Mike Burnick: Hello, everyone, and welcome once again to the special online strategy briefing for Gold and Silver Trader. Larry is here today to answer your questions.
Hi, Larry, it is good to speak with you.
Larry Edelson: Yes, hi, Mike. How are you today and thank you very much for hosting and thank you members for your loyalty and for joining today. I want to take a different approach in today’s webinar. Rather than bombard you with lots of charts and a fancy presentation that sort of pitches you on my views, I want to answer your questions in as much detail as I possibly can. So, I set this up as a full question and answer session and anything goes. Mike will be your host, reading your questions to me, and I will answer them in as much detail as possible. So, let’s get started. Go ahead, Mike.
Mike: Alright, anything goes, and we have already got a lot of questions in the mailbag. Many of them of course are about gold, as you would expect. Like this one from Jan. She says, hello, Larry. You have been expecting a bounce in gold and silver which appears to be taking place this week. Do you also expect a bounce in platinum and palladium? If so, what price range do you expect to see?
Larry: Well, yes. We are getting the bounce right on time in both gold and silver and a meager bounce in platinum and palladium. That said, the important emphasis, the important word there, is bounce. That is all it is in the precious metals right now. They have not bottomed. I expect new lows to complete their three-year bear market on a closing basis, that is the high occurred on an intraday basis since September 2011 and on a closing basis, the high actually occurred in 2012, so a three year bear market will take us into a closing low for 2015. I will answer more questions about how the low will come into place but yes, all the metals are bouncing in sympathy with each other but again that is all it is, is a bounce.
Mike: Okay, here is another, kind of a follow-up question for you, Larry, from Harry who asks, “Is it possible for you to provide subscribers with a weekly update on closing levels and key support and resistance as you have before for gold, silver, and the other key markets? Also, I have asked a couple of times if you could provide us with the latest on your cycles work as it applies to gold. Maybe now is a good time, Larry, to go into more detail about when you expect the bottom, according to your work.”
Larry: Sure, sure. As far as providing weekly support and the resistance levels, I will certainly endeavor to do that again more often. I have refrained from doing it recently because the markets are really very, very, choppy and most of the action that you are seeing in the markets I would say on a day-to-day basis, 95% of the price action that you are seeing is mostly background noise. It is very meaningless. It has no meaning as far as the major trend goes, and I have noticed over the past half a year or so that the more detail I give you, the more questions or ambiguity it seems to actually provide or cause for members, so I have switched my models and my editorial to a more longer term view because we do not want to really waste our time with every zig and zag.
That said, once the markets do start trending again, I will be providing intermediate and long-term support and resistance levels on a more regular basis. For instance, right now I will be putting out an issue in the next day or two which will give you updated levels for this bounce. Right now gold is trading at about $1,226. It looks like we can get up to about $1,245 if we get through there. We could make a run as high as $1,280. I will be taking a long position if we get above $1,245 to capture some profit potential on a further bounce, but I am skeptical that gold can get above that level, that $1,245 level, so I will be giving more guidance when it comes time to stake out a trade, long or short.
Now, as far as the cycles go, I have also gotten away from the shorter term cycles because they are really quite crazy for the last several months. There is a lot of noise in the markets right now and by that I refer to my previous response that a lot of the action in the markets is very, very jittery right now. We are seeing, really if you look at it from afar, fairly tight trading ranges but within those tight trading ranges, we are seeing lots of nervousness and that is wreaking havoc on some of the short-term cycles, but it is also an indication that something big is starting to form and I strongly believe that 2015 is going to be a terrific year for the precious metals, first on the way down and then a turnaround back to the upside, and in many other markets as well. For example, crude oil and natural gas, and of course the stock market not to be overlooked. So, the final answer is yes, I will as soon as we start to see significant trending moves start to
break out.
Mike: Okay. Kind of another segue question, again, precious metals are on a lot of members’ minds as you can imagine, Larry. Christopher would like to know if gold and silver do not bottom in January of next year, then what will be your strategy moving forward, what would you expect to unfold at that point?
Larry: Well, if they do not bottom in January, then again the next is June of 2015, and I am quite confident, I would say I am about 90% confident, that we will have the final lows in place by June 2015. It does not look like we are going to get them by January because this bounce is starting to develop more legs to it and as I just noted we could get up to $1,245 and if we get through that, up to $1,280. Now please, let me remind you, if the market takes off and we get up to $1,280 or see $1,300 in gold, do not jump into the market, it will just be one giant fake out rally. For gold to bottom this past November at its $1,130 low would require gold to close above roughly the $1,500 level on a weekly basis and that is not going to happen.
