Quotes for gold and silver have taken quite a leap from Wednesday's punitive lows, hinting that the so-far 10% correction from mid-July's $1,000 top may be as bad as it gets. We'd been expecting the weakness to continue for at least a little longer, with precious metal prices getting dragged down for another day or two by sagging speculative demand for crude. Our target for October Gold was 874.10, and even though the futures will need to surpass 935.20 to invalidate that target, it now appears as though Wednesday's 902.70 bottom may have exhausted sellers. Coming off that low, bullion surprised us on Thursday by continuing to rebound $10 even as oil quotes were falling a further $2.50 per barrel. This is an encouraging sign for those of us who have been expecting prices in the two sectors to decouple, with bullion going higher, oil and gas lower. After all, why should gold and silver be hostage to the collapse of a speculative bubble in energy resources? We're convinced there's plenty enough oil out there and that quotes are about to chase falling demand down to $60 a barrel as global recession takes hold. Demand for bullion, on the other hand, comes not from a handful of nutty speculators, but from untold millions of investors who are gravely concerned about the terminal condition of the dollar. A Bell-Ringer The irrational zeal of oil bulls showed itself unmistakably a while back when the price of crude continued to soar even as American motorists were reportedly cutting back drastically on their driving. Although this would have significantly reduced global demand for crude at the margin, traders at first ignored the warning signs. But if we needed to hear a bell ring to announce The Top in oil, it came last week with
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