I am looking for gold to surmount $1,600 Thursday, partly on Moody's ratings warning for the U.S., but I would sell out of my holdings before the close, as I expect the European bank stress tests to support the euro, and I anticipate American congressmen will move more quickly now toward raising the debt ceiling.
Wednesday’s move in gold was nothing new, so discount those theorists trying to tie the day’s advance to Federal Reserve Chairman Bernanke’s comments. Yes, the Fed chief said more quantitative easing or other “untested measures” were possible for a still testy economy, but I would hope you all already knew that. This latest surge in the glittery metal I don’t own enough of is marking close to a 10% two-week gain. So Wednesday’s 1.2% rise to about $1582.20 is but a step in a staircase built on the crumbled architecture of medieval Europe and perhaps a few blarney stones.
Gold was not up on the dollar alone, but climbed over the euro too. This is about the demise of fiat currency, watered down by nation states seeking to save sovereign sinners Portugal, Ireland, Italy, Greece and Spain (the PIIGS). This is about the United States’ government growing its debt and deficit to record highs and then threatening default. This is about geopolitical chaos running through the oil rich Middle East and North Africa. This may be about the end of times … or at least the good times.
The gold standard seems to suit Standard & Poor’s and Moody’s just fine, with Tuesday’s downgrade of Ireland’s sovereign rating to junk, a move that followed the recent cutting of Portugal. Wednesday night Moody’s even dared to put the United States on ratings watch, warning that it is becoming more likely that the U.S. could suffer a short-term default on its debt payments.
But, in fact, all that glitters is not just gold. Silver was up near 7% Wednesday as well. Whatever hard asset we price in fiat currency is going to be worth more as those currencies disintegrate.
So I suppose you’re wondering what the Greek suggests you should do in the near-term with regard to gold. While I’m not sure what the Bilderbergers want over the long-term, and while I think traders would like to ride gold over $1,600, I also believe Friday’s stress test results from Europe will be mostly good, if not adequate enough to support the euro. I think Wednesday evening’s warning from Moody’s, the shot across the bow, should be enough to cause a good number of congressmen to step up their action to raise the debt ceiling. In other words, I’m looking for gold to backtrack before too long, so even though I can feel the end of good times coming, I still say take your profits in gold before Friday, yet perhaps after we hurdle $1,600 Thursday.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.