$1007.20 per ounce sounded, and was seen as, even more exciting in some quarters today than the $1033.90 recorded on March 17 of last year. Of course, back then, the stock portfolios of some of the people in those quarters were worth some 40 to 50 percent more... You get the idea of relativity.
Anyone with any money still left in the stock markets this morning, probably felt they were under the hooves of this beast being ridden by gold crowd. Notice that the bull is coming up to a traffic light. What will the colour of the next light be? All we can tell, is that it is currently glowing a bright yellow ( triple-entendre, at least). And flashing. And ready to change. A worldwide plunge in stock markets followed yesterday's Dow closing under the pivotal 7500 mark. Whatever confirmation of ursine signals coming to an end one was searching for in equities, they did not get them. Worse, global investor appear to have just opened the doors to a den full of hungry, cranky, and no longer hibernating bears. How scary is that? Scary enough to send anyone with whatever cash they had left into the one part of the global cave that feels relatively safe from a mauling at the moment: gold and the dollar.
The interesting part of such developments is that investors are either appearing to be reacting to headlines some six-to-nine months late, or that their remaining shreds of confidence finally disintegrated following the Madoff/Stanford/etc. scandals. UBS wrestling with Uncle Sam did not help matters either. Trust no one? Trust April gold at $998.50. Trust nothing? Trust the dollar at 87.68 as much as that strange bedfellow syndrome flies in the face of conventional goldbug punditry. Dollar strong? We'll take it, so long as we get to enjoy four-digit gold: we heard from one source this morning. Well, that, we got later on in the day.
And, now, we know where at least several million in gold coins that were bought, went recently. Into the basement of another Madoff/Stanford imitator. Or, so says the St. Louis Post:
A former investment banker who was found to have millions of gold and other precious metal coins stashed in his basement pleaded guilty to a federal felony this morning and admitted stealing more than $10 million from clients. Donald C. Weir Jr. pleaded guilty to a felony mail fraud charge in federal court in St. Louis and is now likely to face six to eight years in prison under federal sentencing guidelines. Stacks of valuable coins were found in the basement of Weir's house in the 1100 block of Chatsworth Place Drive in Town and Country in September, sparking an investigation that eventually found $10.3 million missing from client accounts, Assistant U.S. Attorney Matt Schelp said in court.
Weir sent clients false account statements to cover up the theft and used the missing money to fund his own lifestyle and send Robin Hood payments to those he felt were needy, Schelp said. Weir, a graduate of the John Burroughs School, Creighton University and Georgetown University's School of Business, was working for HFI Securities Inc. of Clayton at the time. He was also estranged from his wife and living in St. Charles County. Albert Watkins, a lawyer for HFI, said that the company was unaware of Weir's actions. He secretly accepted delivery of the coins and kept them stored in his basement, Watkins said. A press conference has been scheduled for Friday afternoon at FBI headquarters in St. Louis to announce the plea.
Hey, could have been worse. Bernie Madoff bought nada for some 13 years for his clients. At least this guy can claim that he was trying to protect client money by investing into gold since he did not trust the system. Oh, but we digress. Why give the defense any brilliant ideas?
New York spot gold was still showing a 2.2% opening gain this late afternoon, quoted at $995.70 per ounce - within dimes of where it had opened, but about $13 from its intra-day highs. No reason to believe that once the 000 number has been achieved, anyone knows what is next. Markets tend to get nervous and totally unpredictable (as opposed to mostly unpredictable) when euphoria and/or capitulation are in the brew. And, at this time, both emotions are in the mix. Overbought? Who cares? Oversold? Who says? So long as losing money is at the centre of the radar, you can forget valuations. Individuals act with the herd, whilst claiming they want no part of it.
Silver popped 42 cents higher, quoted at the $14.45 level basis spot, and was curiously stuck at the same figure this afternoon. Not a bad data feed, this time. Platinum gained $15 to finish around $1082 on a combination of spillover buying from safe-haven seekers, and of renewed attention from Indian buyers (who are still dumping gold into these highs, and are turning Japanese in their preference for the subdued, classy beauty of platinum). Chapter 11 filing at SAAB took no one by surprise, at least as far as auto catalyst-related metal traders were concerned. Chrysler floated the idea of merging with GM (again) as a survival strategy.
Oil prices gave back only $0.50 of yesterday's mammoth one-day 14% gains (consider that gold rose by about the same amount over one month) and 'fell' to $39.28 per barrel. You tell us if these gyrations do not have the footprints of spec funds written all over them. 'Cause last time we checked, the fundamentals did not yield a particularly warm/fuzzy. As for the Dow, it only looks fuzzy and warm-blooded) if you see it as big and brown, sporting sharp claws.
The last three times when gold and the Dow were skirting the 7:1 multiple (if you believe in those metrics) the ratio ended up shooting to 20 and 30:1 in the ensuing five or ten years. As well, when broken, that ratio fell to 2:1 and to parity in less than five years. That happened twice since the 1920's. And, if you are looking for capitulation, witness the holders of shares lying down and playing dead in the hopes of escaping with their lives. As we have frequently been heard to say, enjoy the lofty gold price - but do not forget to tally the rest of your portfolio that same night; it might be worth next to nothing.
That said, it is enough. The next few days might best be spent in front of 'buy' and 'sell' trigger buttons than reading analyses and such. Prices will move fast and sharply enough to revive the nearly-extinct day-trading species. Okay, we cannot resist. Since there is the weekend to do some reading over, here is the latest from the pulse-o-meter of Mark Hulbert's HGNSI:
It's hardly surprising that gold bullion has put on such a show in recent weeks, actually rising above the psychologically important $1,000 mark in early trading Friday.
After all, the governments and central banks of all the developed nations are behaving in an increasingly desperate fashion to keep the world's financial system from deflating. So it makes sense that gold, the ultimate inflation hedge, would react accordingly.
What's surprising is the lack of excitement among the editors of gold timing newsletters. They would be entirely in their right to become so, as bullion has risen from just above the $700 level in a very short time. But there actually is less bullishness today among such editors than there was in early January, when an ounce of gold bullion was trading for some $150 less (as judged by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). In fact, the HGNSI has not budged upward even one iota since the beginning of February, when bullion was just above the $900 level.
These data points add up to an encouraging trend, according to contrarian analysts, who believe that market tops are often signaled by excessive levels of stubbornly-held bullishness. That would not appear to be the case now. Needless to say, this does not guarantee that bullion can keep rising. Just consider that both bullion itself, as well as gold sentiment, are now at more or less the same levels as where they stood last July, right before the yellow metal dropped by more than $200 per ounce.
Still, the gold timers' surprisingly muted reaction provides at least some support for a continuation of gold's rally.
(Now, if Mark would only tell readers where the exit point actually is...)
Happy (Careful) Trading. $994 and 60 cents as we sign off. Happy Weekend!
PS - Oh, and, don't ask why/how/what of the blue-tongued bear.
It's only there for balance. Kind of like these commentaries. Fear not, roles will eventually reverse, and the pictures swap positions.