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Turk: “Today was a very important one for the precious metals in several respects, Eric.  First, another week has passed since the May 20th low in gold and silver.  That means with each passing day the base of support building under the market is getting bigger and therefore stronger. 

That's very good news, and it also ties into the second key point:  Both precious metals closed Friday on their lows, which has become a common occurrence in recent weeks.  But they did not collapse on Monday morning like they did on that May 20th low, which I previously told you seemed like a selling climax.  Both gold and silver did indeed open lower here in Europe today but quickly found solid support and started climbing higher.

There was another attempt to push gold lower after the Comex opened today, but that raid failed too....

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“It is noteworthy that gold climbed right back to the day's highs by the time of the London PM fix, suggesting that again there was good demand for physical metal.  Gold and silver then continued to hold near their highs through the rest of the US trading day.

These Monday morning reversals that we have been seeing after these weak Friday closes are a good indication that the precious metals are sold out.  The paper traders who are short and the central planners who are trying to marginalize gold by pounding the paper market every Friday afternoon after the physical market in London closes are unable to get any downside follow-through when the market for physical metal re-opens the following Monday.

This observation ties into another point here on which everyone should be focusing.  The evidence is building, Eric, that the central planners are losing control of key markets.  Their interventions are becoming less effective.  Their grip on just about everything is loosening, not because they want it to loosen, but rather their interventions are not having the outcome the central planners are aiming for and expecting.

The central planners are learning that while they can pretty much control prices for a while - or even for a long while as we have learned in recent years - they cannot control prices forever.  Until recently, it used to be that QE was considered to be a good thing, and many people are still thinking about it that way.  But there is clear evidence that the markets are starting to see the reality of QE:  It has been totally ineffective at jump-starting the economy and it is also incredibly destructive in the long-run.

This outcome is what I call the dark-side of QE.  Namely, when the short-term feel-good sugar-high passes, the long-term consequences of money printing begins appearing as is occurring now, for example, in bond markets around the world.  The last time we spoke, I mentioned that the yield on the 10-Year US Treasury note was rising.  In fact, yields are continuing to climb in most countries as the inflationary implications of outrageous central bank money printing is starting to be felt.

This past week the Federal Reserve turned another $14 billion of debt into currency, thereby taking its balance sheet over $3.4 trillion for the first time.  Yet despite all this buying, the Fed could not keep the US 10-Year from rising to 2.22% today, the highest yield in more than a year.

Normally rising interest rates would strengthen a currency, but the Dollar Index has lost more than 3% over the past few weeks.  It is another example that the central planners are losing control, and that the dark-side of QE is wresting control away from the central planners.  

Inevitably the negative consequences of central planning are felt, and the weakness of central planner interventions is also becoming quite apparent to most market participants.  The bottom line is there will be hell to pay at some point for what the central planners have done.”

Turk also added: “I think that there may be more base building in gold and silver until the next FOMC meeting on June 18-19, Eric.  If the central planners announce anything at that time which is more dovish than expected, look for gold and the gold mining stocks to jump.  This would finally start a meaningful uptrend.

The next hurdle for the precious metals is clear:  We need to see gold above $1420, and silver needs to climb above $23.  This is how bull moves get started.  They build a base that gets bigger and stronger as time passes, and before you know it, the metals start taking out previous resistance points.  The price then keeps moving higher as the bull market gathers momentum.

It is extremely difficult to predict when the next move higher will begin in these markets. You and I have discussed this point many times, but it always bears repeating, particularly after the thrashing gold and silver took the last few months.  I just keep accumulating physical metal on a monthly cost-averaging program, and I recommend others do the same thing.  It is the best way to participate in this long-term bull market. 

The bottom line here is Investors will need the protection of physical gold and silver in order to survive the coming financial chaos and currency destruction.  As major cracks in the system appear, these are major red flags for investors to get out of the system and into the safety of precious metals.”

© 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.

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Eric King

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