make money on the $12.00 call and lose money on the $18.00. Your net profit will be the difference between the two. Potentially, if silver goes to $18.00 by December 2007, your profit will be $30,000 less the cost of your investment: $30,000 - $5,000 = $25,000. But it can never be more than $25,000, even if silver goes up to $30.00. By buying a spread, you will have placed a lid on your profit potential. Nevertheless, the profit potential is still considerable, as you can see.

In fact, if you are limited to about $5,000 for your investment, I would recommend a December 2007 spread with your long position as near to the money as you can afford, as just described. I think this is the best way to deal with silver's expensiveness.

I've been telling you that I've been expecting gold and silver to begin a significant up move soon. Yesterday, I finished positioning my account for such a bull move. I'm now long two gold calls and one silver call -- and short, for insurance purposes (in case gold and silver unexpectedly go down), one silver put.

And today, gold and silver jumped up fairly big. Gold closed at $592 and silver at $11.68. This is a big enough day's move to indicate they are clearly starting a new uptrend. Whether this will prove to be a short termer and then head back down to new lows or be the start of an intermediate bull trend is still uncertain. However, my reading of the tea-leaves (the charts) is that it will probably be a significant move.

Saville is beginning to think that if gold and silver surpass their resistance levels ($620 for gold and $12.00 for silver) in the next few days or next couple of weeks, that they will be beginning a multi-month bull move. He does NOT think this will necessarily be the start of the next big bull move though. If not, he nevertheless thinks they will test their May highs (about $750 for gold and about $15.00 for silver).

He further is now beginning to think that gold and silver may not begin their next really big up move until as late as the middle of next year. Previously, he had expected them to start their big move by next month. So this would be a fairly major prediction change for Saville. But he hasn't yet made up his mind about this. He's waiting for more information.

As I've told you, I believe the biggest risk is not so much a down move, but a sideways move lasting till October 2007 or so. That is why I recommended long term options of at least December 2007, just in case it does go sideways for longer than expected. But even a December 2007 option may be cutting it close. There are ways to protect yourself, as I've also discussed, should a long sideways move take place.

Even if gold and silver go essentially sideways for six or nine more months, that doesn't mean those sideways moves will necessarily be small and unprofitable. A move, for instance, to test May 2006 highs would be a big move even if those May 2006 highs are not surpassed. We can profit from those moves -- and this is one of the best ways to protect ourselves against a long sideways move. If gold and silver get up high enough, you can, for instance, sell your December 2007 call or spread early -- within the next few months -- and take your profit and set your cash aside. Then, when or if gold and silver go down significantly, buy back in. It is easier said than done. But this is what I intend to do with my present positions.

Assuming gold and silver do now make a significant up move, I'll tell you when I think the time is right to sell -- or, at least, I'll tell you when I'm selling. You can copy me if you like. Or you can just hang on to your positions through the ups and downs till late next year. Your choice and either choice is reasonable.