Mike: Okay. Another question from Joseph, shifting gears to some of the miners, actually a couple of questions. Joseph asks, “Any thoughts on how the reversed stock split of ten for one might affect JNUG?”
Larry: Well, I think it would be a great thing because many of the inverse ETFs, no matter what the market, have been suffering from a lack of liquidity and low prices and if you look at their charts, they look like something that just is, you know, especially in the miners, JNUG is not an inverse necessarily but it is not just the inverses. Reversed splits would help to beef up the stock prices and make them more liquid and more attractive to institutional investors.
Mike: Okay, following up on that, there is a question here, can the gold and silver miners go any lower do you think, or have they already reached bottom?
Larry: No, unfortunately, they can go lower as well. I am afraid we are going to see a real washout. I thought we were there as everybody knows in the middle of this year, we were not, I was wrong. I believe we are going to see quite a washout in the mining sector and do not be surprised if you see several miners really truly go out of business in 2015.
Mike: Okay, one more question on gold before we shift gears here. In the near term, Christopher would like to know if you have changed your long-term views on where gold may be headed, you know over the next several years, or is that still the same?
Larry: No changes there at all. As a matter of fact, the lower we go in 2015, the higher we will go on the next leg up. Because, that is how markets move. They are much like a scale, you tip it to one extreme on one side and then it throws to the other extreme on the other side as we have seen many times in the stock market over the past couple of years. You get a panic decline and then you get a panic rally.
Mike: Right.
Larry: So, the more energy that comes from a panic decline in gold and silver going into 2015, the higher gold and silver will ultimately go.
Mike: Alright, now let’s shift gears a little bit. Chuck would like to know what your expectations are for interest rates, specifically TLT or TBT, the ETFs that track treasury bonds.
Larry: Well, interest rates are headed much, much, higher but over the next three decades. We just completed a 32-year cycle low a couple of years back in interest rates. We are testing those lows now, we are pretty close to record lows, largely due to capital flight from Europe, but interest rates have not, on the 30 year bond, have not yet made a new low and it does not look like they are going to. So treasury bond prices are going to be falling, albeit slowly, for several years.
Mike: Okay. Let’s see, we have another question about liquefied natural gas. Can you say anything about the LNG export sectors? Steven would like your comments.
Larry: Well, natural gas as everybody knows, is very, very interesting right now. First, technically natural gas prices are pretty washed out. We are hovering near the lows from the 2008 highs right now, it looks like we could get one more new low in natural gas down around 320 per billion cubic feet. The geopolitical situation with natural gas is, as everyone knows, also quite interesting, but long-term natural gas is in a massive bottoming formation and a massive new bull market is forming. It is just very hard to pin down that exact low, but I am watching natural gas probably more than just about any other market with the exception of gold, silver, and of course the Dow.
Mike: Okay, speaking of the Dow, this question from Joel says, “Larry, as always I appreciate your insight and I am hoping you could spend some time discussing your thoughts on the Dow, S&P 500, and NASDAQ. He goes on to say, the markets have done nothing but go up so a pullback makes sense, but we have not seen it and with all of the fear money coming in from abroad into the U.S. markets, I am questioning whether it will happen anytime soon and how sizeable it could be. How about that, Larry, what is your expectation for stocks?”
Larry: Yes, I have been looking for a correction for almost the entire year and we have gotten some mini corrections along the way that I thought were the beginning of a real substantial correction but I was wrong no two ways about it.
However, everything I am looking at tells me still that this market is going to take a surprising sudden fall that is going to scare the heck out of everyone, and until it does so the upside is actually limited. You have to keep in mind that markets get their energy by moving in the opposite direction. It is kind of like a law of physics, third law if you will, for every action there is a reaction and for the market to move much, much, higher, we need to get action on the downside where the weak bulls are tossed out of the market and everyone starts selling, and then a good bottom and a correction can form which will give the energy to turn around back to the upside. Now, what if I am wrong and we never get that correction? We will know soon enough, within the next two months in my opinion based on my latest work. It would require the market to basically continue straight up from here, close first above the 18,000 level, that has some psychological implications
as you might imagine, but it also has some technical and cyclical ramifications as well. If we were to close above 18,000, move roughly up to around 18,300 then pull back to 18,000 and test that level, then the market could slingshot higher all the way to 31,000 without really taking a break. So, we are on the cusp of knowing within the next eight weeks in my opinion, by the end of January, early February, whether or not this thing is going to rocket higher to Dow 31,000 immediately in a straight line fashion, or we are going to get that pull back. I would prefer of course that we get that pullback. But either way, I will not hesitate if we get the final breakout signal to really go aggressively long. I believe the stock market and gold, the precious metals, are going to be the two surprising markets of 2015 and the biggest trades and biggest amount of money to be made are going to be in those two markets, precious metals and stocks.
Mike: Interesting. Yes, we are all rooting for that pullback as a good buying opportunity then in that case.
Larry: Yes. I have no doubts whatsoever. I am 100% convinced we are going to Dow 31,000. There is a very real chance we can go substantially higher than that.
Mike: Okay. A question from Ken. When do you think we will see the low for oil, corn, and soybeans?
Larry: The lows for the ags are not quite in yet. They have had a counter trend rally that has been pretty decent. They look to be topping now. We should see one more leg down in sympathy with gold and silver in early 2015 and that is it. Pretty much the same thing for crude oil. I am kicking myself in the butt over crude oil because as all of you know, my original forecast was for a slide into the 60 dollar level and like gold it looked like oil had bottomed around June to July of this year and might be turning around to the upside, but that was wrong and my original forecast came to pass. Right now, oil is hovering just above $60, looks like we can get up to about 66 to 67 on a bounce, but I do not believe the low in oil will come until late 2015, down below $50 a barrel, around 47 is my target.
Mike: Wow, that is substantially lower.
Larry: Well, Mike, you can recall just a month or so ago, you and I spoke on I believe one of the many markets calls, you asked me my forecast for oil and I said we are going to get down to 60, 64.
Mike: Right on the money.
Larry: You almost thought it was, you told me I was crazy.
Mike: Here we are, at $60 a barrel.
Larry: Yes. I am not bragging, I am just saying that there is a lot going on in the energy market that is geopolitically driven, that is driving prices down in addition to deflation which is really strangling Europe.
Mike: Here is another question. A question from Milton. “Larry, is the Hard Asset Alliance a reliable firm to deal with for physical metals?”
Larry: The best. That is who I have an account with, and have some precious metals there. I do not recommend buying but that is who I recommend buying with, the Hard Asset Alliance.
Mike: Okay. Question from Harvey. “Can you estimate a timeline for gold miners to start an upper trend again?”
Larry: It now looks like it is certainly going to appear instant with gold, so I do not think you will see the final bottom when miners come into play until the final bottom in gold and silver come into play. That is either going to be January or June of next year.
Mike: January or June, okay. We have another question here from Ramon. “Do you believe the odds are good that silver will also recover to the low twenties by the end of next year, 2015?”
Larry: It is hard to say. Very, very possibly. It depends. If we get the lows in January, yes, if we get them in June down at 12.50 which is my target for a final low in silver, we can get back to 16, 17, 18, I do not know about 20. It is too hard to say right now. Once the lows come into place, I will be able to run projections that give us an idea on time and price into the future so we will have to unfortunately wait until those lows come into place.
Mike: Okay. Question here from Steve. “Looking forward to future options opportunities if possible. Anything on the rise in there look interesting to you, Larry?”
Larry: Yes. As soon as I have confirmation the bounce is over, I am not going to hesitate to put options in there again and we had a very nice trade recently in options and, you know, timing is everything in options so you have to be razor sharp in your timing and that is what I am looking at. I do not want to just put options in there and have them waste away.
Mike: Right. Timing is everything with options, that is for sure. This question from Steven is an interesting one. Steve asks, “We have heard that January 28, 2015 is when the Fed will begin raising interest rates and that the financial markets in the U.S. will never be the same. Should we be buying precious metals now to protect ourselves before that date?”
Larry: Well, no one knows really when the Fed will raise interest rates. Some say January, some say the middle of the year, whatever, but let me just emphasize to you that the Fed has no control over interest rates. What they do is they raise and lower their official discount rate. Rates are low because the demand for money and the velocity of turnover of credit all over the world is low. There is no demand for credit.
