Price Follows Volume: Investors Flocking to Real Money (G&S) Cash!

March 12, 2013 By 15 Comments

silverSubmitted by Bill Holter

“Price” follows volume…or at least it should in any real world where the markets are left unfettered to discover true and real values. 

“Crony capital” is flowing into crony bonds but hard earned capital is flowing into, not out of the precious metals that are otherwise known as “money”.  Investors are flocking to “cash” in other words, not trash cash but real money cash!
THIS is what volume flows should be telling you and as Jim Sinclair says “Gold is coming INTO the system…NOT away from it”

 

Zerohedge put out a short piece with a chart which I knew had been occurring but in the midst of all the other disinformation that needs to be filtered out I had forgotten about.  Volume on the NYSE is now at 10 year lows and as you can see, volume increased up and into the bust of 2008.  It has since then been on a steady downhill slope.  The “new highs” last week which were partied to each day on CNBC was lacking in volume which signals the quintessential “non confirmation”.

Think about this for a moment, if volume is low and shrinking is there any “conviction” in the move?  Why is there less volume?  Is it “healthy” or does this mean that the average Joe is not participating because they just don’t believe their own lying eyes? 
Does lower and lower volume make it easier or harder to “manipulate” a market if you were so inclined?  If you were running a propaganda campaign to show that your “policies” are working would you want a higher or lower stock market to show that “all is well”?
Before I go any further I would like to point out what the “stock market” is all about…or what it WAS about and why we even have one.  The “stock market” was originally created to raise capital for new companies to fund themselves to build out operations.  It was all about “IPO’s” (initial public offerings) and then, only then did shares change hands and “trade” at various prices determined by bids and offers.  As the economy and technology grew so would the amount (number) of issues AND the volume traded.  As the economy got larger, volume would increase simply because there was more “money” trying to find the best “investable” place.
THIS is capitalism at it’s purest and I might say “at its finest”.  Now the stock market is merely a casino where everything is rigged, the fire alarms are disabled and the game of musical chairs being played will end with the exit doors chained shut.  In any case, the equity markets don’t even resemble what they once were.
So back to “volume”, where is it today?  Of course there is huge, unimaginable and unfathomable volume in the debt markets because sovereign governments need to borrow so much.  This I would term as “forced” volume with central banks flushing the banking system with money that “wink wink” needs to go into treasury bonds.  But wait, there is another place where “volume” has increased and is increasing at an increasing rate.  Yes you guessed correctly, the metals!
Let’s look at Gold and Silver for a moment.  Physical purchases are now positive and increasing by central banks where 10 years ago they were sellers.  Physical purchases are also increasing by the public, just look at government figures and refinery reporting.  Of course in “Dollar” or fiat terms the “amount” is increasing because the metals are now priced 5-6 times higher than they were just 10 years ago.  More importantly, the amount of OUNCES being taken off the market is increasing.  I am not talking about or even including ETF’s here as I view them as merely a “relief valve” to divert demand away from the real thing and into paper traps.
My point to this whole piece is that if you follow the volume you can discern “where” capital is flowing.  Yes, “crony capital” is flowing into crony bonds but hard earned capital is flowing into, not out of the precious metals that are otherwise known as “money”.  Investors are flocking to “cash” in other words, not trash cash but real money cash.  THIS is what volume flows should be telling you and as Jim Sinclair says “Gold is coming INTO the system…NOT away from it”.  Follow the volume to know where price will eventually go…that is what all the greats have done since the beginnings of capitalism…which is what made them the “greats”!  Regards,  Bill H.


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Comments

  1. Avatar of Marchas45 Marchas45 says:
    March 12, 2013 at 2:17 PM

    I kind of like Bill Holter he writes a good article and opinion.
    He doesn’t have to tell me what MONEY IS, I’ve know it for a few years already, thanks to my forum buddies. Keep Stacking.
     

