Clearly today knocked all my short-term optimism for silver & gold in the head, but today's events go way deeper, and in fact strengthen my long term outlook for metals. What happened? Proximate cause for falls of 5.5% in silver, 3.1% in gold, 2.2% in the S&P500, 2% in the Dow, and a 1% rise in the US dollar index was -- an announcement. Moody's rating service downgraded the credit of 15 banks, mostly metastatic ones like Credit Suisse, Morgan Stanley, Goldman Sachs, JP Morgan Chase, & Citigroup. Apparently -- get this, & stop snickering -- nobody out there knew that these big banks were having trouble, so the announcement came as a surprise. Have mercy. Ask yourself: if an announcement of what everybody already knew can roil markets like that, how fragile are they? The latest explanation du jour of market events is the "risk-on, risk-off" trade. Schizophrenic investors one day run to risky investments (stocks, gold) & then, affrighted by the crisis du jour, run back to [what they perceive as] less risky ones, like the US dollar and US treasury debt (I never said this would make sense, only that it's the explanation du jour). Now attempt to unravel with me this knotty skein. Mega banks' credit rating downgraded, megabanks in trouble. Who bailed them out last time? Federal Reserve & US gummit. Who will bail them out this time? Federal Reserve & US gummit, because the banks own the Fed and the gummit. How will the Fed & the USG bail them out? By printing/loaning/ floating more dollars. What will this do to the dollar? Gut its value. Whether this happens sooner or later, 'twill happen. Oh, and add thereto the virtual certainty that as the stock market plunges over the black cliffs of depression, taking the economy with it, the Fed & the US gummit will create even more dollars. Y'all got the picture now? So, let me ask a question: would you -- personally -- rather own green pictures of famous Americans or certificates signed by the US gummit that promise to pay pictures of famous Americans, or would you rather own something real? Beans, goats, a Chevrolet, gold, silver, anything. Or, you could just follow the crowd into its black panic, until the crowd reverses & runs the other way. Moody's announcement came out in the afternoon, but somebody must have known because the dollar started climbing at 8:00 a.m. and never looked back. Time the doors were shut the US dollar index had gained 80.7 basis points (1.04%) to 82.316. Dollar bounced off that 81.16 low clean up to is 20 day moving average (82.31). Looks like a turnaround to the upside to me. 'Twas not a happy day for the yen & euro. Yen gapped down on its way to the ocean floor, jumping over its 50 dma (125.24) to lose 0.94% and end at 124.60c/Y100 (Y80.26/US$1). Euro slammed down through that 126.24 support resistance like it had two anvils tied to its feet, fell clean to the 20 DMA (1.2532), down 1.28%, and closed $1.2543. Most likely this begins another plunge, this one toward $1.2000 or lower. Dow today lost 250.82 or 1.96% and closed at 12,573.57. S&P outdid the Dow by dropping 2.23% (30.18 points) to 1,325.51. S&P500 will only confirm that it has turned down when it closes below 1,305, but today it fell through the neckline of that supposed upside down head and shoulders, which also is support/resistance from the January high. Should the Dow close tomorrow below today's close, it will have duplicated what the S&P500 did today. Possibility exists that stocks will recover & proceed higher, but that's the least likely outcome. GOLD lost $50.30 today to close Comex at $1,564.50. Gold also began sinking at the open & kept it up all day. However, judging from our overloaded phone lines today, gold will find plenty of buyers down here., Gold shattered its uptrend line from the May low. Last low was at 1,556.40 (intraday), so that is a possible stopping point., However, that strong support around $1,526 offers a backstop, too. Break that, and gold is facing $1,475 or $1,450. Brace yourself: MACD points downward. points downward, too. Meanwhile, remember that great Texas oil man, H.L. Hunt, who said, "Never get really elated in victory; when times are tough, never get down." Gold will recover. Be patient, keep your eyes on the horizon, not the rocky path under your feet. SILVER lost a meaty 155 cents today to end at 2683.3, a 5.5% loss. Owch. Silver's chart looks pretty much like gold's steadily declining from the open until 1:30, then flattening out. Silver must now either hold 2625c or fall further, as low as 2250c. I'm inclined simply to shut my mouth and watch until it stops. People call me and, trying to make a decision, ask what I think the market is doing. My best answer is that I've watched lots of investors, and the successful ones don't hesitate. They decide what price they are willing to pay and buy & take the consequences. Several years ago I found some notes from when gold has risen to $340. I was trying to figure out whether it would correct to $320 or $300. Mmmm. Would you buy gold at $340 today? From that perspective, that forty bucks doesn't amount to a hill of beans. Equivalent decline here from $1,600 would take gold to $1,386.70 (no, that is NOT my target, merely a comparison). We're buying silver & gold for the long run, for the BIG rise, and these little fluctuations, painful as they are, pass quickly. GOLD/SILVER ratio today rose above 58, so if you have been waiting to swap gold for silver, you'd better get cracking. On 21 June 1905 was born Jean-Paul Sartre, French writer and existentialist. Honor his birthday, but only if you choose to. On 21 June 1879 F.W. Woolworth opened his first store and failed almost immediately. He kept at it, & at his death was worth $86.35 million (2012 dollars) and his chain had 1,000 stores. On 21 June 1788 the US constitution took effect when New Hampshire became the ninth state to ratify.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger
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