Now, when they officially raise their rates, it will be because the market has already started to increase interest rates. They will be behind the curve as always. They are always following the markets, they are never in front of the markets, because they do not really control interest rates. That said, I think for gold and silver investors and for many other assess classes, rising interest rates when they do start to move up in an orderly fashion signaled by the free markets themselves will be very, very bullish for gold and silver. If you look back at the 1970s bull market in gold and silver, that occurred with rising interest rates. If you look at the biggest bull markets throughout history in the precious metals and in the stock market, they all occurred with rising interest rates. So, do not buy into, in my opinion, the stuff that, you know, interest rates go up and the world is going to fall apart, stocks are going to crash, gold and silver are going to
crash, etc., etc., etc., that is not how it works. It is exactly the opposite.
Mike: Interesting. Here is another question on currencies from Rex. Rex would like to know what your take is on the Aussie/U.S. dollar pair going into mid 2015 and the end of next year.
Larry: Well, Aussie in the long term, very, very, very good, strong, healthy, currency. It is suffering right now and it is going to suffer heading into January. It is a commodity currency. It is suffering from all the talk and rumors about China, but it is mainly suffering from deflation and commodity deflation which is going to come to an end in 2015. So, I would not buy the Aussie here but I would be looking to buy the Aussie in 2015 when we get evidence that commodities have bottomed.
Mike: Okay. Here is a question from Sherry. “Larry, you were very confident last summer that we had reached the bottom and were proved wrong. Having gone through that experience, what gives you the confidence this time around that we have not yet reached the bottom in gold?”
Larry: That is certainly a very good question. You know, I gain my confidence or lack of confidence from the markets themselves and what my models are telling me. I cannot be right all the time, but I have been right way more often than I have been wrong when it comes to the long-term twists and turns in the precious metals and I have a high degree of confidence in my models because I have never, ever, missed a major turning point. Yes, I thought gold and silver had bottomed in June of last year and we certainly took our losses based on recommendations I made based on that call. But if you look beyond that and you look back at that time period, gold really did not go anywhere and I was pretty quick to make the call that gold was back in a bear market and indeed that is exactly what happened. I cannot be perfect. If I were perfect, I would not even be on this webinar with you, I would be trading from my 300 foot yacht in the Caribbean.
Mike: I would be right there alongside you.
Larry: Yes, you know, I do my absolute best but it is not a business where you can be right all the time. I am very, very confident, extremely confident, that gold and silver will bottom in 2015, more confident than I was in the middle of this year, much more confident.
Mike: Okay, here is an interesting question from William. He comments, “Larry, this is the craziest market I have ever seen. Any comment?” How about it, Larry, do you think the central banks’ massive money printing has forever changed the financial markets?
Larry: No, it has not. Markets never change because human beings never change from the beginning of time. Human behavior does not change. It is dictated by four basic emotions, greed, fear, hope, and regret, and that is innate to every culture on the planet. Human behavior never changes. What changes are the actors and the message they employ, and by the actors I do not mean you and I or the members on this call, I mean the powers that be, the leaders that occupy Washington or Brussels or Beijing or you name it and the central banks. They fiddle with the markets, they try to eliminate booms and busts, and what they end up causing is more volatility, more uncertainty, and more booms and busts down the road, they just never learn from their past mistakes. In that sense, they are making the same mistakes today that they made in the 1930s for example, and the chickens are going to come home to roost and we are going to see many of the same things
occur.
History does repeat itself, not always exactly the same, but yes, it has made for difficult markets in the sense that volatility in many markets, not in stocks per se, although that is starting to rise, but in many markets volatility has been picking up but more importantly liquidity in volume levels in almost all markets are down dramatically since 2008, by some measures as much as 50%, and that causes wide bid and asked spreads in the market, it causes volatility, it has caused a tremendous number, I read an article today, 683 hedge funds around the world have closed their doors this year ranging from small hedge funds to big hedge funds and, despite all the bad talk about hedge funds, we need them in the market to provide liquidity. So as you see some of these hedge funds exit the market, that ultimately hurts all of us because it reduces liquidity. Does it change trends? No. It just makes it more difficult to trade.
Mike: Okay, here is a question from Chris about mining shares again. “What do you think the downside is in mining shares from here?”
Larry: About another 40%, believe it or not.
Mike: Wow. That much.
Larry: Yes, unfortunately. You are going to see some big names go out of business. I am not going to mention them on this call but you are going to see some pretty well-named miners close their doors or get taken over.
