Wednesday, April 25, 2012

My Coin Dealer

Today I visited my local coin dealer.  He is Russian and grew up in Russia while it was communist, and has family who buried gold while waiting for the system to collapse.  Funny thing, his grandfather who buried the gold died before the collapse and didn't tell anyone where he buried it, so his family has dug up their backyard but still have not found it.  His time frame for the collapse of the economy is that it will happen in 2015, because, "That is how long it took Russia".  It may not be perfect logic, but if history is any indicator....

He also likes to chart.  An interesting fact about him is that he closed his MF Global account days before its bankrupcy.  I know because I was at his shop the day before MF declared, and he told me he had already closed his account and had the funds wired.  He is very savvy, and my conversations with him are very interesting.  I am going to brief today's.

We went over charts, and he and I both agree gold and silver are forming inverse head and shoulder formations.  He thinks that the shadow, the final down move of the shoulder before the upmove, will touch $27.  I think it will be about $28, but potato potato.  Gold he sees moving below $1600 on the final break, and I think it will be a hair above.  Once again, very similar support.  You know what I think as far as the next few months, so let me write what he told me.  He says that once gold and silver finish their formations, the break will be quick to the upside.  His thesis is that silver will break $33 with ease and will not stop until about $37-$38.  This is interesting because I broke May and June into this one move, so he is more bullish than I.

Long term he thinks silver will get to $42 before the election and will get to $48 in nine months.  He thinks gold will be at $1850 before the election and by February it will be around $2000.  I am more bullish long term, where I see gold at $2200 and silver at $49 before the election.  I think that the next couple months will be mitigated, and that long term there are so many problems that any slight up move in gold and silver will set a fire and the move will build on itself over time.

The most interesting part of the coversation was about the Comex.  He says that if silver goes lower than $22, then there will be so many buyers in size that the Comex will default.  He made a point to say they have only 30 million ounces many times throughout the conversation.  He also said that the Comex could default at higher prices if anyone decided to move in.  But he also noted that Comex likes to pay people in cash when they ask for delivery.  He said this will continue.  He also mentioned that Chavez had only received his first delivery from JPM, and still awaits the rest of the shipments.

Finally, the most notable thing I took away was that production had peaked already.  He said it peaked years ago, around 2009.  I have long said that silver's price, and in fact the whole economic system, is waiting for silver to peak production.  I guess that may have happened already, so as for now, paper, which as he pointed out is leveraged 100:1, is doing a great job suppressing the price.

Also to note, he does not like platinum, and he did not have much to say about it.  What he said was it has never been considered money, so if people do move into silver and gold because of their history as money, platinum will be ignored.  He said that platinum is merely industrial.  I do not fully agree with his prediction, although his take on its history is accurate.  Platinum was shaved off and thrown away in the same way natural gas was torched when crude was produced, only until recently.  But platinum meets the definition of money in my book, so I think it will move with its sisters gold and silver price wise.

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