Precious Metals Get Tagged Again
May 2nd, 2008 | By Doug Casey | Category: Gold MarketGold took it on the chin after holding near $880 in the far East, falling in London and through most of the New York session on Thursday, before finally finding a bottom at $850 and trading sideways for the afternoon hours, finishing at $851.90, down $24.70. Overnight, gold has been flat.
Platinum also took a pounding, just coming off its intraday low to end at $1865/oz., down $68. Overnight, platinum has edged lower.
Silver’s decline was even sharper than gold’s, but it did bounce off the $16 mark and rebound up to close at $16.15, down 69 cents. Overnight, silver is trending higher.
(Click here for charts)
The bloodletting in the precious metals continued with a vengeance yesterday, but with gold finding support at $850 and silver at $16, is the worst over? It’s way too soon to tell, as yet.
One thing for certain is that this is entirely counterintuitive. The Federal Reserve’s quarter-point cut on Wednesday is inflationary, without question, which should be gold-positive. But traders seem to be grasping at the straw that the Fed may be done, based on little evidence.
If this is indeed the end of this round of interest rate reductions, then that could be seen as very slightly dollar- and equity-positive. But not to the extent we saw yesterday, with stocks booming and the buck strong.
The truth of the matter, though, is that the Fed wouldn’t have acted if it felt that the economy had been given enough of a cash infusion to perk it up. And it is also true that serious inflation is baked into the cake.
That the market can ignore those important factors in favor of a wispy hope that things maybe, possibly, might not be quite as bad as they seem is a good indication of just how daffy this market is.
Whatever, “gold will remain at risk to further corrections in the coming sessions,” wrote James Moore, of TheBullionDesk.com.
Perennial pessimist Jon Nadler of Kitco goes farther, saying that, “Despite the lack of a clear pause signal in yesterday’s Fed announcement, the markets are treating May/June as the pivot point beyond which they can no longer reliably depend on ever cheaper dollars to fuel speculative binges in commodities.”
But what then will they spend those eroding dollars on?
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Doug Casey is a contrarian investor, sought-after public speaker and author of several books. His work "Crisis Investing" held the position of # 1 bestseller on the New York Times list for 26 consecutive weeks. Doug's unusual views on the economy - and just about everything else - have gained a huge following in the investment community, and it certainly helps that his stock recommendations of undervalued junior exploration companies have made his subscribers millions. Now in its 27th year, Doug's monthly newsletter, the International Speculator, is one of the most established and esteemed publications on gold, silver and other natural resource investments. Together with the Casey Energy Speculator, it covers a broad range of carefully selected stocks with the very real potential of double- and triple-digit returns within 12 to 24 months.