Gold and Silver

It is September 24th 2011 and something happened in the markets this week that caused gold and silver to drop. In two days gold dropped 9.3% the most since 1983. Has growth slowed? Have the markets been manipulated? Why are stocks dropping as well? I don’t know the answers to this but want to find out. Understanding this market will help make sense of when these dips happen and when I can take advantage of them.

There was a sell off and Jim Rogers said in a interview that Brazil started a trade war that put on big tariffs. http://www.youtube.com/user/JimRogersChannel  How does a trade war bring down gold and silver? Well, it is apparent that Brazil hit China with 30% tariffs which is causing some markets to stumble and bring down the prices of commodities and stocks. People are panicking because of this and are moving into the dollar and selling off their metals. The sell off was similar in 2008 when Lehman Brothers collapsed.

What is interesting about this dip is that gold is usually the safe haven when the markets collapse and this time money is moving into the dollar and frank. Again I ask why? Investors must feel that the dollar will help them in the short term until the dip in commodities and stocks subsides. Cash is king these days and it shows on the books of many companies and investors.

Bob Chapman http://www.youtube.com/user/TheSchiffReport has some good insight on this recent dip. He remembers what happened in 1987 when they had a similar dip and feels there is some manipulation and he sticks to his prediction of gold hitting $3,000 by February. It still doesn’t give me the answer of why the dip happens when the stock markets also dip.

The Federal Reserve has also made some announcements that have hurt the market. It seems as though every time Bernanke gives an announcement the markets do something crazy. Maybe that is a good indicator that people do not trust what the Fed is doing. Maybe that is also the reason that Ron Paul is making ground with his popularity. At least this time Bernanke said that the Fed has a grim outlook on the economy in the near future and markets need to be cautious. They have changed tune as to outlooks and the markets have adjusted to this with gold and silver following the downward trend. Still, why did gold and silver go down with this outlook and announcement?

Gold has been hit by global liquidity and when the global liquidity contracts it hurts the prices of commodities. This is the theory from Marc Faber http://www.youtube.com/user/DoomBoomGloom and the most believable heard this morning. Asset prices are down and gold and silver are just adjusting not dropping back to the levels before the crisis of 2008 when they started to rise and will continue to for the next few years.

This is a good time to watch and learn from the markets and what I want is not repeat some the same mistakes of the past. We have not learned from mistakes as this crisis has shown. Some of the most influential and supposedly intelligent experts have been wrong and now like to write their theory of what happened but never made an effort (with the exception of a few) speak when markets needed it the most. Therefore we have this market move where gold and silver have made a correction because of manipulation I can’t explain other than that I know it is manipulation. The tone about gold with some of the mainstream sites and channels are “told you soish” about commodities but their bonds they are paid to promote will crumble like no other soon. That is my prediction.