I can go to sleep at night and know one thing–the Fed will not allow deflation. The reason is simple, according to Harris...Debt based societies cannot absorb a deflationary spiral. - Yra Harris, legendary and longtime commodities trader.It's been a rough period of time since the beginning of October for precious metals and mining stock investors. In fact, its been a rough 22 months, dating back to the end of April 2011, when Sunday night paper ambush on silver started the current price correction cycle in the precious metals sector.
I have to say, while this current bull market correction has been the longest so far since 2001, it hasn't been even close to the worst. In 2008, the HUI index dropped 70% in the space of 6 months. Ironically, if you had the courage to buy that drop, you are still sitting on a 250% gain. The first correction I lived through back in 2002 took the HUI from 148 down to 95 - 36% - in the space of a little more than a month. The next one started in December 2003, lasted 18 months, and took the HUI down 34%. For the current HUI correction (which started after silver peaked) dating to August 2011, the index is currently down 40%. Please note and to reiterate, if you had bought (or added to positions) near the bottom in 2008, you are up 250% on that capital.
For comparison purposes, the SPX index is up 227% since its bottom in early 2009. I think the fact that the HUI has outperformed the SPX since both indices' respective bottoms, which heralded the banking system collapse and the subsequent transfer of trillions of dollar of public wealth into the banking system to bail it out.
Before you lose your gold, silver and mining stock positions, you need to ask yourself this question: Has anything gotten better? Be honest. Obviously, if look at the Treasury's balance sheet and the Fed's balance sheet, the fundamentals have deteriorated significantly since late 2008. How about the Government's income statement? That's gotten worse too. Housing market? If you believe the b.s. being thrown at you by Obama and the complicit media, you should read, or re-read this: LINK After you're done with that, read this: LINK And then read this: LINK The latter article is Obama's promise to transfer more money from the general public to the homebuilding companies and mortgage banks and to home buyers who otherwise can't afford a home.
The bottom line is that the fundamentals underpinning our economic and political system continue to deteriorate, masked only by trillions in funny money coming from the Fed and from complete Orwellian diarrhea of the mouth coming from Obama and both sides of the aisle in Congress (note: both Dems and Republicans). It's those very fundamentals that vary inversely with same fundamentals driving the price of gold and silver.
Here's the only difference between now and 12 years ago when the bull market in the precious metals sector started? Back 2001, it was primarily the deteriorating fiscal and economic situation in the U.S. and Europe driving gold and silver; now, it's the deterioration of those same fundamentals globally that will lift the precious metals sector out of the current price correction and on to even higher price levels than the previous highs. One more important factor. Back in 2001, up until 2010, Central Banks globally were selling and leasing out their gold. Now, except for the U.S., British, and European Central Banks, the rest of the CB's globally are accumulating gold - some of them hand over fist.
Have a great weekend.