"People can foresee the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome."
George Orwell
A wild day in the markets as fears of a European credit crunch, and possibly a eurodollar squeeze, combined with renewed fears of a US double dip recession had equities reeling and investors flying into the safe harbor of gold, and to a lesser extent, silver.
The miners were beaten bloody with a few notable exceptions. You may wish to note those who held their ground and even moved higher today.
I think the Philly Fed contraction brought the Ten Year Treasury yield down to the 2 level which is quite amazing. Does that signal deflation? Perhaps, but the CPI came in quite high at .5%. I suspect there is a lot of hot money floating around looking for a place to hide, and it ran into Treasuries and gold.
What next. It really depends on how the equity option expiration goes tomorrow, and how the market frames itself up for the Comex expiration next week.
I would not be buying new gold or silver bullion positions here on a risk reward basis until I see how it goes next week unless we get another curve ball from Europe. But that does not mean I would be shorting them either, except for hedging.
Gold can run higher to the 1850 area without a lot of effort just on a failure to correct and short covering into the weekend. After that, we will have to see. I would like to see it pause occasionally, to avoid a repeat of the silver parabolic rise and craftily engineered smackdown.
And of course next week is the KC Fed sponsored Jackson Home EconoFest. Something is quite possible to come out of that august gathering.
Even with its bounce today, take a look at the dollar chart and ask yourself, 'if that was a stock, would I buy it?'
