Gold regains its footing, silver up sharply


Gold has regained its footing in early trading today, up $4 at $1337.00.  Silver is trading sharply higher – up 31¢ at $16.88. Gold and silver are getting a residual, though modest, boost from the stock market routs in Asian and Europe overnight and early New York trading.  The dollar is steady to down this morning, but inflation concerns weigh heavily on both the forex and bond markets.

Not getting much attention thus far is the report released this morning by Standard & Poor’s warning of the debt default danger among highly leveraged corporations.  (See immediately below.)  Zoom out from all the noise and obvious concern this morning among professional traders and you get a sense that the financial markets have crossed a psychological line of which the general public is only casually aware.

Please scroll to get a fuller picture of what is influencing markets this morning.

Chart of the Day

Chart note:  We thought that now with the rumblings in the stock market, it would be a good time to post the chart you see above from MacroTrends. It  shows how many ounces of gold it would take to buy the Dow Jones Industrial Average from 1915 to present.  At present, after Friday’s 665 point drop, it takes 19 ounces of gold to buy the Dow.  In 2000, it took over 40 ounces before the ensuing correction and the launch of gold’s secular bull market.  In 1979, the bottom shown on the chart, the ratio was near one to one. The chart suggests that gold is undervalued compared to the Dow Jones Industrial Average and that at some point the values will cross. The question then becomes: “Where and when will that happen?” – a question that opens the door to all sorts of possibilities.
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