Thursday, December 11, 2014

Are We About To See A Historic Melt-Up In Gold & Silver?


Are We About To See A Historic Melt-Up In Gold & Silver?

Today one of the wealthiest people in the financial world stunned King World News when he said we may be nearing a point where we see a historic melt-up in gold, silver, and the mining shares. 

 Rick Rule, who is business partners with billionaire Eric Sprott, also discussed exactly how this historic advance will unfold and why the up-moves will be so incredibly violent

Eric King: “Rick, are we finally seeing the more than 3-year bear market in gold and silver coming to an end?”

Rule: “You and I both believe in higher precious metals prices, Eric, so it’s tempting to say yes. Bear markets end with capitulation selloffs. I think we were on the verge of a capitulation selloff six weeks ago but we didn’t get one. The questions is, do we have to see a capitulation selloff this time? The answer is, of course not

“I said to my Chinese friends that ‘The U.S. dollar is in one way shape or form a lie.’ And they said, ‘Yes, but it’s the most liquid lie on the planet, and from that point of view we are attracted to it.’

When the confidence in the U.S. dollar begins to wane, and I say when, not if, then precious metals will shine. We may be seeing a preview of that today. But if you had bought precious metals in rubles, Eric, or yen, or the Brazilian real, you would be very happy today. 

 For many people who bought them in dollars this has created frustration because of the strength of the dollar vs other fiat currencies. Gold doesn’t have to win the war against the dollar, it just needs to lose it less badly for KWN readers not to be just happy, but ecstatic.”

Eric King: “In this secular bull market, if we are seeing an end to the cyclical bear market in gold, silver, and the shares, how do you see the advance unfolding off the lows? Will it give people time to get in?”

Rule: “I definitely believe it will. I believe that without a capitulation selloff, the bottom that we see will resemble the market that we saw from July 2013 - February 2014. That is a gradual saucer-shaped recovery, with higher highs and higher lows but plenty of volatility to scare people and also delay investment in the sector. And it may be that we are back into that phase after having been scared to death recently.

Certainly without the capitulation selloff what you will see is a long consolidation period that’s extremely choppy and volatile. And that has been, in my experience in the last three cycles, eventually greeted with a melt-up. 

That’s the only way I can describe it if you remember 2002, Eric. This is where, finally, all of the sellers get used up and the metal gaps higher and the shares gap higher. I’m not saying that past has to be prologue but that’s what has happened the last few times we have been in a similar position.”

Eric King: “You are talking about some pretty violent upward moves.”

Rule: “Yes. It’s funny that we have been, in effect, punished in this market since 2012 and subjected to several violent down-moves, so we forget that the thing which attracted us to this sector originally was the fact that in recovery this market exhibits very violent up-moves.

Remember, people’s expectations of the future are set by their experience in the immediate past. And everybody’s experience in the immediate past going back to the tail end of 2011 has been negative. What that means is that our expectations are all negative. 

 What moves a market is a market that exceeds expectations, and expectations for the mining industry are pathetically low, which means we will exceed those expectations.

And when we exceed those expectations the market will move significantly higher and perhaps very violently to the upside. If you remember back to the 1993 melt-up, or the 2002 melt-up, or going back even further to the melt-up of the late 1970s, which was the most violent melt-up I’ve ever experienced in my life, these are truly spectacular events. If past is prologue, and it normally is, this will happen again.”