While the prospects for hyperinflation and the general outlook on the economic and systemic-solvency crises are unchanged, general circumstances have continued to advance towards the ultimate demise of the dollar. The most recent development was yesterday’s (Septembers 13th) announcement by the Federal Open Market Committee (FOMC) of a new, open-ended round of Federal Reserve quantitative easing (QE3) - John Williams, Shadow Statistics
Well, tonight is a big night for the Peyton Manning-led Denver Broncos. More on that later. Last week Bernanke set the wheels in motion for QE to infinity. QE to infinity is really just a flashy metaphor for the concept of competitive global fiat currency devaluation - i.e. the race to see which Central Bank can most quickly devalue its currency to zero. In a sense, Bernanke just gave the U.S. a commanding lead in that race by making the Fed's new mortgage purchase program "indefinite."
The Fed's actions clearly signal to the world that the real economy is in much worse shape than is being conveyed by overly manipulated Government and industry association economic statistics. This view is affirmed by this morning's Empire State manufacturing survey. This widely followed metric released by the NY Fed came in at -10.41 vs an expected reading of -2. It was the weakest reading in nearly two years. Especially troubling was the plunge in the new orders index. Here's the report: LINK
The action in gold and silver reflected the market's "vote" on the FOMC policy decision. Technically the metals and mining stocks are a bit "overbought" after starting a big move higher since the last week in July. I am expecting a period of pullback/consolidation while the market digests its recent gains. Having said this, the eastern hemisphere physical market buyers have started to ramp up their buying again, as seasonal factors in India come into play and, as is being reported by several European bullion banks, the Chinese have begun to aggressively move into the silver market.
Also, I suggested about a month ago that eventually the Indian rupee would start to reverse its long sell-off and move higher and unleash a torrent of pent-up gold demand. This appears to be occurring and import premiums in India have gone from being negative for a few months to now being mostly positive. This means that the Indians are buying again. This demand is being further boosted by strength from the Indian stock market and a recovery of the crucial Monsoon season, which determines the extent to which Indian farmers will make money which is typically converted into gold.
The seasonal/fundamental factors in India and China could easily curtail the degree and length of market consolidation. In fact, every intra-day sell-off during Anglo/U.S. trading should be seen as an opportunity to accumulated more metal. Aggressive traders can try to market time the volatility by buying the dips and selling the spikes, but the real risk at this point is being left out of a market which could easily take gold well over $2,000 and silver well over $50 before the end of the year - and even higher this spring.
Today is a great example, as post-Comex electronic market, which tends to be relatively illiquid, was used to knock silver below $34 to $33.84, after which silver took less than 15 minutes to rally back over $34 and is trading at $34.20. Buy all dips.
As for tonight, I am looking forward to a competitive football game between Denver and Atlanta. As a homer of course I expect the Broncos to win, but win or lose I want to see good game. Denver has a better defense than Atlanta and they both have potent offenses. The Falcons hammered a very bad Kansas City Chiefs team last week, so we don't know how good Atlanta really is. Denver's tough win over the Steelers speaks for itself, especially if you were betting on Denver and laying the 1 point spread!