    • Avatar of Ed_B Ed_B says:
      March 12, 2013 at 3:29 PM

      Yes, I do too.  In fact, the whole gang at Miles Franklin are all pretty good reads.
       
      No, he does not have to tell US what money is, for sure, but I am sure that he is hoping to reach a lot of noobs as far as bullion collecting goes.  Hopefully, he will, as every person who joins the stacking group will be one less person who is SOL and looking to take OUR stuff when the SHTF.

  2. Avatar of Canadian Dirtlump Canadian Dirtlump says:
    March 12, 2013 at 2:37 PM

    Good read. In other news, I never thought it would take silver hovering around 29.25 to put a smile on my face in terms of an advance in price, but 1 step at a time lmao.

  3. Avatar of Thomas Thomas says:
    March 12, 2013 at 2:55 PM

    Reading Seeking Alpha, cash is coming out of PM ETF’s and bonds into mutual funds. My state’s retirement system has their money in “alternative investments” AKA hedge fund management, very hard to track volume there. Cash? With the printing presses set on turbo, it is hard to avoid the equities rising opportunities with hard earned cash, with low volume. Hedge funds may have hidden high volumes. Yes, CB’s are buying gold, but coins are in the hands of dealers, so far. I am still with JS and the switch to long gold and silver, but most cash will be in equities, trapped with chained exit doors. My two cents.

    • Avatar of Ed_B Ed_B says:
      March 12, 2013 at 4:58 PM

      “Yes, CB’s are buying gold, but coins are in the hands of dealers, so far. I am still with JS and the switch to long gold and silver, but most cash will be in equities, trapped with chained exit doors. My two cents.”
       
      Agreed.  But those dealers would not be stocking up on coins if they did not think that they could sell them.  The fact that the prices of those coins are lower now than they have been is a sign that better profits might be realized when metals prices rise and they have a good inventory purchased at lower prices.
       
      Compared to the gold and silver markets, the stocks and bonds markets are HUGE… MANY times the sizes of the metals markets, so this is where the bulk of the money will be.  Also, remember that brokers and financial advisers make their money based on the paper investments that they make, either by commissions or by the fees that they charge their clients.  A really good adviser will often be well worth the fees that they charge.  The problem, of course, is that many of them are not all that good, so are expensive for what the client actually receives.  Brokers and other advisers know that when money moves from their control to physical metals under the client’s control, it rarely, if ever, returns.  Because of this, most of these people do not recommend physical gold and silver, even though they were THE best investments one could make from 1999-2011.  About the closest that the advisers would come would be metals ETFs and mining shares. While both of these could be of use in a general portfolio, they are still commission-generating paper products.
       

  4. Avatar of Mr. Fix Mr. Fix says:
    March 12, 2013 at 3:29 PM

    If physical sales are increasing, then confidence in the currency is diminishing.
      This can only go so far before it reaches a tipping point.
     That’s when it gets interesting.

  5. Avatar of Ed_B Ed_B says:
    March 12, 2013 at 3:32 PM

    One thing that we do not know is, “Who is buying?”.  Are new bullion collectors buying gold and silver or are the same stackers continuing to buy?  My guess would be mostly the latter, although I am hopeful that there will be new stackers joining the party.  It would be good if they did before the mad rush that comes as the house of cards obviously begins to tumble.

    • Avatar of silverseeker123 silverseeker123 says:
      March 12, 2013 at 4:11 PM

      @Ed_B: first hand reference; in just the last few months a few associates and friends have made their first purchases. I thnk there is no doubt that stackers will not slow down purchases so long as silver remains so far below the 1980 nominal high… And many folks are digesting five straight years of Federal Reserve/ political insanity, suspension of rule of law, etc.
      The floodgates are ready to burst, imo. It is far more powerful when a million new stackers begin in earnest to rotate some savings out of the Wall St casino, bonds, etc vs the long time paper ponzi domination, not yet stressed due to lack of fresh chips. The chips are now leaving the casino!

