Gold rebounds $100, silver by 20% as eurozone mulls $2.7 trillion bailout
Posted on 27 September 2011 with 2 comments from readers
In a memorable 24-hours that most gold and silver investors would rather forget, unless they took ArabianMoney’s advice and bought the metals, gold was up $100 from yesterday and silver recovered from a mini-flash-crash from $26 to $31 an ounce.
Such volatility goes with the territory in precious metals and this is most likely not the end of it. The eurozone financial crisis is far from over. Yesterday some panicky european officials muttered the words that the markets wanted to hear about leveraging up the new support fund with standby faciilities from the ECB to $2.7 trillion.
No $2.7tn plan
That is the plan the markets want to hear but it is very far from reality. It is not yet even a proposal on anybody’s desk. Indeed, news that officials are considering it will certainly damage their still lukewarn negotiations over the original suport fund that are far from signed off.
Eventually such a plan must emerge, and that is what markets concluded yesterday and rallied across the board. Another bout of wishful thinking by Mr. Market in a better mood?
However, precious metal investors got a powerful lesson in keeping their nerve, unless they sold. Interestingly the ETF gold and silver funds did not sell, only the traders in futures who immediately got whacked. Holding on is the rational decision.
For the $2.7 trillion ‘plan’ is the next leg up for gold and silver prices. QE1 and QE2 and their compatriots from Japan and the UK brought us $1,923 gold and $50 silver. What next?
It’s the money printing stupid! That is what is debasing global currencies and boosting the appeal of the currencies that nobody can print like gold and silver, in fact only gold and silver!
What will it take to get the Germans on board? A massive Lehman-style financial crisis over a Greek default? Pressure from the US Government? A few more resignations from the ECB?
Betting against gold
As we noted yesterday you would need to be sure that the Germans will commit economic suicide to bet against gold and silver. The alternative path is just too tough for democratic politicians to take. Will it still all blow up in the future down the road?
Yes, and that is why investors will increasing choose to buy gold and silver until that happens, and a new credit and monetary system is imposed.
Will gold and silver remain volatile? You can count on it. Between March and November 2008 gold fell 33 per cent and don’t forget the May-June correction of 2006 of 25 per cent. We would stick our neck out and forecast that the current correction will be a short one but that does not necessarily mean we have seen the bottom of it yet.
Does that make shares in gold and silver producers an excellent buy? The next issue of the ArabianMoney newsletter is to discuss that question (subscribe here).
2 Comments posted by readers:
the march -nov ‘08 gold ‘hit’ was the result of the ‘unwinding of the carry trade’ and dow fall……..people sell things then.
but we came back strong and the mar ‘09 crash hardly made a dent in gold on liquidity flight to…………. .qe….n we be gettin more of that alright
there are litterally lines at PM dealers and g’ville coingold has had their website up n dn….they say for maintenence(!) but give me a break…they’re running out of metal in stock.
pity the poor people who do not heed the waning of the coming reset.
Bob Doll has even went bearish!!!!….the ultimate equity cheerleader!!!!
All roads out of the debt threat will lead to inflationville. That should push gold and silver up.
It is amazing that 65 years after the end of WW II Germany is still taking orders from the USA. Geithner goes over there, and a week later they are doing what he ‘recommended’. Wouldn’t it be something if it was a sabotage plan to destroy the euro as a rival reserve currency. That won’t make a Hollywood blockbuster movie.
Putin will soon be back. Don’t expect Russia to become a manufacturing superpower with him in charge. He will be calling the shots as a virtual czar until he dies.
Some say the euro is heading to parity with the dollar. I say around $1.15.
Boeing delivered the first 787 carbon fiber passenger plane to Japan. CNBC just did an interesting program on it, and other Boeing products. They showed the first test flight of the latest 747. I doubt it can compete with the A-380, but I’m no aviation expert. The original chief designed of the 747 was at the test flight of the new model. He is 91. It is still the coolest looking plane flying. It is hard to believe it first flew 43 years ago. Will it last as long as the B-52?
The euro rescue plan sounds like a potential doomsday machine to me. Does leverage sound like a good way to solve a debt problem? Wait until the rating agencies start their downgrades. That could get interesting.