We've all heard the news.
Osama Bin Laden's reign of terror has come to an end!
His demise brought on one of those moments in history where all seems right in the universe.
In reaction, the markets took pause to contemplate the effect.
Charts reveal that overnight, silver dipped below $43 an ounce . . .
. . . while gold touched $1543.
Then, as news was processed, interpreted and spun by the world, it was soon back to business as usual. Some reports claim gold and silver prices were down before the Bin Laden news was released. I believe there were many people who heard it long before the rest of the world did and had a chance to react to it.
As the day's trading began, I immediately checked the dollar index, believing if anything could rally the dollar, it would be this kind of news. While I expected the dollar index to rise, instead it has fallen to levels precariously close to all-time lows. All-time lows were reached in March of 2008 of 70.67. Today, the index touched 72.72.
You can monitor the dollar index yourself at this link.
The slipping dollar has served as a reminder that serious issues remain in the economy and the markets - raising the debt ceiling perhaps being foremost. Warren Buffett is on record as saying, failure to raise the debt ceiling would be asinine.
There are few people who believe the debt ceiling will not be raised. I believe it will and once it happens, the floodgates of spending will open. There was so much stimulus built into the budget, once the ceiling is raised the all-clear will sound to start spending. One friend from Minnesota tells me about how the construction of a light rail system has been approved.
The system will be funded first by the State, then at various stages of completion, Federal money will be injected to bring the project to completion. In anticipation of the ceiling being raised, some phases of contruction have already begun with state money. Failure to raise the debt ceiling now would jeopardize the entire project.
Another contact of mine speaks about the energy infrastructure of this country and the numerous grants offered by Government to fund the updating of our aged system. Once the debt ceiling is raised, projects will commence.
I believe there are hundreds of projects around the country banking on rasing the debt ceiling. Right or wrong, it's a bi-partisan hope that an agreement will be reached. We truly are backed into a corner.
So, while good news may have appeared to cause a dip in metals prices, the dip is more likely attributed to normal profit-taking. Going forward, I believe debt news will play a greater role in driving commodity prices. In my opinion, once the ceiling is raised, the Inflation Kraken will be released sending global investors back to the protection of the commodities.
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