Mike: Okay. Here is another question from Michael. “Larry, I am on board with your advice to establish a strong precious metals position in physical metals to protect myself. My question, when gold does go to $5,000 or more, where do you see the actual dollar position, that is, will we face hyperinflation and will we be paying the same prices as before? I look forward to hearing from you. This is a very important item.” Thanks, Michael.
Larry: Yes, after the dollar, the dollar is still in an interim bull market that will probably last, you know, sync up with gold and last into probably June of next year, and then the dollar will resume its long-term bear market. You are not, however, going to see hyperinflation in the United States, it is not going to happen. You are not going to see it in Europe either. Hyperinflation does not occur in developed economies, core economies, it simply does not occur, it will not occur in the United States. I used to think myself that we were facing hyperinflation until I saw gold decline when Bernanke did QE3 plus to infinity.
When gold’s bear markets took hold then, it became patently obvious to me that we were entering into deflation, and we are entering into deflation because you have to think this through logically and not listen to the fear mongers out there who constantly preach hyperinflation. The dollar is still the world’s reserve currency. That is not going to change overnight, okay. It is going to change, it must change, but it is not going to change overnight. Meanwhile, we have roughly 150 trillion dollars of dollar denominated debt all over the globe. In severe deflation, that debt becomes for most countries, non-dollar countries, becomes more and more difficult to pay off but it must be paid off, at least in part. So they have to scramble to buy dollars to pay off those loans and those debts.
The worldwide rush to buy dollars is going to send the dollar substantially higher in 2015 before it peaks. We have a long way to go on the upside, maybe six or seven months left to the bull market in the dollar, but you are going to see some pretty wicked deflation in the first half of 2015, worse than we have already seen, and then it will turn around because the dollar will, either by hook or crook, resume its long-term bear market. I suspect what is going to happen is that the dollar is going to get so strong in 2015 that the Federal Reserve and the U.S. Treasury are then going to go in basically to start selling the dollar again as they did in 1985, for example, and in other periods where the U.S. Treasury started selling dollars to intervene and press the dollar down just like Japan is selling yen right now and Europe is selling euros. Money printing if you will but it is normal trading. After all, they have on their balance sheets some 3 trillion dollars
so the Federal Reserve can go in there and sell dollars.
You are probably going to see at some point in the latter half of 2015 talk about the U.S. Treasury intervening in the currency markets. This is where the dollar reserve monetary system is going to break down. It is going to start to break down in 2015 and by 2020 which is also the peak of the war cycles, we will have to have either before that or going into 2020 a new Bretton Woods and a new monetary system, because this cannot go on, it simply cannot go on, and it will become abundantly apparent as we go into 2015 all the way into 2020 that the world’s monetary system is broken, it is completely broken, and a new monetary system with the dollar not the world’s reserve currency, will have to be designed.
Mike: Okay, here is a question from Steve. He says, “Hi Larry. Here we are near the bottom of gold prices, yet it seems like at any moment gold could shoot up high enough to launch us into a new bull market. If this is true, how should we think about risk when placing our trades?”
Larry: Well, gold is not about to shoot up into a new bull market. That is my first response. Secondly, related to the previous question in a way, is how do you manage risk in these kinds of markets where we have rising volatility coupled with decreased liquidity? That is difficult because first of all risk management is number one. If you take care of risk and you manage your risk tightly, the profits will come naturally.
The problem is the decreased liquidity and the increased volatility. So what I have found personally in my own day trading of gold futures, I have had to double recently my risk tolerance instead of using one unit of what is called the average two range, I now use two units. I have actually had to double on my own personal day trading and position trading in the futures market, I have had to double the risk in order to stay in a position with potential. That said, for members and the activities we are doing here, doing a combination of that as well as being more conservative and picking our entry prices. That is why you are not seeing frequent trades and I am being very, very conservative here.
The last thing in the world I want to do is get us into a situation called chop suey. We have had enough losses in this service. The performance has been miserable. I am very unhappy about it. We have made some money back and we have turned the corner in the last couple of months and I am determined by hook or by crook to turn the track record around and go into positive territory, so you will have to be patient with me and wait for my signals. The trading will be coming slowly until we get clear-cut moves that are about to develop and, you know, then I will be more aggressive. You just have to manage risk and your timing of entries and exits so carefully these days it is like nothing I have seen in years.
