Sudden gold and silver drop on Monday suspicious

You only have to look at the gold and silver charts for Monday to sense that more than market forces have been at work. The chart slumps suddenly at the 8 am Eastern Time opening of trading and then flat lines.

It is true that German business confidence slumped to a two-and-a-half year low. But have markets forgotten that interest rates in the euro zone may go up next month, while Fed hints at rising rates for the US dollar are both priced into the market and likely to disappoint as hot air?

This still left precious metals as the victim of the dollar’s immediate resurgence. Gold prices fell back three per cent although rebounded from a floor of $880 an ounce. Silver dropped five per cent before rebounding to $16.75.

Yet this is a very suspicious movement. All the traders decided at 8am on the first day of the week to buy the dollar? It seems more likely that the hidden hand of the Plunge Protection Team is at work.

The PPT will have noted that the Dow is perilously close to key support levels and that if these are broken then a plunge to 9,000 or all the way back to 7,000 is likely. You do not need to be an expert to notice this. It was all over financial TV at the end of last week.

Preventative action has followed. Comex traders have now squared their positions ahead of the Fed interest rate decision on Wednesday. But the unrealistic expectation of higher US interest rates before the end of the year is still in the market.

When that comes to nought then the dollar will fall and precious metals rebound, and that realization will come into sharp focus as soon as the ECB rate rise next month. Abandoning precious metals in this environment, and with inflation surging throughout the world, would appear foolish.