The gold and silver prices continue to consolidate since reaching new five-year highs in the summer. Gold is nearly $100 lower from its high of $1,566 on September 4th, while silver is down more than $3 from its $19.75 peak on the very same day. Thus, gold is down 6% while silver is off by more than 15% from the peak summer prices.

However, some precious metals analysts continue to harp on the “Price Hammering” or “Manipulated” knock-down of the metals when they didn’t complain when both gold and silver increased 23% and 38% respectively from their lows in just three months. I bring this up again because the time spent fixated on the “supposed” precious metals manipulation will only amount to increased “FRUSTRATION.”Rather, I believe it’s better to focus on understanding the underlying “ROOT” fundamentals of the market and the impact on the future value of gold and silver.

For example, I no longer spend much time at all, looking at the Political Circus in Washington, DC. It’s a complete waste of time. Americans are either brainwashed by propaganda from the LEFT or the RIGHT into believing their “ASSHOLE” leader is better than the other. So, trying to debate Americans who are proud proponents of the LEFT or RIGHT is similar to wasting time on precious metals manipulation.

With all the articles claiming Gold and Silver Manipulation, why hasn’t anyone brought up the fact that gold and silver are now trading above their total primary cost of production (+$200 for gold & +$1-2 for silver)?? It would be one thing if gold were trading at $750 and silver at $10.Then, the “Manipulation” mantra would carry more weight and make sense. However, these two precious metals are still trading above their average cost of production, even after consolidating lower over the past three months.

So, the frustration experienced by many individuals in the precious metals community is that they believe the gold and silver prices should be up much higher than they are currently. While I agree that it would be nice for the precious metals prices to be higher, especially considering the tremendous Fed and central bank market intervention, the underlying bullish fundamentals haven’t kicked in yet.

SRSrocco Report Analysis of the Precious Metals Has Changed Over The Past Several Years

My analysis of the precious metals changed over the past several years, mainly due to my focus on energy and how the markets trade. Regrettably, back in the 2009-2016 period, I was stuck in the “superficial” GOLD BUG MANTRA. By that, I failed to understand the many factors that were the key drivers of the gold and silver prices.

Also, at the time, I held an extreme contempt for bankers and the banking industry. So, when the gold and silver prices were hit hard, I would blame the so-called “Bullion Bank Manipulators.”I look back at it all now and can’t believe how silly and naive my past views on the markets.

Unfortunately, I see a lot of my fellow brethren in the precious metals community still stuck in that narrow-minded thinking that only leads to frustration. You see, the bankers aren’t the real problem. Oh no. Without the bankers, the entire Facade of a Bubble Economy that we currently have would collapse. And let me tell you, I would much rather have the current gold and silver prices in a semi-functioning bubble economy rather than super-high precious metals values in a Global Depression that never ends.

And, this is where I disagree with Peter Schiff. Schiff continues to believe that if we allowed the fiat banking system to collapse, while there would be a terrible economic depression, we would eventually recover to a much more productive market if the monetary system was backed by gold. Schiff makes the “CARDINAL SIN” that plaques many of the top-notch precious metals analysts.

They fail to incorporate ENERGY and the FALLING EROI in their forecasts and analysis.

Recently, I had a Twitter exchange with Jan Neiuwenhuijs (formerly known as Koos Jansen) regarding energy’s impact on precious metals and the economy. While we had several Twitter replies, the following two summarize the problem with the lack of energy knowledge by most precious metals analysts.

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Jan replied to my Tweet where I stated that Energy Comes First, then Value Second, with his response, “The energy put into the production process has value too.”Thus, Jan is implying that energy has “VALUE TOO” means that energy isn’t the key, just that it also has value. I differ in that energy must be burned first or human labor expended before any value can be created. Without the SUN, humans on planet Earth would be totally screwed. Thus, energy from the sun is the critical number one factor allowing life on earth.

This is also true for the value of most goods and services. Hunter-gathers enjoyed an average 10/1 Energy Returned On Investment (EROI) of food gathering versus the modern high-tech agricultural growing, production, and distribution net energy loser EROI of 1/10. While Hunter-gathers invested one calorie of energy in obtaining 10 calories of food, we burn 10 calories of energy just to put only one calorie of food on our dinner plate. Without oil, our modern agricultural system would disintegrate.

Thus, SUPPLY & DEMAND have nothing to do with the EROI of food gathering or production. It is just a scientific ratio. 

The Austrian School of Economics, where most of the “upper-level” precious metals analysts acquired their education on money, fails to incorporate the EROI or Thermodynamics of Resource Depletion in their analysis of the economy and markets. So, the overwhelming majority of precious metals spokespeople continue to provide analysis that is faulty and incomplete.

Jan’s second twitter reply shows a perfect example:

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I have to commend Jan for actually looking over the Thermodynamic Oil Depletion chart. Still, his response typifies the ignorance held by most of the precious metals analysts in regards to the Falling EROI of oil. While there are “other energy sources,” as Jan claims, their production would be significantly reduced without the oil supply.

This sort of lackadaisical response that “there are also other energy sources” demonstrates the utter lack of knowledge by the precious metals community on the KEY FACTOR that drives the economy. The Mainstream and Alternative Media are clearly guilty of believing in the ENERGY TOOTH FAIRY.