Mike: Okay, another question from John. “Thank you for all the great advice, Larry. I have been debating about investing in more U.S. farmland. You say that corn and soybean will go higher eventually but does this mean that farmland will resume its upward trek higher with increasing operating expenses and rising interest rates for purchasing land? What are your thoughts there?”
Larry: Well, I am not an expert in farmland prices. I know they had quite a boom over the last several years. I do not know if they have come off with the three year bear market in grains, I suspect they have. I would like to do some research on it. Longer term, I think farmland is going to do just fine.
Mike: Okay, a question from Barbara. Barbara says, “Hi, Larry. What is your near term forecast for natural gas? Is the bottom still here? And kind of a follow-up, regarding rare earths, you mentioned earlier you had researched the rare earths market and given us an opinion. Do you have any expectations for 2015 in this area, any choice companies?”
Larry: Rare earths I think we have to be careful with, I will take that part of the question first. Again, because we are in deflation and also because China has now opened up a lot of their rare earths supplies for export for increased revenues and also they are permitting other refineries to be developed outside of China. So, we need to be careful there. I do not think rare earths are ready to be bought in any aggressive way. Timing will probably hook up with the end of deflation and the latter half of 2015. As far as natural gas, it is building a humongous bottom, that is all I can tell you. It is trying to bottom around the 360 level but it looks like it will probably make a new low and drop down to about 330 over the next few weeks, probably with another move to the downside in oil. But that should be about it. So, I do not think natural gas has reached its bottom yet, I think we have one more low coming.
Mike: Okay, Frank has a question again about gold and silver. “Will gold and silver move more or less together once they bottom or do you think one will lag the other? In other words, what will the ratio look like?”
Larry: Well, right now it is about 70, 72 to 1, it has widened out and that is because silver is weaker than gold. Once we do bottom and turn around, I suspect silver will play catch up with gold and the ratio will narrow and it could narrow quite sharply going into the latter stages of the next bull leg. But it remains to be seen because a lot of factors affect the ratio. Contrary to what you hear, it is not normal for gold and silver to be 16 to 1, that is not normal, that is advertised out there in promotions and editorials and so on and so forth. The gold/silver ratio fluctuates wildly. It has been as low as 10 to 1 and as high as 125 or 130 to 1 during the Civil War, okay. It has a lot to do with which metal is perceived safer and what is going on with the monetary system. I suspect in the latter stages of the bull market when we get up toward 5000 plus gold, we will start to see gold hold
up better than silver but it is too early to say.
Mike: Okay, Mark has an interesting question. “What books do you recommend to learn about the market patterns and cycles?” What is on your bookshelf?
Larry: Well, I always start with, as far as cycles go, I would start with Edward Dewey’s basic book on cycles, he is the grandfather of cycle work. D-E-W-E-Y-S. I do not have it in front of me, I cannot remember the exact title. As far as the markets go, for a good primer, I would pick up any technical analysis book at your local store or through Amazon, there are plenty of them out there.
Mike: Okay, Ivan has a question. “Larry, other than what is going on in Europe right now, what do you think is causing the U.S. dollar to rise so much and how long do you expect this to continue?”
Larry: Well, it is not just Europe. It is also the Middle East, it is also some flight money from Asia, particularly China, especially China. It is pretty easy to understand. I mean, Europe is the bulk of it, Europe is a mess, it is just a total mess, and anybody with any decent amount of money is looking to get their money out of Europe and the two choices for them are the U.S. and some of the Southeast Asian currencies such as the Singapore dollar, but the bulk of it is going into the U.S. dollar. Middle East, same thing. Geopolitically it is a mess. So, the natural place for flight capital there is to go into the U.S. dollar. In China, you have an interesting situation going on. China’s economy is fine, despite what everybody says, okay. But what you have going on is the Chinese communist government is now on the warpath against corruption, they are rooting out corruption, and you are seeing a tremendous amount of black market money leave
China to try to get illegal money out of China and it is going into the dollar, I know that for a fact, behind the curtain so to speak.
In fact, over the weekend I was in Hong Kong and Macau and I met with some very, very, wealthy Chinese investors who are doing the same thing and unfortunately they are not on the right side of the law. I actually met with some Chinese mafia people. It was not a meeting set up by myself, I do not want anything to do with them, I just happened to meet with them and they told me, and picked my brains, and told me what they are doing. Anybody who has made tons of illegal money in China is getting it out of China, and that is going into the dollar. And then you have all the debt, and deflation, that is causing the dollar to rally. Right now short term the dollar is overbought, it’s probably going to pull back, but we are probably going to see a massive rally in 2015 to the upside in the dollar.
