Black Tuesday Turns Golden

Includes: CNH, DE, DIA, GLD, QQQ, SPY
by: Investing The Middle Way

What could have been a cliff-dive was averted by the Fed's emergency 0.75% rate cut. The Dow managed to end the day down only 128 after opening down 460 points, but the real beneficiary was gold as its spot price gained $7.9 after being down more than $23 overnight. The precious metals positions I picked up last Friday were comfortably in the green by 10 a.m., but I couldn't help but wondering what I would have done had the U.S. markets been open on Monday. Would I have cut my losses early? Probably, but again, perhaps we would have seen the 75 basis point cut on Monday morning?

After a day like this, a near-term bottom must be considered a real possibility. I took some profits but net/net added more positions on Monday so that the trading account is now back to 2/3 committed, and all in PMs. There was a lot of strength in the old green back as world markets were crashing. Indeed, the dollar index may bounce further, but I do not expect gold to take the inverse course as many are conditioned to believe. Whatever renewed vigor in the dollar comes from competitive devaluation of other fiat currencies. The upshot will be that gold rises in all currencies.

Elsewhere, farm equipment makers Deere (NYSE:DE) and CNH Global (NYSE:CNH) had a good day, gaining 8.8% and 7.4% respectively. I picked up some CNH Tuesday morning as its early gains stood out in a horrendous tape. As long as the U.S. ethanol program remains and the Chinese eat more meat, I'm sticking with positive views on the agribusiness sector.

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