Weird day. Fates are messing with the markets.
Fear of European financial crisis keeps panicking buyers out of euros & stocks & into dollars & gold -- but not silver.
Dollar index last night punched thru 76 and ran to 76.70 before the Nice Government Men called out their cowboys to tame that bucking bronco. They managed to run it down today to 75.703, but it was like holding a basketball underwater. Not much changed from yesterday it's now trading at 76.022, but that's as phony as the Consumer Price Index. 'Twill rise again tomorrow.
The euro added more downside to yesterday's gap, down 0.44% to 1.3970. The 200 DMA draweth nigh, & standeth now at 1.3902. The yen slipped out of the Japanese NGM's grip like a bar of soap in a bathtub, gapping up to Y79.18/$ (126.3c/Y100). NGM won't be enjoying sake & sushimi in peace tonight, I dare say.
Markets are whipping stocks like a rented mule. Dow lost 58.88 today to settle at 12,446.88 (down 0.47%) and S&P retreated 5.85 (0.44%) to 1,313.64. Trading was jerky & ragged. Looking bewildered, timid, & scared.
Stocks -- you can count on 'em in a crisis, just like a sprained ankle.
I reckon I got something right yesterday, snuffing out the nervousness when I wrote, if gold "trading even HINTS it intends to pierce that [$1,560 resistance] level, gold will race toward $1,575."
Somebody heard that hint today. Overnight gold traded down to 1540, and opened in NY at 1549.60. Stayed under $1,555 until 1:30, when the whispers hit the market. Not sure if that was the time that S&P announced it was downgrading Ireland's debt to junk status or not, but that would surely fit. Literally, next thing I saw was gold at $1,564, then $1,573.25.
Let's deal with that new all-time high close first. On 2 May gold topped at $1,556.70. Today's $13.10 rise took Comex gold to $1,561.90, a new high close. Two interpretations wrestle here: is it a double top, or a breakout beginning a new rally?
Remember the rule of thumb says a market must break out by at least 2% (some say 3%) to qualify as a breakout. That would take gold to $1,587.85 ($1,603.40 for 3%).
Here's the risk. Markets correct downward in three waves, A-down, B-up, C-down. I claim not to be able to discern these, but my untrained eye sees A-down to $1,462, then works at trying to find the rest of B & C. Then I recall that B waves are often so ebullient, especially in bull markets, that they exceed the high beforehand & appear to be breaking out to a new rally, until their bottom falls out in a C-Down that takes them to new lows.
And bear in mind that sudden, jerky moves can reveal strength beneath, but they also are handmaiden to tops.
NOTE WELL that I am NOT calling this move by that name, only explaining that gold's position is nowhere near as clear as the mindless enthusiasts would have you believe.
On the other hand (Mercy! I'm sounding like an economist!) gold has made a slightly higher new high, & a financial crisis is fueling it, & you'd have to be a central banker not to conclude that gold will drive higher for the next few days. Question is, how much higher?
Right here there's not enough tea in China or ham in Tennessee to tempt me to short gold. To turn bearish gold would first need to close below $1,540 then follow up quickly with a close below $1,520. Tomorrow, gold could easily touch $1,600, and run on to $1,625.
All things considered, I would buy here (did buy some today) & not mourn too long if gold fell back down. Why not, because I can't add & subtract? No, only because gold, despite whatever intervening tumbles, will end the year much higher, & scale price heights presently inconceivable even to its cheerleaders.
Did I mention that gold in euros made a new all-time high today, too? E1119, versus old high at E1088, 2.8% higher.
Here's an added twist to yesterday's silver story. Silver, as I noted, tends to outperform gold when stocks are strong, and underperform when stocks are weak. Historical fact, not treason. Yet more lurks beneath the surface. When gold rises, most observers expect silver to rise as well, so if you are jimmying the gold price, as Nice Government Men are wont to do, you need to jimmy silver, too, so that the market says, "Gee whiz! Gold is rising but silver is not -- maybe that means the gold rise is phony!" Just a thought.
And what brought that though bubbling to the surface of my boiling brain was silver's behavior.
Yesterday it lost 85c, to 3568.9c. Overnight it sank like a rock to 3475c, but just as swiftly arose from its bed of shame in the gutter, shook itself off, & shot up the stairs to close Comex at 3562.9c, THEN add another 53c in the aftermarket to 3616c.
Meanwhile all the gurus & media voices are intoning their mantra (stocks & silver, remember) that silver is falling in response to reduced global economic expectations. Yeah, maybe. And maybe not.
Add all that up, and I wouldn't short silver with your money. Silver's tussling with its 50 DMA at 3617c, & tomorrow is liable to paint a black eye on all those clever people and run for 3850c.
I'm just doing the best I can to stay long silver, but as quick as I buy it somebody calls & buys it away.
Another tasty tidbit: that wholesale buy discount on US 90% silver coin which stood on 98c under spot on 6 July, today has climbed to 68c under spot. This transpires after a long period when the discount has ranged 115c - 105c. I trust that premium to tell me when silver is serious about rising, and its screaming that right now.
European financial crisis is driving this gold rally, so don't get too excited. Once fuel is withdrawn from a fire, it dies out. Buy sparingly here, with one eye on the end of the crisis, & one on its worsening.
Gold silver ratio today rose a 0.50 to 43.838. One remember with sharp longing the Fall 2008 US financial crisis & the opportunity it afforded to swap gold for silver at ridiculously high ratios, and to gobble up silver on the cheap. We might see that again, & join in shooting fish in a rain barrel.
On 12 July 1690 Protestant forces led by William of Orange defeated the Roman Catholic army of James II in Ireland at the Battle of the Boyne.
MILESTONES OF AMERICAN CULTURE: On 12 July 1960 the first Etch-A-Sketch went on sale.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger