Recently, pub­lic inter­est in gold and sil­ver and gold/silver min­ing stocks has been at multi-year lows. And that is a super bull­ish con­trar­ian indi­ca­tor. In fact, a glance at the Gold Min­ers Bull­ish Per­cent Index illus­trates that sen­ti­ment to start the year was at a three-year low.

At the end of last year, there was a lot of chat­ter on the inter­net, due to the end-of-the year slam down effected on gold and sil­ver futures by the global bank­ing car­tel, that sil­ver prices were going go col­lapse to $20 an ounce and gold prices were going to col­lapse well below $1000 an ounce by the first quar­ter of 2012. We felt that these dis­cus­sions and the con­se­quent, induced panic sell­ing out of gold/silver min­ing stocks and phys­i­cal gold/silver at the end of 2011 was highly unwar­ranted and the result of peo­ple falling for the global bank­ing car­tel price sup­pres­sion tricks. In fact, we sent Spe­cial Alerts to all of our clients at the end of 2011 inform­ing them that the bank­ing car­tel often paints charts in gold and sil­ver to fool peo­ple and that one can­not make accu­rate pre­dic­tive behav­ior based upon the assess­ment of tech­ni­cal charts alone.

At Smart­Knowl­edgeU, it has always been our mantra that tech­ni­cal ana­lysts often make huge mis­takes in their pre­dic­tive calls due to their sole reliance on tech­ni­cal chart­ing and there­fore often have to flip-flop like a politi­cian on their calls regard­ing gold and sil­ver, one moment call­ing for a huge crash and to sell every­thing gold and sil­ver, the next moment call­ing for a huge run-up and to buy back every­thing gold and sil­ver. While nim­ble­ness is a good trait to have given the volatil­ity of gold and sil­ver assets and stay­ing on the side­lines is some­times nec­es­sary, try­ing to get out of the mar­ket on every sin­gle weekly down­turn in gold and sil­ver will surely drive an investor insane. Thus, some­times it is nec­es­sary to ride out dif­fi­cult peri­ods of volatil­ity and main­tain your eye on the long-term trend instead of short-term bank­ing car­tel tricks. We pre­fer to remain more long-term trends with our calls and to keep our eyes grounded on a more fun­da­men­tal out­look that incor­po­rates tech­ni­cal analy­sis with more than a decade of knowl­edge regard­ing global bank­ing car­tel price sup­pres­sion schemes. We have stated since day one of launch­ing our com­pany in 2006 that gold/silver tech­ni­cal analy­sis per­formed with­out incor­po­rat­ing the con­tex­tual nuances of global bank­ing car­tel price sup­pres­sion schemes will not be accu­rate, espe­cially since the cartel’s gold and sil­ver price sup­pres­sion schemes exert the most influ­ence right now over set­ting the futures and spot prices.

Last year, we informed our clients at the very start of the year in Jan­u­ary of 2011 that 2011 would yield mas­sive volatil­ity in gold and sil­ver assets, pro­claim­ing the com­ing year as “The Year of Volatil­ity”. Before the year started, we knew that 2011 would pro­duce a fierce bat­tle between the global bank­ing car­tel and the dynam­ics of the phys­i­cal mar­kets for gold and sil­ver as the global mon­e­tary cri­sis deep­ened. And indeed it did. Though we can mark 2011 as a win for the global bank­ing car­tel as they col­lapsed open inter­est in gold and sil­ver futures repeat­edly through­out the year by rais­ing ini­tial and main­te­nance mar­gins for gold and sil­ver futures (once rais­ing mar­gins on sil­ver futures a ridicu­lous five times in just 9 days when sil­ver broached $50 an ounce) and by also using the MF Global bank­ruptcy to force invol­un­tary client liq­ui­da­tion of gold/silver futures at the end of the year, I am con­fi­dent that all the bank­ing shenani­gans of 2011 has set the stage for a spec­tac­u­lar year ahead for PMs in 2012. If you are inter­ested in my thoughts about how the bank­ing car­tel used the despi­ca­ble MF Global fiasco to col­lapse gold and sil­ver prices, you can read about it here: Did Bankers Delib­er­ately Crash MF Global to Crash Gold and Sil­ver Prices?

In 2011, due to the extreme volatil­ity in gold/silver min­ing stocks, there were peri­ods we opted to cash out and sit on the side­lines pre­ced­ing bank­ing car­tel smash downs of gold and sil­ver prices, and other peri­ods we opted to stay in the mar­ket and ride out the extreme volatil­ity due to our belief that the down­side volatil­ity would be short-lived. Thus, admit­tedly we had to sac­ri­fice short-term per­for­mance for our mis­sion of a longer-term reward with the gold and sil­ver min­ing stocks in 2011. As you can see in the chart below, the HUI Gold Bugs Index re-tested lows in the 490–500 range on five sep­a­rate occa­sions last year and greatly under­per­formed the met­als them­selves. No won­der bull­ish sen­ti­ment regard­ing gold and sil­ver stocks just recently hit a three-year low!

