"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Tuesday, November 8, 2011

The Berlusconi Bash

Maybe that is a bit of an overexaggeration but it was the news that Italian Prime Minister Berlusconi was stepping down, resigning his position leading up the government, that sent the equity markets into an upside tizzy as giddy bulls threw caution to the wind and jumped out of anything resembling a safe haven and back into stocks.

Down went the US long bond, a full point and a half, and down went gold after it had pushed solidly above the psychological resistance level of $1800. Even the mining shares had been moving higher adding onto yesterday's gains before they too gave way under the selling pressure unleashed into gold.

Silver actually was functioning a bit more like a safe haven earlier in the session, drawing buying on off the stronger gold price before it moved lower when gold broke down and could not hold onto its gains. However, the return of speculative inflows  (RISK ON) into copper and many other commodity markets underpinned silver and it clawed its way higher pushing back towards the $35 level.

The Dollar also moved lower as traders jettisoned the greenback for the "undervalued" Euro.

We could just as easily see every bit of this completely reverse before the week ends if these same traders start thinking about the structural difficulties standing in the path of dealing with the Eurozones financial problems. For today, they seemed to think that with Berlusconi out of the picture, a new government would perhaps be more receptive to implementing the "austerity" measures required under the plans by those who hobbled this European care package together. That was interpretted (Beauty is definitely in the eye of the beholder) as meaning the party is going to get going once again as the liquidity spighot opens up.

We'll see how long this sentiment indeed lasts. Suffice it for now, the gold bulls were clawed and bitten some by the bears as a result of this news. The shorter-term oriented bulls quickly sold out and cashed in some of their winnings with a fairly good amount of volume being down up near and just above the $1800 level. Clearly some fresh shorts were put in place today with some attempting to pick a top hoping that the fresh news will provide them with some downside momentum.