So accustomed have we become to seeing bullion’s worst days matched lurch-for-lurch by the stock market’s that yesterday’s chastening of gold and silver bulls, if no one else, came as a rude surprise. Up until now, the exhilarating pleasure of watching the stock market get the crap kicked out of it whenever gold and silver were falling was our consolation prize.  Yesterday, however, with gold down nearly $50 at one point and trading $42 lower at settlement, the Dow thumbed its nose at bullion bulls by rising a token 20 points. Ouch! If the Industrial Average instead of rising had fallen as hard as gold percentage-wise, it would have been down by 345 points. And what a lovely day that would have been!  It is so rarely any more that we experience anything resembling a breath of sanity on Wall Street that the spectacle of stocks paying heed, however fleetingly, to America’s darkening economic prospects comes (when it does come) like a bracing blast of fresh air — akin to being pronounced fit as a fiddle by one’s shrink. Alas, with yesterday’s schizophrenic tallies to ponder, we can only infer that our view of the financial world, particularly of a U.S. economy sinking deeper and deeper into Depression, remains outside the flow of popular opinion.

So what of the pasting that bullion took yesterday?  We wouldn’t worry too much about it, at least not yet.  Although Comex February Gold fell $50 to an intraday low of $1375, it would need to drop by a further $58, to $1317, over the next day or two to do any real technical damage to the daily chart (see above). As it happens, the selloff did not breach even a single prior low; we require no fewer than two such breaches to signal the onset of a trend that is likely to continue. That would imply a fall, by no later than Thursday’s close, beneath the 1352 low labeled in the chart.  And even if that should happen, our gut instinct would be to back up the truck and buy ‘em if the futures were to rally and commence a second leg down. This scenario is sketched out hypothetically in the chart, and although we are obliged, as always, to remain open to the possibility that something far worse than a minor correction is developing, at this point that is all we see. Technical factors aside, we should ask ourselves whether anything has changed to deflect the forces that have been driving gold and silver relentlessly higher for the last ten years.  In fact, the most reckless monetary blowout in the history of civilization is continuing unabated as we write these words. As such, we commend bullion’s inexhaustibly deep-pocketed buyers – China, Russia, Saudi Arabia, India, Brazil et al. – for the patience, diligence and wisdom they have shown in stepping back for a while to allow gold and silver prices to return briefly to relative bargain levels.

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