Mike: Okay, Kurt would like to know about uranium. “Do you also expect uranium and uranium stocks to go lower as long as oil goes down?”
Larry: Yes. Just about everything is going to be going lower into 2015.
Mike: Okay, a few followup questions to some of your earlier comments now, Larry. Kenneth would like to know, “How can gold and silver go higher at some point this year if crude oil goes even lower into late 2015, as low as 40 a barrel as you said?”
Larry: Well, you have to remember that, you know, first of all they are probably all going to bottom at the same time, but gold and silver can go up, even if oil stagnates. I mean, there is no set relationship between the price of oil and gold and silver just like there is no set relationship between the price of silver and gold. Anyone that tells you otherwise is just trying to sell you something. Oil can stay at $50 a barrel and gold can go, I mean it has been happening lately. Let’s just look at the past two weeks or three weeks. Gold and silver have been going up and oil has been crashing.
Mike: Indeed it has. Let’s see, here is another follow-up question from Michael. Michael says, “You talk about human emotion being unchanging and I agree. But algorithms are unemotional and they are used these days by high frequency traders to distort and manipulate the markets. Your comments?”
Larry: Well, algorithms, I am fully aware of algorithms, I have programmed algorithms. Algorithms simply try to take a tenth of a point or a thousandth of a penny off of the buy side and the sell side. That is all they try to do. It is arbitraged. They are constantly buying and selling and placing orders, buy and sell orders, at the same time simultaneously. They are, if you want to call it manipulating the markets, fine, you can call it manipulating the markets. They are not really doing that, they are skimming the markets, okay. That will never, ever, change. It cannot be outlawed, I do not care how many laws they create, there will always be high frequency traders if you will that will find a way around it to skim some profits off the market. The biggest question is does it change the trend? Absolutely 100% no. There has never been a successful market manipulation period. The free markets are way to powerful and to be honest with you, you
know, we hear so much about this and the regulator and, you have to have experience on the floors of the Exchange such as I do and be a real trader to understand market manipulations really do not exist. Are there attempts? Yes. They always fail. Okay? Is gold being manipulated down right now? No, it is not, of course it is not. Why do you hear about market . . . You know, when gold goes down, everybody comes out and says it is being manipulated, nobody says anything when gold is going up, that it is being manipulated, do they? It is a bunch of rubbish.
As far as high frequency traders go, again they are called high frequency traders now because we have advanced state of the art computers, but high frequency traders existed 30 years ago, they existed fifty years ago, they existed a thousand years ago. The techniques are the same. They step in front of an order and try to front run another person’s order or they flip the order within seconds to make a penny, and if you do that on a thousand contracts, you make some good money. It is just the time rise. A thousand years ago it was going on and it might have taken three months to flip something before the wider population even knew about it. Thirty years ago, it was routine on the floor of the Exchange. It happened in seconds. Today with state of the art computers, it happens in fractions of a second. But all it is doing is buying and selling simultaneously for very, very, tiny amounts of profit. The thing is you do it on such a scale that if you
make a penny on 10,000 shares of something and you do that five times a day, you make a pretty good living.
Mike: Indeed. But you do not change the long-term trends as you said.
Larry: It has zero impact.
Mike: Alright, well said. Several questions here about the euro so I will kind of bundle them together. Susan asks, “Please discuss the euro and where you think it will go in the first half of 2015?” Rex would like to know where the euro will in 2016 and following. Do you still see it as going down against the dollar, even when the dollar is weakened. Finally, here is your third part. Bob would like to know, “What do you think the chances are that Germany may one day withdraw from the European Union or Europe?”
Larry: Oh, wonderful, great questions. Let’s see if I can remember them. Okay, the first one. The euro is deeply oversold so on a short-term basis, let’s say the next few weeks to three months maximum, we should see a bounce in the euro and a decline in the dollar. Intermediate term, a little bit long than that, the euro is still in a very wicked bear market and remains in a very wicked bear market, and will probably over the next few years fall to par with the U.S. dollar, okay, and that is about a 30% or 25% decline from where it is right now. The biggest push will happen next year as the dollar surges once again and then you probably, late 2015 or early 2016, as I said earlier, you are probably going to see the Treasury very worried about the strong dollar because the strong dollar will import deflation into the United States, okay. That is what will happen. So there will become a tug of war between the European Central Bank and the Federal
Reserve Bank to start manipulating the currencies so that neither continent is trying to get out of deflation. Europe is in the grip of deflation now, the U.S. is going to be worried down the road that it is going to go into deflation, so if we talk about currency wars, you have not seen anything yet. The currency wars are really going to heat up in late 2015 because everybody is going to be trying to head off deflation and then it is going to get really messy.
