Avi Gilburt – Thu 7 Jan, 2016
The QE Fallacy and Precious Metals
Here is Avi’s latest posting. It is posted over at Gold-Eagle so simply follow the link below to read the full report.
Markets have a funny way of providing us with the exact opposite of what the masses believe will be seen. This is why contrarians often outperform the masses. And, the precious metals market is not immune to this phenomena.
Back in 2012, when the Fed announced QE3, many were not just viewing it as a positive factor for the metals market, but almost everyone was quite certain it would cause the metals to rally to the moon. I remember it all too well, since I was suggesting shorting silver at the time. I was warned time and again about how “foolish” I was for suggesting this trade. Many even warned me that “it would completely ruin your career as an analyst,” and they strongly urged me to reconsider my perspective. I was told many times that “this was possibly the worst trade you could ever suggest.”
At the time, silver was in the 35/36 region, and I was looking for a drop towards the 22 region, with the potential we could drop as low as 12.75-14. Yes, everyone looked at me like I was crazy. Not only was I suggesting some “ridiculous” targets on silver, but I was doing so in the face of a “certain” moon shot about to be caused by QE3.
Needless to say, QE3 came and went, and we now find ourselves in the 14 region, with our sights clearly being set on the 12.75 region next.
Moreover, we now have been through the ECB QE program also, yet, the metals have continued their decline. So, the appropriate question to ask is “what went wrong?”