Pass the Antacids!
Gold and Silver investors and speculators may be beat-up over the past two days of sell-off, but more is likely to come if the banks continue to need to raise capital, and if the banks still have significant positions in the precious metals.
I don't know about you, but the fact that gold and silver got sold off considerably was like a punch in the gut for me. The reason is this: Take a look at the following chart tracking Gold, silver and the Big banks that are exposed to toxic debt. The link is Here. Nearly every single one of those banks is up day-over-day, and while gold has surpassed them by leaps and bounds over the past year, by the looks of things, gold is currently getting trashed like an old sofa. But where is the money going?
The answer isn't easy, nor simple - and may in fact defy all logic. Big Banks have done well today, major communications companies were in the green, as well as many major tech stocks. In fact, outside of the worlds of metals and energy, the markets felt relatively clam. Financials were eerily stable today. Let's not forget that the big banks of the world are almost all still significantly in the red year-to-date, and many still hold toxic debt which they need to somehow paper-over.
Interestingly enough, the banks who made some ground breaking gains today are comprised of European Banks like UBS, BNP, Bank Of Ireland, Barclay's etc etc. Each of them are privy to the bad debt of Greece and Italy, by the way. Logic would assume that these banks don't have a leg to stand on. However, they may have been able to sell-off precious metals holdings to raise much needed capital and avoid defaulting. If so, that may be the first reasonable move they've made in a long time: "tap into the real money - gold and silver - to get some liquidity and capital." Unfortunately, the sell-off they (may have) started fuelled market fears and the sell-off worsened as the day wore on.
Here is a great graphic that shows just how big these banks get: (click here to enlarge)
Disclaimer: a lot of what I'm getting at here is conjecture, but it would still be worth checking into who was holding what and when. Answers may lie in the weekly Commitment of Traders Report.
One thing I am fairly sure of is that this sell-off is far from over. I wouldn't be surprised to see another day like today on Monday. Time will tell. As a side note, if you are in the precious metals market with both feet, now is the time to talk to your adviser about re-balancing your portfolios. Get rid of the chaff and keep the wheat.
Full Disclosure: I have no positions in any of the companies mentioned, and do not plan to take any positions in these companies within the next 72 hours.
Gold and Silver investors and speculators may be beat-up over the past two days of sell-off, but more is likely to come if the banks continue to need to raise capital, and if the banks still have significant positions in the precious metals.
I don't know about you, but the fact that gold and silver got sold off considerably was like a punch in the gut for me. The reason is this: Take a look at the following chart tracking Gold, silver and the Big banks that are exposed to toxic debt. The link is Here. Nearly every single one of those banks is up day-over-day, and while gold has surpassed them by leaps and bounds over the past year, by the looks of things, gold is currently getting trashed like an old sofa. But where is the money going?
The answer isn't easy, nor simple - and may in fact defy all logic. Big Banks have done well today, major communications companies were in the green, as well as many major tech stocks. In fact, outside of the worlds of metals and energy, the markets felt relatively clam. Financials were eerily stable today. Let's not forget that the big banks of the world are almost all still significantly in the red year-to-date, and many still hold toxic debt which they need to somehow paper-over.
Interestingly enough, the banks who made some ground breaking gains today are comprised of European Banks like UBS, BNP, Bank Of Ireland, Barclay's etc etc. Each of them are privy to the bad debt of Greece and Italy, by the way. Logic would assume that these banks don't have a leg to stand on. However, they may have been able to sell-off precious metals holdings to raise much needed capital and avoid defaulting. If so, that may be the first reasonable move they've made in a long time: "tap into the real money - gold and silver - to get some liquidity and capital." Unfortunately, the sell-off they (may have) started fuelled market fears and the sell-off worsened as the day wore on.
Here is a great graphic that shows just how big these banks get: (click here to enlarge)
Disclaimer: a lot of what I'm getting at here is conjecture, but it would still be worth checking into who was holding what and when. Answers may lie in the weekly Commitment of Traders Report.
One thing I am fairly sure of is that this sell-off is far from over. I wouldn't be surprised to see another day like today on Monday. Time will tell. As a side note, if you are in the precious metals market with both feet, now is the time to talk to your adviser about re-balancing your portfolios. Get rid of the chaff and keep the wheat.
Full Disclosure: I have no positions in any of the companies mentioned, and do not plan to take any positions in these companies within the next 72 hours.
