05 August 2011

Gold Daily and Silver Weekly Charts - US Government Preparing for Debt Downgrade

After the bell, a Reuters story quotes an ABC News report that the US is preparing for a downgrade of its sovereign debt, according to an unnamed government source.
(Reuters) - The U.S. government expects its debt to be downgraded by credit ratings agency Standard & Poor's from its current triple-A rating and is preparing for the event, ABC News said on Friday.

ABC cited an unnamed government official as its source and said it was uncertain whether the rating would drop from triple-A to AA+ or to AA.

The report said the main reasons likely to be cited for a U.S. downgrade by S&P included political confusion surrounding the process of hiking the debt limit and doubt that agreement would be reached on more deficit reductions..."

It should be noted that there is not a consensus on this. Forbes says that S&P will not downgrade the debt.

This contributed to the remarkable volatility in US markets today, despite a better than expected Non-Farm Payrolls number.

The initial response was what one might have expected, but it was quickly met with selling that provoked more volatility and selling that reached a crescendo around mid-day at some key technical support areas in stocks.

This market is good for Wall Street and traders, and very bad for the real economy. It adds to the sense of uncertainty and riskiness in business and investment planning. It is a gambler's market, and not even a particularly honest gambling environment, with a noxious mix of asymmetrical information flows, front running, deception, ponzi schemes, and con men. 

I am now even more suspicious that there is a strong artificial element to thhe trading in these markets, and a 'setup' for either the re-introduction of Quantitative Easing,  and softer bailouts and subsidies for the corporate sector in the name of recovery and 'jobs,'  or a credit downgrade event in which the economic hitmen make the US an offer which they think that they cannot refuse.

I also wonder if the threats from S&P were a pre-emptive warning on QE3.  Make no mistake, there is a currency and class war underway, and things are not as they may seem to be on the surface.

The debt issues in Europe and the FOMC meeting on Tuesday will likely contribute to the market swings based on trading algorithms and the 'technicals.'

Gold showed remarkable resilience, and a safe haven aspect even with the obvious bear raids that hit the metals, especially silver.

Here is an interesting 2009 Bloomberg Radio interview with Jim Sinclair. It is well worth listening to with the benefit of hindsight.