As far as the long-term is concerned for the euro, it will cease to exist, I have no doubts about it. Probably not until 2020 which seems to be a very major pivot point in terms of the war cycles, in terms of the monetary system and geopolitics. Germany will have no choice but to take, this is opinion but it is backed by substantial research, Germany will probably take the euro as its own currency, maybe even rename it, the new deutschmark or something like that. The rest of Europe will have to take back their domestic currencies and devalue in order to get out of their depressions and all that hits the fan, we are going to need a new monetary system. They will be forced to come to the table in a new Bretton Woods and design a new monetary system and hopefully by then they will have heard enough from investors and from people outside of the investment banks who always have a vested interest in keeping the status quo and they will go to a monetary system that is
not backed by debt. That is farfetched but I hope and it is something I am going to be working on, white paper to Washington over the next year or so, I am hoping the new monetary system will be based on an agreement that no government can go into debt anywhere in the world. I know it sounds crazy but it is not all that crazy, we just have to stop issuing debt.
Mike: That is for sure. There is enough of that around the world floating around.
Larry: Yes, believe it or not, we actually need to take some concepts from Islamic banking, Sharia law, which forbids interest expense and debt.
Mike: Okay, here is a question moving on from Wade. “Larry, do you think the low price of oil will drive the U.S. shale players out of business?” That is an interesting question.
Larry: It is going to cause some pain, so is low natural gas prices. It will definitely cause some pain. But you know, that is how markets move, okay? That is creative destruction. You are going to destroy the weaker players, there is going to be less supply available, and prices will go back up.
Mike: Okay, a couple of questions here on gold and silver miners. I will kind of combine them together. Ken asks, “Considering the continued drop in gold and silver prices, I am compiling a list of prospective miners to purchase, when you give the go ahead of course, that prices have bottomed. Have you made any changes to your list you gave us earlier of miners to be considered for purchase?”
Larry: No, I have not made any changes, but we are not buying any miners right now so, in fact, that list for the record is really obsolete at this point in time. I do not want anyone to be willy nilly buying any of those miners, they are all going to have to be looked at again much more closely as we get closer to the final lows.
Mike: Okay, makes sense. Another question from Ron. “You say some mining companies may go out of business before the bottom arrives. Will you give us a heads up on those companies you think might be most at risk?”
Larry: Absolutely. Absolutely, will do.
Mike: Finally, here is a good one to kind of end the session on because we are right at the one hour limit. Susan asks, “Before you end today, Larry, will you please summarize your gold thoughts in terms of your predictions of gold to trade below $1,000 coming very soon and once again what do you see in the near term for gold on the high side? Thank you.”
Larry: Okay, sure. Well, on the high side, we are looking to $1,245, we could get up there quite easily, if $1,245 is closed above on a solid basis, on a closing basis, either daily or weekly, we have a shot of going all the way up to $1,280. On the down side, we have support at of course a prior low at $1,130, we have some support at $1,087 and $1,020 area, I expect those levels to give way, major support comes in between $860 to $920, and that is where I suspect the low will form, somewhere between $860 and $920, a good chance that it is in the upper part of that range.
Mike: Once that bottom is in, whether it is January or later on toward June, how high do you think gold can get by the end of next year?
Larry: It is too hard to say. You know, when I see the velocity and the geometry of the decline, then I will be able to do the geometric projections to make forecast going forward. If I were to pick a number now, it would be merely a guess.
Mike: Okay. Well, that is about all the time we have for today’s session but if we were not able to get to any of your questions or if you have any additional questions or comments about the markets or about Gold and Silver Trader, please remember that Larry is always available and you can submit those questions online via the Gold and Silver Trader editor mailbag which you will find right on the Members Only website and Larry will either answer those questions directly or perhaps will tackle them in a future online briefing. So, with that said, once again, thank you one and all for joining today and, Larry, thank you for your time as well.
Larry: And thank you Mike and members, thank you very much for attending today, thank you for your loyalty and your patience and have a wonderful holiday season.
