Last Tuesday at this time, gold was trading at 1424. Now it is testing its first level of significant support at 1340. Almost a 6% correction in a week. Ouch! And at a time when many were "all in" based upon QE2 and this week's POMO schedule. So what happened?
1) The increasingly desperate EE pulled out one of their remaining arrows in the form of increased margin requirements. Not significant monetarily but significant symbolically in freaking out inexperienced, weak-handed longs who were caught by surprise. "What? They can changes the rules mid-game?" Yes, they can. And they'll do it again and again in their pathetic, criminal attempts to retain power.
2) Does anyone else find it just a little to coincidental that, after six months of peace and quiet, the entire EU debt fiasco once again rears its ugly head just as the Euro reached 1.42 and the dollar was collapsing? I mean, seriously, the timing is blatantly obvious. If you don't believe in the global manipulation of the 24-hour news cycle, you should. This is prime example #1. The currencies, in their relative movements, were getting out of whack. Hmmm, how to weaken the Euro and thus strengthen the $? I know, lets bid up PIIG cds and get that ball rolling again. In one week, the euro has moved from 1.3950 to 1.3550 and the USDX has gone from 76.90 to 79. So far, you have to say, its worked pretty well don't you think?
3) Ass-covering academics and politicians, has-been and current, are filing out of the woodwork to cry foul at QE2 but we all know that HellyBenny has no options. If he changes his mind or reins in some QE, the bond market will collapse, taking with it stocks and the entire economy. Rates skyrocket and tax revenues plummet. The entire US ponzi collapses nearly overnight. THIS WILL NOT BE ALLOWED TO HAPPEN. Ignore this nonsense for what is is...media spin and perception management.
4) Please re-read this:
None of the fundamentals have changed. All that is changed is sentiment and sentiment changes very quickly. The last week being your most recent example.
Keep the faith. Gold and silver are simply testing the support levels I outlined last week. The 1330-40 range in gold should be significant support. Last is 1337. Silver will be very well bid around 25. Last is 25.19.
Obviously, anything can happen going forward but my guess is that, by next Tuesday, all will once again be well, the PIIG situation will have cooled down, the $ will be rolling over and the PMs will have consolidated in price and will be ready for the next big move up, beginning after Thanksgiving.