Very strange action in today's markets. FOMC minutes of last month's meeting were published today and roiled markets. Stocks ended up, dollar ended down, and metals sprang high after stooping low.
The FOMC published minutes of its last meeting today & they implied (this is like reading sheep guts to tell the future), at least in the eyes of people buying stuff today, that (1) the FOMC are in no hurry to raise rates, and (2) they weren't too keen on a strong dollar, either.
About the time that news broke the US dollar index fell off a cliff. It lost 43 basis points (0.51%) to end at 85.33. This is good news for gold, but it played out oddly as I'll explain below.
The euro woke up enough to rise 0.6% to $1.2740, still below its 20 DMA ($1.2774). However, it has floated up out of the oversold zone and its MACD has turned up, so you can expect higher prices. Despite the Bank of Japan's announcing on 7 October that it would significantly increase its monetary base, from $550 billion to $655 billion or 17.27%, the yen rose 0.4% to 92.50 cents per 100 yen. Yen has now climbed over its 20 DMA and appears set to rally. We'll see how efficiently the BoJ can poison that rally.
Bond prices rose in spite of dollar woes. Yield on the 10 year treasury fell 0.85% to 2.330%. Looks like that interest rate increase all those wise speculators & hedge fund managers were betting on isn't coming true after all. Shucks. Reading sheep guts to tell the future beats parsing the Fed's intention any day.
Stock charts look like somebody had a little advance notice how those Fed minutes might read, as stocks climbed just above unchanged & hovered, but rose as 2:00 p.m. drew closer. At the announcement stocks shot up. Dow rose 274.83 (1.64%) to 16,994.22. S&P500 gained 33.79 (1.75%).
Now I ask you, just because I like to pose as sane every now and then: Did the US economy really become 1.64% more valuable today because the Fed might suppress interest rates a little longer? To ask the question is to spotlight the mindless gullibility ruling markets, the economy, & the Fed.
Looking closer, all today's huge rise accomplished was to boost the Dow above its 50 DMA, but not the S&P500. In both cases buying trampolined off the last low. This volatility reflects bears and bulls wrestling & struggling for the prize.
The Dow is below & outside its uptrend line from March 2009. The S&P500's analogous line not stands at 1,904. Broken uptrend lines are almost as easy to repair as eggshells.
Of course the Dow in Metals rose today. Dow in silver rose to S$1,286.59 silver dollars (995.91 oz), but this sawing back and forth looks like a top running shy of momentum. All indicators still point to the earth's core.
Dow in gold rose back above its 20 DMA (G$288.99 gold dollars or 13.98 oz) to end at G$291.27 (14.09 oz). All indicators point steadily, stubbornly down.
On Comex today, gold closed down $6.40 (-0.53%) at $1,205.30. Silver was 17.6 cents lower at 1701.50 cents.
Here's what's odd. Comex closes at 1:30, but all the damage the FOMC minutes might have down had already been done. Then a little after 3:30. long after the news had broken, gold gapped up $6 and launched heavenward. In the aftermarket it's trading at $1,223.60, $18.30 (1.5%) higher! Silver is selling for 1745c, 43.5 cents higher than the close -- 2.6% higher!
But look here. Gold had crucial support at $1,206, and despite the Nice Government Men's best efforts -- whoops, I didn't mean to write that. The reader will please ignore that remark. Anyway, gold HELD that critical support, then sprang higher.
We work with a convention of market "closes" that hardly applies in these days of 24-hour markets. How important is the Comex closing when you can still trade later all around the world? Today makes that plain. Gold's $1,205.30 close looks weak, but in fact it ran up to $1,223.60, the next resistance area, nearly $20 higher, AND above the $1,218.70 20 DMA. At 1745c, silver stands only ten cents from punching through the downtrend line, and only 30 cents from its 20 DMA. Indicators have all turned up, pointing to higher prices.
Now 'tis the time to swap gold for silver, & capture this high premium.
My nightmare is that metals would stage a big rally here, but then fail to get through $1,350 on the rally, then fall back for one last swoon. Problem is, I can't read the future. Despite the dollar's fall now, it appears to be headed much higher. That contrary wind doesn't exactly fill gold's sails. However, if the stock market has topped, gold will begin to shine much brighter. And metals have been correcting for three years, surely long enough.
In this every-changing sublunary world, the only constant is change. Overnight whole civilizations can collapse. I was reminded today that the Stock Market peaked on 9 October 2007 at 14,164.53 and a year later in September & October was ravaged by the Panic of 2008. On 9 October 2008 the Dow closed at 8,579.19, 39.4% off it 2007 peak. And similar carnage was wreaked on silver & gold.
In this sea of change, how do we find any lasting value? I might take that off into a philosophical or theological direction, but I will forebear & restrict myself to the secular world. When the guarantors of value and guardians of the law depreciate and undermine every value, what do you do? Till memory runneth not to the contrary, men have valued silver & gold. I won't say they have intrinsic value, only that men have always valued them. Also, today silver & gold are the only values that keep value OUTSIDE THE SYSTEM. Since the hilariously mis-named Bank Secrecy Act of 1970 the US government has been constructing a world-wide police state. They can cut off all your electronic credits at the flip of an electron, but that silver & gold are OUTSIDE their system. If they can't find it, they can't steal it.
But what do I know, a nat'ral born durned fool from Tennessee?
On 8 October 1906 in London Karl Ludwig Nessler first demonstrated a machine to put permanent waves in hair. The victim wears a dozen brass curlers, each weighing two pounds, for the six hour process.
On 8 October 1918 US Army Corporal Alvin C. York in the Argonne Forest killed 28 German soldiers and captured 132. He was promoted to sergeant and awarded the US Medal of Honor and the French Croix de Guerre. Did I mention that Alvin York was from Tennessee? He was. If you have never seen the 1941 movie Sergeant York with Gary Cooper, you have missed it. Cooper's east Tennessee accent is not the best, but he still does a superb job still.
On 8 October 1862 Confederate General Braxton Bragg lost the battle at Perryville, Kentucky. He just couldn't carry out a plan. That defeated the South's attempt to free Kentucky from yankee occupation. Bragg starred in almost as many disasters for the South as Gen'l. P.G.T. Beauregard.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger