Liquidity Injections Carry Consequences

Emotions are certain push around the gold and silver markets in coming days/months/years. In light of the increased volatility, it is important to note that nothing has changed. Global and domestic (US) problems will continue to be met with direct or indirect liquidity injections. Liquidity injections, such as the one provided by BOJ over the past few days to stabilize various short-term credit markets, remain the only (politically) viable option to a debt problem that still has no acceptable solution.

While liquidity injections figuratively keep the economic can moving down the road another day, they carry consequences. The primary consequence is currency devaluation. Global citizens easily recognize this inflation as rising food prices.

The subtle hand has been providing resistance (tapping down on gold) for weeks. This was illustrated in yesterday’s commentary, Keeping The Tiger (Gold) In Its Cage. Today’s heightened emotions provided just impetus to trigger another burst of computer selling. This technique of stampeding the mindless computers has been repeated over and over since the inception of the secular bull. What's new here?

Gold and silver, despite the increasing volatility, remain quite resilient during what should be a period (cycle) of weakness. Subtle strength during what should a period of weakness is an important message that many investors/traders are missing.

Eric,

Thanks for all you have done over the years.

Exceptional turbulence is developing in the markets this morning, and should be reflected by gold as we approach Thursday.

The attached is my rendition of the coming market sentiment.

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Gold? Yellow, glittering, precious gold?
This yellow slave
Will knit and break religions, bless th' accursed,
...Make the hoar leprosy adored, place thieves,
And give them title, knee and approbation
With senators on the bench.

Commerce has set the mark of selfishness,
The signet of its all-enslaving power
Upon a shining ore, and called it gold;
Before whose image bow the vulgar great,
The vainly rich, the miserable proud,
The mob of peasants, nobles, priests, and kings,
And with blind feelings reverence the power
That grinds them to the dust of misery.
But in the temple of their hireling hearts
Gold is a living god, and rules in scorn
All earthly things but virtue.

Regards,

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