Precious Metals Up: Will The Party Noise End Today?

The AP newswire headline reads, “World stocks up amid faith in recovery”, but are they really or is this mostly a simple two-day $USD-Precious Metals trade?

http://finance.yahoo.com/news/World-stocks-up-amid-faith-in-apf-86354435…

Over the past three trading sessions, the equity indexes have hardly moved and some have even fallen, but the casual observer would think from the headlines that a so-called economic recovery has pumped stock prices much higher.

Take for instance the index of the world’s second biggest equity market, the Nikkei 225 closed last Thursday at 9978.6 and today was 9799.6. Australia, for all the talk of booming economy and higher interest rate closed last Thursday at 4702.0 for the All-Ordinaries index and this morning was 4695.8. So why are the headlines so loudly proclaiming the opposite?

The French CAC, German DAX and UK FTSE closed last Wednesday at 3795.4, 5675.2, and 5133.9 respectively and yesterday at 3770.2, 5657.8 and 5138.0.

So, frankly, I don’t see what all the screaming of joy is about other than more hype. On the weekend I opined that there was a temporary over-sold equity condition that might lead to gains of +2% to +4%, and in some markets that happened. I gave a list of stocks, mostly in the Energy and Basic Materials sectors and in most of those cases, those share prices happened to pull the indexes higher.

But where I have been wrong or at the very least confounded is the moon-shot in the precious metals this week. Silver for example closed Friday at 16.12 and at 6:28am ET today was trading at 17.46. That’s a gain of +8.4%. Gold, which in percentage terms usually moves very little, closed Friday at 1002.10 (spot) and this morning was up +4.5% to 1047.21. Palladium was up +6.1% from 293 to 311 and platinum +4.3% from 1277 to 1332.

These are massive two day moves and, because of the plunge in the $USD, well ahead of what I thought likely. But are they sustainable? Is the rest of the world prepared to stand by as speculators drive the US Dollar into the sixty cent level, causing their own export manufacturing industries to close more plants and lay off more workers? If so, those governments will soon have anarchy in their streets.

Some of the Fed governors are beginning to speak up. That is the voice of reason. On the other hand, there are Gold Bulls acting like this is Carnival, the street party never to end.

Well, I’ve been there; it always ends.

Something else to think about while you watch precious metals prices get pumped higher this morning. I have a hunch that party noise will come to an end today.

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