Norcini has been stunningly accurate in his predictions of the movement in the gold and silver markets.  Now the acclaimed trader discusses incredibly important developments in key markets:  “With US equity markets surging into new record highs on a daily basis, one of the few sectors not participating are the gold and silver mining shares.  The divorce from the broader stock market is quite evident with the miners sinking lower as the rest of the market moves higher.  Clearly there is little if any speculative interest in owning shares in this beaten down sector outside of the value based buyers.

As I have mentioned many times before, its takes the momentum based buying crowd to chase prices higher, and clearly they are not interested.  As far as the broader investment community is concerned, the central bank reflationary activities via bond buying programs, mortgage-backed securities, agency debt, along with the low interest rate environment, are having no impact whatsoever on inflation.  Thus, the West continues to cast off gold, jettisoning the metal in favor of equities, while the East accumulates as much physical gold as possible....

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“Physical market demand for gold is extremely strong on bouts of price weakness, but that in itself is not able to overcome sentiment among many investment fund managers in the West.  The general feeling out there amongst most fund managers is that the decade-long bull market in gold has come to an end.  If you believe the gold bull market is over, why would you want to own shares in the companies that mine gold out of the ground?

Keep in mind that this is not my view of the gold market but it is currently the prevailing view in the West at the immediate moment.  Little if any thought is given to the long-term implications of this experiment in unlimited money creation.  The thinking seems to be, “Things are okay for now, not great, but okay.  We will worry about the other stuff later and cross that bridge when we get to it.  But for now, it’s equity buying time”.

Even the notion of “Sell in May and go away” has been short-circuited by the paper money alchemists as the combination of $85 billion from the Fed, and $74 billion from the Bank of Japan each and every month, is overwhelming anything that gets in the way of slowing down the daily record setting run in stocks.

Bad news has become a reason to expect a longer duration of QE efforts and thus a reason to buy stocks, while good news is a reason to buy stocks in anticipation of yet even stronger economic growth.  In short, it is a “no-lose-scenario” for hedge funds.   This is precisely what the central planners wanted when they concocted this “print your way to prosperity” scheme.

Given that environment, investors have to understand this situation is completely and utterly dependent on central bank liquidity injections for success.  Why would anyone give up a sure bet and even remotely consider gold miners in this situation?  Safe haven?  Who needs a “haven” if they believe there is no storm?

As mentioned previously, this market will just keep going up and up and up until one day it just stops.  That will be the end of it.  After that, revisionists will go to work.  The same ones who are now saying what a great buy stocks are at current levels will be tripping over each other to get to the TV cameras first to marvel out loud how investors never saw the bubble!  You know what is sad?  That the mainstream media will pretend these same people will maintain any credibility whatsoever.

Those who say there is no inflation need merely look at the level of the US stock markets to see what paper asset inflation looks like!  The bulk of that hot money being created by the central banks is being rammed into stocks.  How could they not go up?  As they do, the disconnect between Wall Street and Main Street will further widen.

“You can’t fight the Fed” is a popular saying, and it has been proven right time and time again.  Attempting to point to reality is a fool’s errand when it comes to trading/investing.  Traders who try to short this market have been repeatedly blown out of the water.  The shorts are simply forced into covering, which simply adds further fuel to the upside fire. 

However, it is my belief, and a rule of Mother Nature, that the Fed cannot fight reality indefinitely.  It simply won't work, even as the Fed doesn't learn a single thing from their previous attempts at resuscitating popped bubbles.  The Western nations are sinking into an abyss of indebtedness.  How this massive build in government debt is going to be dealt with in the years ahead is something that few if any seem to be the least bit concerned about. 

With the central banks encouraging and actively cheerleading the furtherance of government spending by keeping borrowing costs artificially low, this has created an environment where political leaders have no incentive whatsoever to play the role of senior statesmen.  Why move towards something politically unpopular and risk losing your political career when you can have your cake and eat it too?  After all, the masses are participating courtesy of their own nations' central banks.

The inherent and extraordinary instability inside a system in which risk has been rendered obsolete for the investor, and fiscal prudence among political leaders has been abandoned because of the reckless behavior of central banks, needs little in the way of further clarification.  Suffice to say that when investors can plow cheaply borrowed money into formerly risky investments and leverage those bets up, knowing that they are backstopped by the CB’s, you have all of the ingredients in place for a catastrophic market event. 

In short, nearly the entirety of the investing world is all sitting on the same side of the USS Titanic, the floating juggernaut of steel, which “God Almighty could not even sink”.  No one saw the iceberg then, and those few who see it now are quickly dismissed as frustrated market bears, rather than voices of reason and sanity.

If we could truly print our way to permanent prosperity, without any pain, without any side effects, without any ramifications, then these central bankers will have become magicians, for they will have suspended the laws of economics and completely redefined the very concept of “money” itself.

My thinking is that there are some in the halls of economic power who have looked over the cliff and seen the abyss below, and whose only concern is avoiding entering that chasm.  “Damn the torpedoes; full speed ahead” were the words uttered by Admiral Farragut during the War Between the States.  As the West nears the great abyss, that might well be the swan song of the central bankers of our day.  God help us all because this sure as hell will not end well.”

© 2013 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

The audio interviews with John Embry, Dr. Paul Craig Roberts, Jean-Marie Eveillard, Dr. Stephen Leeb, Bill Fleckenstein, Eric Sprott, Gerald Celente, Andrew Maguire and Nigel Farage are available now.  Also, be sure to hear the other recent KWN interviews which include Art Cashin, Marc Faber and Felix Zulauf by CLICKING HERE.

Eric King

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