IT'S GOING TO BE VOLATILE NEXT WEEK FOR PRECIOUS METALS

All eyes will be on the GDP reading next week on Friday. The Atlanta Fed is projecting a GDP growth of 2.4%. Any reading above 2.4% will likely result in a sell off of precious metals and will impact upon gold and silver mining stocks.

Meanwhile commercial shorts are at a record high for silver and near record high for gold. If anything it goes to show the desperation to push the price of gold and silver down, for fear of both the metals rising higher. This is unsurprising given the host of weakness and uncertainty in the global markets.

Nevertheless, gold and silver will likely propel higher in the ensuing months due to the following factors:

1) More than US$13 trillion of bonds are already in the negative zone in terms of yield. Should the amount of bonds with negative yield continue to expand past US$13 trillion, we could see a move towards precious metals as investors lose confidence in sovereign bonds. As it is, it is preposterous that one pays to lend the opposite party money. 

2) Imminent banking crisis in the EU involving Deutsche bank and the Italian banks.Also look out for weak earnings among the EU banks which could widen the crisis further, involving banks from other countries, most notably, France. When the crisis becomes full blown, it is inevitable that precious metals will shine. 

3) A full blown asset bubble in the US stock market as central bank interventions continue to push the US stock market higher despite the sixth quarter where GAAP earnings have fallen. The non-GAAP earnings however were above expectations due to the ingenuity of financial engineering, share buybacks and write backs. The higher it goes, the harder it will fall. Panic buyers who fear missing out on the "false" rally will have the fingers burnt.

4) As we go into the fall, the US Presidential Election will heat up. There will be more uncertainties, and this will give support to the demand for precious metals.

5) Major data for transportation and freight within the US is already showing a slowdown. The regional economic indicators are also not robust, and inventories continue to build up and durable good orders fell. The US is already in a recession already but the no one in power is willing to acknowledge this fact. Look at the massive number of people dependent on food stamps (47 million) and almost 100 million people of employable age remain unemployed.

6) Demand for gold in the summer months has traditionally weak, but going into the fall, with the coming festivals in India, demand for gold could rise. The fall is also the period when marriages are most popular in India.

I continue to be long in precious metals, miners and related ETFs.