It has obviously plummeted as it discounts the massive hit to the Japanese economy but it could be that traders are saying, "enough" for now. Of course, if the situation regarding the nuclear reactors were to worsen further, all bets are off; however, if the interprid Japanese can get those reactors under control, the Nikkei will probably commence a short covering rally with shorts booking profits under the idea that they have discounted the worse case scenario.
Were that to occur it would pull up the US equity markets and probably send money flowing back into the commodity complex as longer term, demand for many commodities is going to be on the rise due to the amounts required for reconstruction purposes. Food stocks will also have to be replenished.
Gold and silver would then rebound sharply. Stay tuned as events unfold.
Hi Dan, I have been a watcher/investor in the precious metals area for 5 years now and I must admit, this stuff is no easy ride. Take the markets today. Usually when fear comes in, the dollar rallies a bit and PMs go up. I can understand that right now, with the uncertainty in Japan, that Hedgies etc are getting into cash. But whose cash/dollars/assets are they buying? The dollar is flat and PMs are dropping. Where has the money gone?
ReplyDeletedan, something has me besides myself in bewilderment.....how on earth is the yen rallying on the heels of the disaster and the irresponsible BOJ.
ReplyDeleteplease make some sense of it for me.
thanks
Markaltobelli;
ReplyDeleteThe Japanese insurance companies are selling Tresuries and exchanging those Dollars for Yen and then repatriating the Yen to prepare for the enormous claims that they are going to have to pay out to rebuild the nation.
As counterintuitive as it sounds, they hold such a large number of Treasuries that the impact on the Dollar/Yen cross is significant.
Andrew Smith - the money comes out of the commodity sector and just sits there in cash in the accounts of the hedge funds. They run to cash to get liquid and also to meet any potential margin calls in other markets where they are leveraged to the gills.
ReplyDeleteThat is also one of the reasons they sell gold initially.
thanks TD.
ReplyDeletethat helps a little
Hi Dan,
ReplyDeleteThe trouble I have is that in a free market ,one that is not so manipulated as the PMs are gold/silver should of been going up not down.There is no reason why gold/silver are not breaking into new highs .It just makes me sick to see how these metals are manipulated by the bullion banks and of course the Fed.
Robert - yes both the metals markets are not freely traded but keep in mind that this is exactly the same thing that happened back in 2008 when the huge sell offs hit the commodity sector and the metals. These damn hedge funds just dump everything at once, and I mean everything. the only thing higher today was the Yen, the bonds and the Dollar, only a tad.
ReplyDeleteIt was pretty much the same back in 2008.
Dan,
ReplyDeleteThanks for the reply .
What would be your best guess when this over reaction will reverse and things get back to normal?
I wish I was around before the Fed and all these hedge funds and their black boxes made such a mockery out of trading
Fundamentals mean nothing to these guys--