The Devil’s Market Has Done It Again …

Larry Edelson

Given the absolutely wild market moves over the past week, I’m going to use today’s column to tell you — in no uncertain terms — what’s happening and what I expect to happen over the next few months in the most important markets: Gold, silver, oil, the dollar, bonds, and the Dow Industrials.

I am going to start first with silver, and I’m going to spend a little more time on it than the others, for obvious reasons.

I have been warning for some time now about the dangers in the silver market. It is, bar none, the wildest, most manipulated market on the planet, full of thieves, charlatans, and pundits who have no idea what they are talking about.

Many of them have attacked me verbally in the past. Some even threatened my life back in the mid-1980s. The reason: I know of their nasty, dirty game and how they rip off tens of millions of innocent investors.

The latest manipulation in silver and its near vertical ascent to $50 an ounce has added a new component: While silver inventories were “allegedly” draining away to next to nothing, JP Morgan and other big investment banks were also allegedly short massive amounts of silver.

So, the story goes, the combination of very low supplies and massive short positions that would have to be covered — made for some fantastic reasons why silver had nowhere to go but straight to the moon — and great sales pitches to get every Mom, Pop, Grandma, Grandpa and even the kids and grandkids into silver.

But as I told you before, I’ve known of these charades in the silver market for decades. It never changes.

All this is also why I have recommended very strongly to my followers that they stay largely out of the silver market during this period.

It’s also why — even though I am now long-term bullish on silver per the signals my systems generated in March and April — I still refused to buy any silver bullion or silver miners on an aggressive basis, waiting instead for the inevitable crash to unfold first.

Now, in just the past week, silver has crashed a full 30%, one of its worst slides of all time.

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Last week’s silver panic has wiped out many who didn’t listen to me, many more who bought into silver at or near the $50 level, and it’s been such a price collapse that the margin calls in the silver futures market are reverberating all over the world.

It’s the charlatans, thieves and fraudsters in the silver market who are at it again. Profiting at the average investor’s expense.

The charlatans in the silver market are big inside speculators who routinely take delivery of the nearby silver futures contract, in physical form — but instead of keeping it stored in official warehouses, where the movement of silver is reported publicly, they move it offshore, to places like Switzerland and London, and into warehouses where the holdings do not have to be reported.

They do this over a period of time, draining official reporting warehouses of silver to make it look like there’s a massive silver shortage.

Then, as silver prices start to rise, the little guy gets sucked into the rally. This charade keeps going until silver’s price action goes parabolic and the average investor is jumping into it with both feet.

Next, the charlatans who have removed silver from reporting inventories then begin to dump the silver back on the market, all over the world, in London, Singapore, Zurich. This starts a cascade of selling and liquidation, slamming the unknowing, innocent investor.

All along, this operation, a giant market manipulation, is aided and abetted by silver dealers, who make their living selling you silver ingots, bars and coins. They can’t sell silver unless it’s going up.

And most recently, by investment banks that do nothing but deny that they’re building up massive short positions to take advantage of the inevitable crash that will come.

The only ones who make money are A) the large speculators who take the silver off the market to make it appear that there’s a shortage … B) the dealers selling investors silver … and C) the investment houses who have sold short into the rallies.

The average investor loses, usually big time, getting caught in the middle.

The fact of the matter is that, yes, while demand for silver is rising and silver is now in a long-term bull market — these silver manipulations will continue, there will be many of them going forward, creating giant rallies and crashes …

And if you don’t know what’s happening in the silver market, you are bound to buy at the wrong time and get slaughtered by those who continue to play with this market.

There’s a reason traders in the know call the silver market the “devil’s metal.” It is, I repeat, the most manipulated market in the world.

I will recommend aggressive investments in silver. But not until I see that this latest manipulation has run its course.

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So that you fully understand the risks in this market, here are the critical levels that could easily be tested before the latest silver crash is over, and before the real, long-term bull market in silver really gets going …

Major support levels in silver …

$37.00

$30.52

$29.05

$23.84

$23.25

Since silver has now already broken the first level of support at the $37 level, I fully expect we will see at least a test of the $30.52 level, and probably even lower, as low as $23.25, before the long-term bull market in silver resumes.

