Ben Bernanke didn’t quite deliver the “we will print” message that the world had been expecting instead used language that has sent world markets in a free-fall today. He pretty much sealed the deal when he said that the economy is in significant peril. Today’s jobless claims reaffirms that and as we’ve ben saying here forever, we never really got out of the recession…the numbers just made it appear that way. The underlying fundamentals that were ailing the global economies were never adequately addressed and notwithstanding the stock market’s rise since the March 2009 low point, the real problems ailing the economy were never really receiving much attention as all the focus was really a thinly veiled measure at trying to recapitalize banks and not get people, the drivers of economies, working again.
China is showing cracks and is slowing down. Other emerging markets that have seen exponential growth over the last 4 years are also slowing. Europe is in complete shambles and the American economy is confirmed to be officially headed lower.
So, what is the catalyst right now for owning gold? Quite frankly, I see none. The market this morning looks like it has fallen off a cliff and taking silver with it so it is clear that others share this view.
$1,702, the low made after the correction from the first breach of $1,900 is the level to watch. Silver has already confirmed it wants to go lower and a break of $1702 in gold will surely solidify that a downward move in gold is officially on. No bull market lasts forever and as staunch a gold bug as I have been, I must also be a realist and look at both sides of the coin (pardon the pun). Could the rapid move from $1,500 to over $1,920 in gold have been the final thrust? Only time will tell.
As I have been warning here over the last month or so, in a de-leveraging environment, no asset class is safe. I was worried about the euphoria that had reared its ugly head in the gold market with gold bulls shrugging off the warning signs etc etc. This was supposed to be the perfect storm for gold but we haven’t seen it reflected in today’s panic trade nor have we seen it in the “rush to safe haven” trade that was supposed to be gold. As I have started to make mention of recently here on my blog, the US dollar still remains the trade for safety and if the action in the US dollar over the last 3 weeks hasn’t convinced you yet, then the look at the move in the greenback from last night should tell you that.
Careful with your moves out there. It is a tricky environment. I would suggest that the dollar and Yen appear to be safe but it is well publicized that the Bank of Japan could intervene at any moment to stem the record rise in their currency.