We have taken energy, especially oil, for granted that we assume there will be an endless supply. However, if we do believe that the oil supply is finite and will peak at some point, then most have this SILLY & NAIVE NOTION that humankind will replace it with new energy technology. This type of delusion is worse than believing Peak Oil is a conspiracy propagated by the Elite.

Unfortunately, most people have no idea just how critical the JUST-IN-TIME-INVENTORY SUPPLY CHAIN system relies upon a constant supply of oil. Our just-in-time-inventory supply chain can not be powered by transitioning to “Other Energy Sources.” If you believe natural gas, coal, nuclear, hydro, thorium, solar, wind, geothermal, or whatever, are going to replace oil as the “PREMIER” energy source, you are ignorant of the Full Cycle EROI analysis of these forms of energy.

Simply put, without oil, the entire Global Economy would collapse and grind to a halt. So, individuals must understand the EROI and Thermodynamics of oil depletion. If you don’t, then you are misleading yourself and your followers (clients).

SRSrocco Report Has Distanced Itself From The Alt-Media & Websites That Bamboozle & Defraud Investors

If you have been reading my recent articles, you will notice a bit of a different tone. It has taken a few years, but I now no longer care about being apart of a community that MISLEADS or DEFRAUDS their followers. Unfortunately, the are LOTS of SCAMS out there… so BUYER BEWARE.

While I am not going to name… names, I am quite surprised at the lack of MORAL CHARACTER displayed by many of these individuals who run fraudulent websites or worthless companies in the precious metals or resource sector. They prey on the ignorant when they should be educating them and providing a valuable service. However, at some point, they are going to have to face a MIRROR and look deep into their soul to see if they are just as BAD or WORSE than the MainStream Media that they criticize.

The lure of easy money has destroyed the Integrity of many in our precious metals and resource industry.  I can tell you horror stories about individuals who were RIPPED off by various precious metals dealers providing one scam or another. While the scam of selling investors high-commission “rare gold coins” has declined over the years, there are still companies doing it.

And then we have the resource sector newsletter and website scam of pushing GARBAGE STOCKS to its followers. Gosh, there are so many doing it, I am surprised investors continue to fall for this SCAM. But, as I stated in my previous article, there is a new SUCKER BORN every minute to supply victims for these shady players.

IMPORTANT TIP:  If you subscribed to a free or paid service to provide you with “Stock Recommendations,” make sure that you check to see if the company is being paid to promote the stock. You will find this in the disclaimer at the bottom of the stock recommendation. While there are a few legitimate stock recommending services, the overwhelming majority are not. Again, if the analysts recommending the stock makes most of the money from his or her subscription service, then that is likely more legitimate than those who are ROLLING IN THE DOUGH by promoting GARBAGE STOCKS.

WORD TO WEBSITES:  If you have been paid a nice fee to help assist in the promotion of GARBAGE STOCKS for these newsletters or websites… consider doing the RIGHT THING for your followers and refrain from this activity.  However, if you feel that you need the money that bad, then look deep into the MIRROR and realize you are no better than the Bankers and Elite that you criticize.

Okay… now that I got that off my chest let’s look at what’s going on with the current gold and silver prices.

Gold & Silver Price Update

As I stated in my articles and videos over the past few months, the gold and silver prices will continue to consolidate after reaching new five-year highs in the summer. And that is precisely what we have seen.

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While the precious metals rallied a bit today after the Fed announced no new rate cuts until 2021, the gold price is still about $100 lower than its peak price of $1,566 on September 4th. I believe the gold price will likely retest the $1,360 level before setting up for a new move higher in 2020. And, if we look at the current Gold COT Report, the Commercial Net Short position is still at a high level:

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Thus, logic suggests that as these Commercial liquidate their short positions, the gold price will likely retest the $1,360 level. And for the silver price, it will also continue heading down to the lower rising trend line (blue dash line):

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Initially, I thought that the silver price would find a bottom at the 50 Month Moving Average (blue line), but if we look at the Silver COT Report, it will likely fall back down to the lower rising trend line (blue dashed line).

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My analysis of the Commercial Net Short position to consolidate lower as the silver price fell back to the 50 Month Moving Average was based on the current state of the market. However, since then, the Fed has lowered interest rates three times, started providing liquidity in the Repo Market and is now buying $60 billion a month in U.S. Treasuries:

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The Fed market machinations curtailed the buying of paper gold and silver by institutions and investors as they realized the Stock Market would receive the overwhelming benefit of this central bank intervention. Thus, the gold and silver prices peaked once the Fed brought on its repertoire of monetary magic. We must remember, the Fed is purchasing the same monthly amount of Treasuries that is being spent by the entire U.S. Military.

The Stock Market is now the economy. Thus, the Fed will do everything in its power to keep Stock Asset Values elevated. However, this is not a long-term sustainable model. And, the Fed is using all these monetary interventions when the U.S. economy has even entered into a recession.

Lastly, precious metals investors would spend their time more wisely if they understood what is going on in the U.S. and global oil industry than focusing on the superficial aspects of manipulation and market rigging. The Oil Market will be the key factor in determining asset price values in the future.

When the U.S. and global oil supply starts to decline in a big way, it will negatively impact the value of most Stocks, Bonds, and Real Estate while providing an excellent store of value for gold and silver holders.