Until then, or until I give you the all clear to start buying silver and silver-related investments, I strongly suggest all investors steer clear of “the devil’s market.”

Now, let’s take a look at gold: Naturally, gold has pulled back along with the crash in silver. But, gold has held support at much higher levels than silver has. That’s a testament to why I believe gold is a much safer bet than silver over the long haul. It’s far more stable, and while it too can be manipulated, it is not manipulated like the silver market is.

Look for support in gold at the $1,477 level followed by $1,423. If gold should fail to hold the $1,423 level on a closing basis, the short-term picture in gold will change to bearish.

Crude oil: As you know, I forecast a topping formation in oil at the $108 to $110 level. Oil has now plunged from $114 to back under $100 a barrel.

I believe an intermediate-term top is in place in oil, and we could see it move back to the mid-$80 level before the next bull leg unfolds.

The dollar: I remain long-term bearish on the dollar. There is no question it is headed much lower. However, in the short term, a rally is way overdue. It has likely begun this past week, with the U.S. Dollar Index holding the 72.50 level. The triggers: The ECB holding rates steady, while more and more talk of the Fed exiting its loose monetary policy is high.

The Fed will try to exit, but it won’t work. When they come back into the economy with QEIII, the dollar will start tumbling again.

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The Dow Industrials: Expect a very wide trading range over the next two to three months, with the Dow ranging between 12,170 on the lower end, and 13,800 on the upper end. Yes, that’s a wide range, but I see no disasters ahead for the Dow. Even though it may be very choppy for stocks over the next few months, the blue chip Dow Industrials and S&P 500 are preparing to make a major move higher in the coming years.

Bonds: Yields may fall a tad going forward and bond prices bounce, as the economy slows, but stay out of U.S. and European sovereign bonds, no matter what. They are a disaster in the making.

Best wishes,

Larry

P.S. For just $99 a year you can get ALL of my timing signals, recommendations, risk reduction strategies, insights into the markets, and more. It’s a freaking bargain. Join now by clicking here.

Your thoughts on “The Devil’s Market Has Done It Again …”

  1. Hi Larry, you haven’t mentioned rare earths for a while
    I have a big chunk of my portfolio invested in a rare earth stock which as done very well.
    do you think I should hold or get out?

    Pino.

  2. Gold and Silver are the only really “good store of value” and Silver is now almost a rare metal , due to the fact that it is a scarce commodity and much needed for all it’s industrial uses…….However , you are absolutely right
    the market’s are being manipulated by ” SHADES OF THE HUNT BROTHER’S WHO ATTEMPTED TO CORNER THE MARKET” and “EVENTUALLY FAILED”………..Stay invested in Gold and Silver approx. 15% to 20% of your portfolio and you will not be disappointed.
    Steve

  3. Hi Larry, nice to see you here.I know you are doing your best in a wild market.All my studies are telling me to head for the hills !..Margin debt is at i’ts second highest in history.insider are selling every rally in the big boards.
    This is an easy/cheap money driven market..It looks ominously similar to 2008,when I lost a million in a couple months…I think the S and P will have one more mini rally,taking the metals up with it…Then ” look out below “..
    A 20-40% correction in the S and P..Will crater the commodities..So, I’m buying inverse EFT’s at their 3 year low !.
    I like the Proshares small cap 600 (SDD) (this stock traded at 300.00 usd at the crash of ’08,now you can get it for 44.00, ,ZSL.HZD_T…I’m planning on making more on this mini crash than I did on the recent move up…Then I’m buying resource shares come August or so at 50-75% off sale..And I’m loading up on Nat, Gas assets..I think you should start talking about N. Gas now…
    I’d like to here your comments,,
    Peter

  4. LARRY, TO FOLLOW UP ON DAVID X’S COMMENTS, I HAVE ALOT OF MY FUNDS IN GOLD STOCKS. AFTER MUCH REVIEW LOOKS LIKE I WOULD HAVE BEEN BETTER OF IN GLD INSTEAD OF THE INDIVIDUAL STOCKS OR EVEN THE STOCK FUNDS LIKE TOQUEVILLE. WHAT’S YOUR OPINION?
    THANKS,
    HILLBILLY

