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ORANGE COUNTY, CA (KSIR Capital) - There has been a constant debate over the years on what drives theprice of gold and silver. Obviously we have the fundamentals thathave put the metals in a bull market for the last 10 years. Thepowers that be have total control over money, as they set the pricefor capital via manipulating the interest rates. So it is not astretch that they would be concerned with a rising gold pricebecause gold is a threat to how the current fiat regime functionson a day-to-day basis. Without Mr. Bernanke able to step in and buy US treasury bills,where would interest rates be? How would we fund our deficits? These are just some of the reasons why it is important for theelites to pay attention to the price of gold and silver. Knowingthis, the powers that be have instructed their banking armsJPMorgan, HSBC, Goldman Sachs and the like, to create paperderivatives to help manage the price. But what happens when we get to a threshold point where thephysical market breaks the back of the paper derivatives? We thinkthat this time is near. The Accumulation Distribution Line developed by Marc Chaikin is avolume-based indicator designed to measure the cumulative flow ofmoney into and out of a security. Chaikin originally referred tothe indicator as the Cumulative Money Flow Line. As with cumulativeindicators, the Accumulation Distribution Line is a running totalof each period's Money Flow Volume. First, a multiplier is calculated based on the relationship of theclose to the high-low range. Second, the Money Flow Multiplier ismultiplied by the period's volume to come up with a Money FlowVolume. A running total of the Money Flow Volume forms theAccumulation Distribution Line. Chartists can use this indicator toaffirm a security's underlying trend or anticipate reversals whenthe indicator diverges from the security price. We think this, along with other technical indicators, is screamingBS on the paper gold and silver game. If you take a look at thechart below, you can see that the indicator has confirmed this bullcycle as money has continued to move out of paper assets and intothe physical. Currently we see an extreme divergence: The volume and the Moving Average Convergence/Divergence (MACD) arealso calling BS on this latest paper assault on the metals prices.It is even more obvious when you look at this chart of silverbelow: The recent lower volume in the metals and the related mining sharesare not confirming this move lower. If the gold and silver price were to have kept a correlation withthis indicator we would currently see close to $1900 and $50silver. Our experience tells us that this type of disconnectusually ends in violent corrections to the norm. In this case itcould mean that we are witnessing the straw that breaks the papergold and silver games' back. There is an even more extreme disconnect in the related miningshares. We have just witnessed a silver producer lose 10% ($15million in market cap) off a $250k market sell order. The sharesare now in the strongest of hands; the problem is that most of thestrong hands are fully invested at this point, allowing anemotional mom and pop liquidating their 401k position due to massfear in the markets to knock down the price significantly. To us the writing seems to be on the wall for an "event" to takeplace. Fortune picked up a story on April 6, stating:"Aftercompleting a series of public lectures in Washington, D.C. lastweek, Federal Reserve Chairman Ben Bernanke quietly slipped intoNew York City for a private luncheon on Friday with Wall Streetexecutives. Fortune has learned that attendees included Jamie Dimon (J.P.Morgan ), BobDiamond (Barclays), Brady Dougan (Credit Suisse),Larry Fink (Blackrock), Gerald Hassell (Bank of New York Mellon),Glenn Hutchins (Silver Lake), Colm Kelleher(Morgan Stanley), BrianMoynihan (Bank of America), Steve Schwarzman (Blackstone Group) andDavid Vinar (Goldman Sachs). Sources say Bernanke spoke at length about monetary policy, in anapparent effort to persuade attendees that they needed to take amore active role in helping to deal with the European debt crisis.He spent virtually no time discussing regulation, although thatmantle got taken up by both Dimon (domestic regulation) andSchwarzman (global regulation)." Another red flag was the recent 2 billion dollar loss JPMorganannounced because of a bad bet with credit derivatives. We are also seeing bearish divergences in the fixed income market. The recent breakout of the IEF which represents the Barclays 7-10year Treasury Bill fund was not confirmed by the MACD, Accum/Dist,or volume. Don't be fooled by this latest market mirage. Brett Heath is Managing Partner at KSIR Capital - SUBSCRIBE to Mineweb.com's free daily newsletter now. We are high quality suppliers, our products such as Coal Tar Pitch Manufacturer , Fluorspar Ball for oversee buyer. To know more, please visits Calcium Fluoride.
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