Gold closed below the technically important $1,320 level on Friday, setting this week up for a continuation of the trend, lower. Ditto for silver.
What about Deutsche Bank? I’ll address that head-on since it’s on everyone’s mind. “Won’t that cause gold and silver to explode higher if the bank fails?”
The simple answer is that it’s too soon to say. A failure of Deutsche Bank should cause massive liquidation of other assets and margin calls by Deutsche Bank customers and other banks, and gold and silver could get hit very hard as those customers free up cash by selling their illiquid assets.
This could cause the October 5-7 forecast date for a low to extend out a bit in time. It’s just too soon to say.
On the other hand, the metals may bottom right on time, and turn back up, as we have expected all along. But even here, it’s too soon to say.
I’m not being wishy-washy, though it may sound that way. The fact of the matter is this: The potential failure of Deutsche Bank is many times greater than when Lehman Brothers went under in 2008.
Such a black swan event can cause markets to move several standard deviations in both price and time. That essentially means that anything goes.
For right now, I have to monitor the markets down to the five minute charts to stay on top of them.
The euro is also down hard this morning; the dollar is making a nice move higher.
The Dow Industrials are a tad lower, but caught in the cross hairs of those in Europe wanting to get their euros to safety (into U.S. blue chips) and those wanting to liquidate just about everything and go to cash.
Hold all positions and related stops. But stay tuned in, this is a critical week …
Best,
Larry
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