Mate.. you take the prize for worst timing on a post from me on this one.. 15 mins later was the start of its massive drop. Bugger.
$80 drop in one session and silver nearly 7% decline. I recall myself saying gold down to 2250 INITIAL target level.
What caused the markets to react like this? Anything to do with the drop by the EU in dropping interest rates by 0.25%?
Partially likely but as the bears have been saying for a long time, dropping interest rates signals that the economy is in a worse state than we are being told and that is the signal to the markets GTFO. I also said that gold drops initially when markets drop then it recovers (historically but might be different this time).
Shouldn't a drop in interest rates be a good thing for real estate? Here's a German RE company reaction. Bugger. Something must be about to collapse right?
The drop in interest rates by the EU caused the USD to strengthen putting downward pressure on commodity prices. At present, the Fed has diamond hands on interest rates and not going to drop these in the near term, therefore a further collapse in the above for the forsake future but once they reverse and start to drop the above might change. A fall in USD strength should occur if not earlier.
By then it could go in either direction.. Fed dropping rates will be the signal the economy is weak and there might not be the demand, therefore commodity and gold prices won't rise. But if China and Russia are strong then those might rise again. This will lead to a further increase in cost of goods and therefore inflation which will require an interest rate increase once again (1970s style).
Warren Buffet has made a big bet on the oil price rising based upon a folding of the Fed in interest rates. I am sure that the price will sky rocket for some time at which point he'll dump those holdings and take his profit. Then oil will likely plummet as the final phase of economic correct takes place.
He did the same with silver AFTER the 2008 crash. I would explain the recent silver price movement pushing the shorts out with the final pump and the intelligent shorts coming back in. We'll see a drop in the price alongside gold and this is the end of the markets until a bottom is set.
Stagflation like Japan in the 80s or a quick recovery? A folding Fed is likely stagflation until massive pain over an extended period (40 years before ATHs?). Maintaining rates might kill the economy but it'll stop inflation finally (after a massive jump in unemployment).
All this might change in the press of a button.. then it really doesn't matter..
(20min delay)