1650 and 42
I'm still confident we're headed there as soon as next week. Here's why.
The Turd is no civics professor but, as I understand it, there's a process which must be followed on Capitol Hill. As a refresher, I offer you this:
IF The Republocrats in The House pass their bill tonight and IF The Republocrats in The Senate approve their's over the weekend, the differences must then be reconciled in a conference committee. Then, IF reconciled, both chambers MUST pass the new, singular version. By Tuesday. Our esteemed, illustrious and supremely qualified President must then sign the bill into law.
Hmmm. When you look at it that way, it sure doesn't seem likely that they're going to get it done. I'd say that the chances are now greater than 50/50 that The Regime raises the debt limit by Executive Order. If O'bottom goes this direction, you can bet your arse that he won't just piddle around with a puny increase. He'll raise that baby by at least $2T, enough to last through the 2012 election. This will result in two things:
1) A complete loss of confidence in the ability and desire of the U.S. government to address their disastrous fiscal "situation".
2) An inevitable downgrade of U.S. debt by the major credit rating agencies to AA+, at a minimum.
Both of these developments are extremely bullish for the PMs. Extremely bullish. They also signify a major signpost on the road to economic disaster. Remember, quantitative easing is, at its core, simply about buying time. The idea was that if, by buying treasuries, The Fed could keep rates down long enough, the economy would recover and tax revenues would increase sufficiently to sustain The Great Ponzi. To no one's surprise, it didn't work, and now Fed/Govt/TBTF Complex faces their end game.
In order to survive, The Fed MUST now continue QE at an even greater pace. The PMs and all commodities will see their multi-year rallies accelerate. Economic conditions will continue to worsen. Tax revenues will remain stagnant or decline. The annual U.S. budget deficit will widen. The dollar index will break down through the March 2008 lows of around 71. The ratings agencies will be forced to downgrade U.S. debt once again. To keep rates on current and past debt low, The Fed will have to engage in even more QE. The entire U.S. ponzi scheme will continue circling the drain faster and faster until the bottom finally falls out.
And this is all going to happen a lot sooner than what you might think. Some say 2030. Some say 2025. I think we'll be lucky to make it through 2013. Oh, and don't ever forget, the favorite tools of distraction for the Fed/Govt/TPTB Complex are wars and insurrections. Plenty of that on the way, too. As we like to say around here, prepare accordingly.
Onto the charts. Both of our metals ran into a double whammy today. First, there's a general reluctance to bid them higher in that everyone is now convinced that a debt ceiling deal will cause price to drop sharply. Second, The Cartel has clearly decided they'd like to keep a lid on things near 1625 and 41. However, it is very important to note that, even under these conditions, the metals never did truly roll over. Gold rebounded off of firm support below 1610 to close near 1615. Silver held support near 39.50 and is now back just under 40 at 39.80.
For tomorrow, there are more reasons to be long than short over the weekend so I expect an UP day. Ideally, gold will trade up and finish the day near the crucial 1625 level. Silver will rebound and finish somewhere in the neighborhood of 40.50. When the markets re-open Sunday evening and the "deal" has still not been reached, expect both metals to blast through the Cartel-induced resistance levels mentioned above.
That's all for now. I'd like to end this on a happy, upbeat note but I'm afraid I can't. I can give you this, however. My favorite schoolhouse rock. "Yow! That's unfair! Givin a guy a shot down there!" See you tomorrow. TF