  5. We should start an ETF that holds dirt and then convince people there is a shortage of it.

  6. Larry, There are lots of different kinds of bonds. Can you explain in a little more detail which ones you would avoid and why. Also, since bonds are supposedly the “safe haven”, and those people close to retirement are to have 60-80% of their portfolio in bonds, what do you suggest as a replacement? Thanks JLH

  7. Larry, It has been difficult to have consistent up days in this crazy market, and many of the comments indicate that greed lets ua make bad decisions. You have made some good predictions for me, but world events can produce problems.
    I am concerned about the world food supply with draught in some areas and 75 year floods in the corn,wheat, soybean and animal feed stock areas. This may not be as severe as I find it in Texas, but what would be a good investment vehicle if you think this may be a problem. It looks as if Southern hemisphere countries are six months from harvest and we have lost many crops. I do not know what the world food production looks like, bu would appreciate your input. I have some DBA, but not much.
    Richard

  8. we keep hearing that 50 plus countries are in the process of devaluing or revaluing their currencies. If so, how will that affect the precious metals?

  9. Dodd/Frank have been trying to get the CFTC to limit the number of contracts to 1500 per account ( I believe that is the intent) this has not happened. Push as they have it hasn’t happened that is why the margin on silver has gone to $26,000.initial and $16.000.maintenance on the 4th hike. flushes out the speculator and dealers. This is certainly a watch and see time. I bought silver when it was $7,00-$8.00 it went to & $50.00 and I still have same silver that was the Hunt brothers. NOW new players.

  10. Why is it significant that we sell our debt in gov bonds to other countries, often referred to as Exporting our inflation over seas? How is this any more detrimental than selling bonds to our own citizens? Either way, aren’t we injecting money into the economy either way, which will add to inflation? Why do people act like our debt to china is worse or better than debt to our own people?
    Thanks
    William

  11. Hello Larry,
    The last RWR report that i received 5/2/2011 you said if silver was to get down to 37 or 38 dollar level you would AGGRESSIVELY buy silver bullion ETF as well miners. Now silver dropped under 37.00 the same day 5/2/2011. Should you have sent us a flash allert, letting us know you were recanting what you just sent and do not buy? I still beleive you have better insight than most, Butt we need more alerts in such volitol Times.

  12. Silver was much more predictable when it belonged to The Lone Ranger.

  13. What currency would be the reserve currency if the dollar is not?? The yen, euro are in trouble. Thanks

  14. How odd I am. I hold both dollars and silver, etc. I watch the moves of silver and the precious metals daily,,,, and rarely take notice of the continual erosion of the dollar,,, which certainly has a greater effect my lifestyle.

  15. Hi Larry,

    I’m hanging in with you on this pullback in precious metals which seems to have come just a little later than you had expected. In retrospect I wish I had time-averaged some extra gold purchases and then started selling some of them when you started calling for a pullback. Now I guess the issue is trying to pick a bottom for gold (silver will have to take care of itself).

    I seem to recall your early advice being that gold and miners should be about 25% of the portfolio and the rest should be elsewhere, like natural resources, but your recommendations have mostly been light on anything outside of PM and miners. Therefore over the past two years I let my broker diversify about half my money into a mix of somewhat ‘defensive’ stock and bond funds. These funds have profited mildly by the continued increase in the general market but I’m wondering if we are at the top for the market. Inflation seems to be affecting consumer goods but not having the predicted effect on boosting stocks. You have predicted a dramatic inflationary rise in stocks, but most recently suggested that the market may be topping. My hunch is that there is a lot of money sitting around as cash derived from QE2 that will find its way into the market soon. Does that make sense, and if so when?

  16. Hi Larry, I am holding on to a losing position in real estate (REK) and was wondering if I should sell and take my loss or hold. Any thoughts? Thanks.

