With gold and silver surging strongly, James Turk spoke with King World News about what really triggered the massive spike in gold and silver today.

Precious Metals Spike
February 14 (King World News) – James Turk:  “Today was a very important day for gold and silver, Eric. The reaction in their prices to the CPI released earlier today provides us with some very valuable insight into the state of the precious metals market. And this insight is bullish for both precious metals…

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The CPI number came in higher than expected, which shows that even by the government’s own calculation, inflation is worsening. And we all know that inflation is a lot higher than what the government reports, so the purchasing power of the dollar is being stealthily eroded even more than what is reported.

But there are two things that I found to be the really interesting about this CPI report. 

Two Different Roads
The first is the prevailing sentiment. Before the CPI was released, commentary on the precious metals took two different roads. 

If the CPI was worse than expected, the Fed would raise interest rates which would be bad news for gold and silver. If however, the government’s inflation report came in less than expected, it would be bad news for gold and silver because no one would need to buy the metal to protect one’s purchasing power from inflation. 

So there you have it. Conventional wisdom had it that gold could not win. No matter what CPI was reported, gold and silver would get hit, and they did. But here’s the important message from this conventional wisdom.

When sentiment gets so bad that there is no reason to buy an asset with a 5000-year proven track record of protecting one’s wealth, you know the price of that asset is extremely undervalued and ready to move higher. When it comes to markets, conventional wisdom is usually wrong, and today was not an exception.

The Key Break Above $1,300
In my KWN article last week,
 I noted that gold began the second leg of its bull market when it broke above $1300. 

The key thing to watch during this second leg is how sentiment will change over time from very negative to overly optimistic. But right now, most people are watching the gold train leave the station, while the smart money is already enjoying the ride.

The smart money will continue accumulating as long as the precious metals are good value, so today they were in there buying on the dip. Here’s proof. 

The backwardation in March silver rose to 6¢ after the CPI announcement from 3¢-5¢ prevailing over the past several days. That change may not sound like much, but it is really bad news to those short physical bullion. 

Shorts Struggling
The shorts are struggling to try finding physical silver to deliver
. The smart money is asking the shorts to turn the short’s paper promises into the real thing, which is a trend that I expect will continue throughout this year, not only because of inflation but also as a result of rising counterparty risk because banks are sitting on a growing stack of bad debts.

As a consequence, both gold and silver will continue much as before. The prices of both metals will trend higher as the year progresses. Importantly, the uptrend will accelerate as the group of smart money buyers accumulating the metal gets bigger as more and more people begin to understand that the debasement of the dollar is accelerating.

The second important point, Eric, is what happened after the CPI was released. Both gold and silver climbed back after the big hit they took on the release of the CPI. 

A Very Bullish Reversal Day
After the CPI was released, the price manipulators took the metals lower to clean out the sell stops under the market looking for more physical metal. To their surprise, the backwardation didn’t disappear. It got worse. And then both precious metals completed a very bullish outside reversal day.

So the shorts are in real trouble. The central bank price manipulators who have been shorting gold and silver to keep prices under their control are contending with a toxic mix of a collapsing dollar and rising inflation. Both of these reasons mean that the precious metals are destined to continue climbing higher this year.”

***KWN has now released the timely KWN audio interview with Dr. Stephen Leeb and you can listen to it by CLICKING HERE OR ON THE IMAGE BELOW.



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