The Federal Reserve Speaks, Gold and Silver React and…

What it all means to you and I

Allow me to begin by stating I am NOT a financial advisor, guru, or expert in ANY way. I’m just a guy who does a lot of reading, thinking, and assessing. So, with that…

I’m writing this at 4:02PM EDT (I’m in Wyoming, but I CAN do time zone adjustments!) on Sept 18, 2013. This is barely 2 hours after the Federal Reserve’s latest decision – one to continue “Quantitative Easing” which amounts to printing about $85 Billion each month “from nowhere”. They opted to do this as in their words “the economy has not performed as well as expected” (paraphrased) and they have downgraded the economic outlook for the United States for the coming months.

The Federal Reserve Releases BAD News…

And what happens? Wall street ROCKETS upward! The DOW Rose about 200 points in the last 2 hours of trading – most of that within SECONDS of the news issued at 2pm EDT today (9/18/2013).

On the surface, this seems downright silly – the Dow RISES when the Federal Reserve indicates the economy is WEAKER than they thought… but since the money they are “printing” is going into banks that will buy stocks… well you see the picture, right?

The TRUE indicator of this insanity (I believe) is the reaction of gold and silver – which are TRYING to tell us something! Gold has risen almost 70. on the news (since its low earlier today) and silver almost $2. (on a PERCENTAGE basis) – that is nearly a 10% gain in the price of silver in a matter of HOURS?! Think about it!

My video attempts to make sense of it all…

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AND…remember this – only about 1/2% of the general population owns silver and gold now – historically about 5% have owned precious metals. WHAT do YOU think will happen when the MILLIONS in that “missing” 4.5% “wake up”?

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US Debt Limit vs. The Price of Gold

U.S. Debt Limit vs Price of Gold

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After reading an analysis by Bill Holter on Harvey Organ’s blog, I decided to include this very telling chart. Note the STRONG correlation between the price of gold and U.S. Debt Limit. As Congress has raised the debt limit, the price of gold has continued to rise. The inside vertical axis is the US Debt Limit, from about 6 trillion in 2002 to nearly 17 trillion now; the outer vertical axis is the price of gold from about $250 in 2002 to about $1800 now. 

There is a most interesting break in the pattern that began in mid-2012 – note where the debt ceiling continues to rise, and gold’s price fell. Now, again I am NO expert, financial advisor, or anything of the like, that said, here’s my take… First, some argue that the drop in gold prices was the result in MANIPULATION; and from my experience, manipulation while effective in the short term, is not going to last IF demand remains high (for gold) – do your research, most gold producers are having difficulty keeping up with the ongoing DEMAND for gold! 

Why the relationship?

As the U.S. Debt Limit is raised, we are going deeper in debt and we “print” more money. So… our dollar is being devalued (you and I see this in the form of inflation). To gain an unbiased view of inflation, search for the “Big Mac Index.” As the dollar deflates, gold will necessarily rise in response to a weaker dollar. So, to me at least, the relationship exhibited by the graph makes perfect sense.

The trend resumes…

So, if one expects the trend to resume, there are two options: 1) the debt ceiling can be reduced by about 30% (Ha! Like THAT will ever happen!!) OR 2) Gold will rise (at some point) quickly to around $1900. (and perhaps since “corrections” often over-correct) – will it rise to a significant percentage OVER $1900. before settling back??

One more thing – whatever Gold does, Silver is likely to do as well – and then some! Silver is STILL well below its historic 16:1 price ratio to Gold… so, expect silver at some point – and for some period of time to OUT-perform Gold! This is why some analysts are seeing silver as an INCREDIBLE opportunity. 

 Want more analysis of what I think is coming? Click HERE

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6 Replies

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  1. Billy Bob says:

    You are one of the smartest men on the planet. Your insights have helped shape many business decisions I’ve made (more than you’ll ever know). This topic and the decision to throw more un-needed paper into the U.S. is by far one of the most ludicrous decisions ever made. I’ll stay tuned to your insights. I’m very active in gold and silver. EVERYONE should be.
    Stay “SILLS”,

  2. Alan Sills says:

    Thanks Billy. I’m here for you if you want a referral to where you can get the best price and service on precious metals; I’m also here for you when you’re ready for either BB or Rippln – both are “on track” and growing. Al

  3. adil says:

    How we can get best advice from your regarding buying precious metals?

  4. Alan Sills says:

    Do you have skype? Add me – my id is alan.sills

  5. Get Paid For Your Opinion says:

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    Regards – Daniella

  6. Alan Sills says:

    thanks… and nice try!

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