Is it true that research has shown that there is a two week time gap after a collapse in stock markets when bullion prices rise markedly before falling again after the 14 days when people sell bullion to buy cheaper shares?

If so, what do bullion bugs do? My current policy is to set a level such as £100,000, and anything above that I cream off by selling gold as opposed to silver. This then deals with current debts and allows me to store a bit of cash in the bank and elsewhere for that globally rainy day I still fear is coming.

Of course, I would like to buy more silver after the 14 days post stock market crash.

Do you buy this two week hypothesis, Ed.?

Ed Note: No, you can’t make this sort of assumption, markets are far less predictable than this.

Ed., I noticed in the eDaily Telegraph that there was a sour response to your second post today, complaining that you are always negative about the future (or words to that effect).

There are always people who do dislike bad news and prognostications. How they cope with life when it does go really bad economically or otherwise, I don’t know. Perhaps they kill themselves!

I am an optimist in regard to many things in life but I share your so-called negative view in finance and investment, unlike that sour responder. My negative view is turned optimistic by investing in the commodities of silver and gold.

I suppose that this means that I have a vested interest in a negative future with the result that I don’t feel sour but even find myself pleased with bad news. Now that’s a bit anti-humanistic and anti-humanitarian!

Ed Note: Thanks for your support. I was also very pessimistic in the run-up to the 2008 crash and faced the same criticism then – it was strongest just before things fell apart! Another broker from Bahrain wrote in yesterday saying the same thing but said he still found these commentaries useful as some balance to the positive comment that abounds on Wall Street. I was amazed somebody in Bahrain could have any positive spirit left.

Good luck trying to predict anything these days! Using past occurrences, in an effort to predict what will play out in the future, is now extremely risky. Think about a few of the things that have changed in the last 20 years, that could mess up any forecasting effort.
Have we ever had the levels of public and private debt as we do now? I don’t know, but I doubt it. I am watching CNBC World (and trying to listen to my wifi radio at the same time) and a big red title ‘The Debt Threat’ just came on the screen. Is it all sensationalism for ratings? I don’t think so.
Have you EVER seen as many demonstrations going on in the world’s oil bank as during the last 2 months? I haven’t. Any idea how it will end? I don’t, but you can bet it won’t lead to CHEAPER oil.
Have you ever seen a stock market ‘flash crash’ that no one can adequately explain?
Have we ever witnessed anything like the ENORMOUS derivatives contracts, ESTIMATED to be something like 10 TIMES the value of the entire world’s annual output? How are they all interrelated?
Warren Buffet described derivatives as financial weapons of mass destruction. He is a pretty smart fellow. How many are related to interest rates, or currency values, or the USA defaulting on its’ debt, or who knows what else? Think of the trouble that a far smaller amount of CDOs caused. As I told my neighbor when I first heard that AIG was in trouble. Tanya, if they let AIG go down, get ready to see the President on TV declaring a National emergency within a week. And that was only 1 company. Think what happened when they let Lehman fail. Those derivatives could take down a lot more than that.
We have never had high-frequency computerized trading programs that trade millions of shares a second and can drive up the value of a stock in order to sell it a fraction of a second later.
No, we can’t use what happened in the past to know what the future holds. Too many unique factors are now in play. I saw a short video of Mohamed El- Erian of Pimco saying that the fund managers meet 4 days a week, for 3 hours a day, to decide how to invest. Would they do that in a stable financial environment. I doubt it.
Globalization of trade means that trouble in one country can impact the entire world. That is a new phenomenon.
Ever hear the words ‘peak oil’ mentioned in the mass media 10 years ago. People who said them were called kooks. Not anymore. Warren is buying railroads for a reason.
Ever contemplate what a coronal mass ejection from the Sun that shuts down the electric power grid in the northern latitudes will do? Don’t be living too far from the equator when (not IF) that happens. Get stuck up there in winter without much moving, and you might end up dead. They don’t sell giant transformers at Walmart.
One thing will always be true. Gold and silver will always have SOME value to humans. The value of gold even predates the concept of money. Gemstones do too, but we can make them now.
Would you believe MORE dangerous weather is headed this way tomorrow! Straight line winds of 105 miles per hour (169 km per hour) tore up parts of New Orleans just last week. At least this time it will strike during the daylight. Last week, WWL radio had to stay on live until 2 A.M. Cars had dents from hail in their SIDES. People were calling in describing how the hail hitting their vehicles was so loud, that they were unable to hear others screaming inside the vehicle. My little new HD camcorder is ready with a whole stack of those tiny, 32 gigabyte (!) memory chip things, so nothing exciting will happen right around here.
Some doctor from India just said that we are still having 3X the normal rate or heart attacks around here, as a result of stress from hurricane Katrina in 2005, so don’t worry. It won’t change a thing.

Bill, I sensed in your detailed post that, although you say we can’t predict the future based on the past because the present is now so different, that you are still pessimistic about the future for investment and the economy.

I would argue that your pessimism for the future is a prediction. That emotionally you are predicting the future as being bad for investment so that you are quite unlike the Bahrain expert referred to by Ed. above.

Indeed, your praise of gold and silver is also a future prediction.

Silver is doing quite well in Asia today and SLV is up in pre-market in the US now. Looks like it mat try and head straight to that $40 mark now. I don’t see much resistance from here to $40. It will tank big time though were some big hedge funds to unload their Silver positions.

@ Peter, the Ed:

Your commentary here (tricky time for gold bugs) does a good job of highlighting the ambivalence of investors, as their tolerance for risk varies with the winds.

Is It Worth it to Sell Physical Metal?
One thing should be clear to those who own the physical metals: during these turbulent and uncertain times, it’s not worth selling the physical stuff for fiat paper. Clearly, even the casual observer knows that the world’s fiat paper currency is eroding much more quickly than in the past. The physical stuff will always have value, whether it’s physical gold, or silver, or oil, or some other commodity.

If there’s a depression, the prices of all things will go down; so it’s all very relative. The fundamental issue here is whether the “relative” price of gold/silver will go down more than the “relative price” of other financial assets such as stocks, or cars, or houses.

Debating Whether the End of QE2 Will Cause a Hiccup:
While there could well be a big financial hiccup in the global financial markets this summer, I strongly doubt that “the ending of QE2″ would be a factor.

The reasoning behind my comment is the fact that the FED’s balance sheet is so large now (well over $ 3 trillion) that they can continue to execute “QE” via stealth, principally because there’s now a large turnover in their Treasury holdings. If the “real” amount spent for QE2 was $900 billion (vs. the $600 billion as stated by the FED), then the FED will have approximately $800 billion available for a “stealth QE” while preaching to the world that their QE has ended. Jim Rickards understands this game, as he explained here:
http://kingworldnews.com/kingworldnews/Broadcast/Entries/2011/3/12_Jim_Rickards_files/Jim%20Rickards%203%3A12%3A2011.mp3

Admittedly, some financial disaster (e.g. a sharp and severe stock market correction) may cause the FED to panic, and in turn, force the FED to start a new QE3 if their “stealth QE” funds are not sufficient to manipulate everything (e.g. stock market, Treasury bond buying, “loaning” money to overseas banks, etc.) back up to where they want it.