Lear Capital: Volatile Markets Send Gold and Silver Lower - But not for Long!

By @ibtimes on

DaveOn days of high market volatility, eyes remain glued to financial news in search of an explanation!  Today, stocks are extremely volatile, the dollar is on a bit of a rebound and commodities are trying to figure out if they have run too high.

Last week I spoke with some traders who said stocks were due for a significant sell-off.  Ever since Cisco announced plans to cut 550 jobs, markets became super sensitive.  Then, after showing signs of shrinking jobless claims, jobless claims rose back above the 400,000 level to further exacerbate fears that our employment situation may not be improving. 

Historically, spring marks a time when seasonal employees get called back to work - construction workers being a big part of that.  Now, doubt has replaced confidence in the prospect of higher employment ahead.

Today, Citi announced quarterly earnings of $.10 cents a share against $.09 of expectations.  Still, there is significant cause for concern over Citi's future profitability as total revenues were down from $3.8 billion to $3.37 billion.  Falling revenue indicates profits are more likely being earned through cost cutting than growth. 

These numbers are consistent with a Financial News report that says, Investment Banks will need to take out between 6% and 8% of their costs in the next 12-18 months if they are to meet their reduced return-on-equity targets, with as many as 20,000 back and middle-office jobs likely to go in the process . . .

In short, one explanation of today's market volatility could be that investors are catching up with reality.  I've heard the term slower growth about a gillion times today, as if we all believed in fast growth just a few days ago.  Now, throw in constant warnings over debt, from our nation's leader and it's easy to explain investor concerns. 

I think America is starting to believe both sides of politician's debt arguments.  Either way, we're in trouble.  As one reader, Anne, put it, you have to slow a runaway train before stopping it.  Spending cuts should not be so highly contested.  The amount both parties strive for is minuscule and meaningless.  Hence, no confidence in any effort to get us out of this mess. 

With the markets under great selling pressure today, the usual reaction in metals is to sell off some - especially after significant gains - to lock in profits.  Earlier, we did hear reports of major sell-offs of Precious Metal ETF shares.  Gold moved off its new high of $1498 an ounce and silver pulled back from a another new 31 year high of $43.40.  Currently, however, both the gold price and silver price are headed back to those levels.

How long can the metals rally hold up?  Of course long term, there is a strong consensus that both are headed much higher.  Short term?  Anything can happen as big players move in and out of stocks, bonds, metals and just about every investment.  If today's Exodus from Metals ETFs, was supposed to be the move of larger players that drives down both gold and silver, then I think the bull market is showing signs of great strength.

Time will tell.  Meanwhile, more and more people are fixated on the latest market news and precious metals reports.  If you are one who never likes to be more than a few seconds away from real time precious metals prices, check out Lear Capital's mobile real-time gold and silver prices.  Just type in www.learcapital.com/mobile on your smart phone browser to have real-time metals prices at your fingertips.

 

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