How­ever, despite the severe under­per­for­mance of the min­ing stocks last year, from the launch of our Cri­sis Invest­ment Oppor­tu­ni­ties port­fo­lio in June 2007 to Decem­ber 31, 2011, even in light of our slight set­back of 2011, our cumu­la­tive per­for­mance of +135.18% dur­ing the past four-and-a-half year period has still respec­tively out­per­formed the S&P 500, UK FTSE 100, and Aus­tralian ASX200 indexes by whop­ping +153.12%, +152.37% and +169.20% mar­gins. Fur­ther­more, our Cri­sis Invest­ment Oppor­tu­ni­ties port­fo­lio has even out­per­formed our clos­est com­pa­ra­ble index, the Philadel­phia Gold/Silver Sec­tor (XAU) index by a whop­ping +104.75%. Thus we see 2011, as noth­ing more than a tem­po­rary set­back in gold/silver min­ing stocks, and we’ll explain why below.

More than 3 years ago, on Octo­ber 16, 2008, I wrote an arti­cle titled, JS Kim Uncov­ers Four Par­al­lel Mar­kets for Gold: Asia Futures, NY Futures, Phys­i­cal Bul­lion, Phys­i­cal Coins. In this arti­cle, I dis­cussed the com­plic­ity of reg­u­la­tory agen­cies such as the CFTC in the global bank­ing car­tel price sup­pres­sion scheme exe­cuted against gold and sil­ver that was, at the time, cre­at­ing very sig­nif­i­cant pre­mi­ums in the futures and spot prices in Asia over the West­ern mar­kets, and in phys­i­cal gold/silver prices over paper gold/ sil­ver prices. Since the time I wrote that arti­cle, I have fol­lowed up with many more arti­cles that express my belief that the pre­mi­ums of phys­i­cal gold/silver will increase, and even­tu­ally in expo­nen­tial fash­ion, over the prices of bogus global bank­ing cartel-produced paper gold/silver deriv­a­tive prod­ucts. Even­tu­ally, I believe that the world will ignore these bogus paper gold/silver mar­kets entirely when set­ting prices for phys­i­cal gold/silver. Because the global bank­ing car­tel expended so many of their bul­lets in 2011 in keep­ing the price of gold and sil­ver much lower than their respec­tive free mar­ket prices, it is of my opin­ion that it will be much more dif­fi­cult for them to con­tain the price of gold and sil­ver mov­ing for­ward in 2012.

Today, there are still many rea­sons to expect a stel­lar next cou­ple of years from gold and sil­ver per­for­mance, includ­ing the min­ing stocks. From a tech­ni­cal stand­point, gold and sil­ver appear to be on the verge of mak­ing a very sig­nif­i­cant run higher. I’m not say­ing that this will hap­pen tomor­row, but it does look very prob­a­ble within a short-time period. From a manip­u­la­tion fac­tor stand­point, gold and sil­ver also look poised for a run higher too. So the two fac­tors I use to assess gold and silver’s direc­tion both appear aligned with one another to move gold and sil­ver higher very soon.

As far as the time­frame? Cur­rently, due to exces­sive banker med­dling in gold and sil­ver futures mar­kets, and the unknown fac­tor of when greater diver­gence will occur between phys­i­cal and paper PM prices as pub­lic aware­ness of the paper scam grows, the exact “when” part of the equa­tion is the most dif­fi­cult to assess, though I still believe that we will see some strong moves higher in gold and sil­ver dur­ing the first quar­ter of 2012. Fur­ther­more, I strongly believe that gold and sil­ver will still both rise mul­ti­ples higher than their cur­rent banker-suppressed price and that 2012 will see peri­ods of explo­sive growth for gold and sil­ver, more so for sil­ver than gold, and that PM min­ing stocks, although accom­pa­nied by great volatil­ity once again, will per­form much bet­ter than they did in 2011. I believe that the largest dif­fer­ence between 2012 and 2011 will be, despite some con­tin­ued large bouts of volatil­ity in the PMs, a much stronger annual trend higher for gold and silver.

The start of 2011 was a phe­nom­e­nal start for junior min­ing PM stocks but the lat­ter half of the year was very neg­a­tive. Still, one could have done very well in 2011 with junior min­ing stocks by tak­ing prof­its off the table when they existed and let­ting one’s remain­ing cap­i­tal ride risk-free in the junior min­ing sec­tor. In addi­tion to using dis­ci­pline to pro­tect prof­its when they exist in the junior min­ing sec­tor, the great­est friend of a gold/silver investor is patience. Some­times one knows that great moves higher are com­ing, but one’s tim­ing may be off by a mere six to nine months. Patience will allow one to still reap the bulk of the rewards from these great moves higher as long as one isn’t shaken out of the mar­kets by the bank­ing car­tel induced price volatil­ity in gold/silver assets. To this end, I leave you with 10-year charts of gold and sil­ver. Some­times, it really is nec­es­sary to step back and take a deep breath to see the for­est from the trees.

About the author: JS Kim is the Chief Invest­ment Strate­gist and Founder of Smart­Knowl­edgeU, a fiercely inde­pen­dent invest­ment research & con­sult­ing firm with a focus on pre­cious met­als. For much more detailed com­men­tary about gold and sil­ver, con­sider the Smart­Knowl­edgeU Cri­sis Invest­ment Oppor­tu­ni­ties newslet­ter. To sign up for our free invest­ment newslet­ter, please visit Smart­Knowl­edgeU and sign up here.

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