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There was a major year-end smash in the precious metals markets. This occurred despite the fact that in my view the fundamentals are stronger than they have ever been – namely ongoing money creation and currency debasement, desperately low interest rates, a dangerously overleveraged global banking and monetary system, and even a steadily rising official headline inflation number. 
 
 
There are three explanations for the gold and silver takedown this month. First, the dollar has been advancing versus the euro because of the European sovereign debt and banking crisis. As the dollar still currently retains its status as the world’s reserve currency, its strength against the euro perhaps has fooled some market participants into interpreting that strength as absolute as compared to the reality that it is only relative. When the very same crisis reaches American shores as I believe it will, then it will become clear that both currencies are headed over a cliff regardless of which one may be closer at any given time.
 
 
Second, all secular bull markets are filled with corrections. This pullback could be no different than the many that came before it, all of which were accompanied by hysterical commentary from the financial media and all of which recovered to new highs.
 
 
Finally there are accusations of manipulation in the precious metals markets that I find to be not only plausible but also quite believable. Governments have an incentive to restrain the price of gold and silver as their rise serves as an indictment of monetary policy and a lack of faith in the currency. Banks also have the same incentive, both because they are connected to government via bailouts and hugely beneficial monetary policy and also because some of them have large short positions via derivatives. If there is in fact manipulation, it will not last as the physical metals markets ultimately overwhelm it.
 
 
The stock market remains exposed to a potential European-led global recession. There are, however, always some opportunities. For examples, for those who share my positive views on the gold and silver prices, mining shares could present a compelling opportunity. Also, some stocks may be cheap enough to be attractive regardless of the macroeconomic climate.
 
 
Michael can be contacted at mberlin@mhbpartners.com and at (631) 629-4928 .
 
 
The information included in this article is not intended to be used as a basis for making investment decisions nor should it be constructed as a recommendation to buy or sell any specific security. Consult your investment professional for additional information and guidance.