    • Avatar of Ed_B Ed_B says:
      March 12, 2013 at 5:05 PM

      Well, then, that is some good news!  Glad to hear your firsthand account.  All of the stackers I know are buying into this slump in prices and are committed to buying even more if the prices drop further.  My problem is that I do not know a lot of stackers personally.  It is only through a great web site like SD that I am able to contact so many of you fine people.  :-)
       
      We can both be assured that if a lot of money starts to rotate out of paper and into PMs, the last place we will hear about it from will be the stock and bond cheerleaders on the financial news programs.
       
      As an experienced investor, I will likely always have a mix of various types of investments.  Diversification is one of the few things that small investors can use to our advantage.  But it is of considerable comfort to me to have a good stack of physical PMs as the bedrock upon which my financial house is built. 

    • Avatar of silverseeker123 silverseeker123 says:
      March 12, 2013 at 8:52 PM

      I’d wager ‘diversification’ is highly over rated. Nearly all paper assets are ultimately denominated in fiat currency. Recognizing precious physical metal in hand as supra-national money and converting as much as practical out of this world-wide paper orgy is the only sane allocation I can justify. When the world goes into full panic mode, I may  convert of few ounces into real assets likely for sale at distressed pricing. Lots of folks are going to receive a lesson in nominal vs real returns when the $T props fail.

    • Avatar of Ed_B Ed_B says:
      March 13, 2013 at 2:01 AM

      Actually, diversification is a powerful tool that has worked extremely well for me.  Because of it, I was able to retire while still young enough to enjoy it.  Another powerful tool is dollar cost averaging, which also helped a great deal.  These should be appreciated for what they are because there are VERY few things that small investors can actually use to our advantage.  Virtually everything else favors the BIG investors.
       
      Put another way, if I have 10-15% of my wealth in PMs and we get an economic crash of the worst sort, these metals likely will rise sufficiently that any paper losses will be negated by their rise.  Since I view PMs as financial “Oh, crap!” insurance, this works for me.  Consider that NO ONE KNOWS when the great reset / collapse / SHTF will occur.  It could be next week, next month, next year, or 10 years from now.  I am thinking sooner than 5 years, actually, but that is just my particular guess.  Anyone else’s guess is likely to be different but just as valid.  On the other hand, if by some miracle we do not get a crash, then the paper investments I have will continue to do well (gained over 12% in 2012) and generate additional profits that can be used to buy more physical gold and silver.  We all have an approach to this that works for us and this is mine.  So far, so good.  Yours apparently is different and that’s fine as long as it works for you.   :-)
       

  6. Avatar of Mr. Fix Mr. Fix says:
    March 12, 2013 at 3:36 PM

    Hey Doc,
     ”Somebody” should give Turd a call,  and find out why his site has been down all day. 
    On a brighter note, it has given me the time to explore this site, and as a result, I have placed it on my list of bookmarks, so that now I don’t have to wait for somebody else to link a story here,
     it’s much more likely I will wind up here all by myself now.
     I like having more than one story a day, and you have really good ones at that.

    • Avatar of The Doc The Doc says:
      March 12, 2013 at 3:41 PM

      @Mr.-Fix : have been in contact with TF:

      Hi, Doc. I’m still down.

      My server co, ******, updated some things last night and really f****d things up. Very frustrating!

      TF

      Hopefully TFM will be up soon, but glad to have you join us at SD!

      -Doc

       

    • Avatar of Ed_B Ed_B says:
      March 12, 2013 at 5:06 PM

      Turd got flushed?  Oh, my.  Well, s*** happens.  ;-)

  7. Avatar of Sumkid Sumkid says:
    March 18, 2013 at 6:51 PM

    First of all, why would anyone keep fiat currencies as their savings of purchasing power? I mean it’s just a piece of paper that can be created out of thin air very fast by a human being which means that this human being can eventually become corrupt and he will issue trillions of fiat bills which will lead to hyperinflation.

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