  17. Hi Larry, as Keven (above) mentioned per your analysis I decided to buy a fair amount of silver at the $39 range. Certainly not the top, but not in safe territory either as you mention it may go to $23 before going up. Trying to decide if I should take some off at a bit of a loss or just hold for the long term. Appears the dollar will continue to rally a bit at least in the short term, and mention of QE2 ending likely will not be good for silver / gold at this time. However as you mention, they may then learn they need to stimulate the economy and resume a QE3 type program. When that happens sometime after June I’d think the bull market for these precious metals should resume. Another thing that IMO should be good for the metals to rally would be the lengthy and visible discussion on the debt ceiling. Last time the debate over funding the 2011 budget helped the metals so seems the debt ceiling debate should help again – although my guess is it would have a much stronger effect as there is much more at stake. Any dragging of the feet by Republicans in order to get more austerity will increase fear of default which should crank the metals up. What are your thoughts here Larry? Thanks

  18. dear larry,you say silver is going to fall.But when in the first comment mr. Diva’s asked you that should we short silver?You replied No.Please explain.

  19. Larry, these guys who criticize you don’t realize there is no such thing as a crystal ball. As a subscriber to RWR, I appreciate your willingness to go out on a limb at times and make a call. Can someone introduce me to a guy (or gal) who has never been wrong? I doubt it. I have a large position in GNMA bonds thru BGNIX. My broker says they are higher quality than Fannie Mae, etc. Should I get out? Thanks for your expertise.

  20. common now larry, you expect me to believe that you know what you’re writing about and not a mention of the manipulation at the comex by raising the margin requirement what?…FOUR TIMES LAST WEEK? sure supposedly d.bag. sorros did dump a bunch of silver on the market but in concert with the margin hikes.

    heard of the silver liberation army? tens of thousands of us nipping and stashing the hard stuff at every opportunity. started in 2001 at 4 bucks…. put your boots on and start marching!

  21. Larry, I’m confused….recently you said that Silver and the metals market were NOT going to have a large pullback as that possibility was behind us….and you said that Silver and Gold were going to continue upwards with small retracements along the way. You guys seem to change like the wind….now I’m not sure who or what to believe?

  22. I’ve also given up on prognostications on precious metals. Unfortunately, Larry with your recommendations, we waited to buy at the top missing the entire run. If I were “the powers that be”, I would model the common cyclical and technical indicators and make sure that the largest number of indicators become *wrong* over time. If you believe in the fundamentals, buy on dips and walk away.

  23. Larry, thanks for your insight. I always was curious as to how the silver market was manipulated. Maybe there are other ways they manipulate it as well but you sure made this clear.

  24. @ Craig – good question.

    @ Larry – Thank you for the consistent caution you have voiced about silver. You called for a pullback that I believe would have occured if the Middle East and Japans crisis’s had not occured. You have also voiced consistent concern over the silver market since it began to take off like a rocket. I am glad I was not buying in the high $30’s-$50 range.

    With all the above noted regarding your silver analysis, can you clarify your point about gold testing the lower $1400 range; is the gold-silver relationship so close, that IF silver drops more, testing your 30, 29 or 23 projections, that gold would likely follow suit to your indicated range of 1400’s?

  25. Hi Larry, You were right about silver correcting, just a bit too early. Now that it has corrected, do you see it moving back up to a new high and correcting again? Wouldn’t surprise me if it marches back up to test 50 and fall back again until the 200 MA catches up a bit…

    Thanks & keep us posted!

  26. Larry, you stated repeatedly that Gold would be 1650 to even 1700 by June 2011, just a week or so ago… what happened to this cycle ??
    Now you are saying it has support at low 1400’s !!!!

  27. Just before silver dropped it looked like it flat lined. I had a hunch it was going to drop but it looks like it is now marching upwards again.

  28. Good morning Larry,

    Wanted to say thanks again for keeping us alert to the potential down hill run silver just made!! As I type this, silver is crossing back over the $37.00 support line: how likely is spot to reverse direction and take another run down hill, to the $30.50 mark? Enjoy your Monday folks

  29. This shows,once again,the risks of short term speculating.It’s better to invest for the longer term and don’t overpay for whatever you buy.Forget using charts to try to make quick profits.If that worked,these speculators would soon own all the world’s assets.There is a reason the richest people aren’t short term speculators.It’s a fools game.

  30. Larry:

    How long do you think the “crash” in silver prices will continue? Weeks or months?

  31. Hi Larry,

    what do you think of trying to short silver? Maybe is time for ZSL trade???

    Thanks

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