Don't Ignore this Gold Move

With gold flying today, I wanted to chime in quickly here and urge investors not to ignore this move for a few reasons:

1) Considering the recent strength in the U.S. dollar, gold's relative performance has to be deemed very impressive.

2) There have been rumors for weeks that the Perth Mint in Australia had been having a tough time meeting demand for physical metal. Today it was confirmed, as the Mint suspended all physical deliveries until January. Adam Hamilton wrote an interesting article on silver today, as an aside.

3) Confidence is breaking--hard. I don't know about you, but everyone I know-- including folks I don't necessarily expect to be following the market-- grumbles about how "these guys (politicians) are just printing funny money" in dealing with today's issues. It's clear. People aren't kidding themselves any longer. Thus, we have 2 choices: nasty recession or a wild political attempt to stave that recession off resulting in both recession and runaway inflation. Folks are betting, fairly, on the latter.

4) Citi (NYSE: C). Think Citi at $3 doesn't matter? Spare me the bit about "stock price performance is different from fundamental performance." The market is betting that Citi is going out, and that bet on Citi doesn't feel all that different from the same bet on the entire system. Scary stuff out there folks, don't kid yourselves.

Readers know I'm no perma-goldbug. And I even warned that the depths to which gold could plunge during the recent de-leveraging were unknown. I hope gold crashes and the economy roars back to life.

But you shouldn't kid yourself about what may be happening around you and it wouldn't be wise to ignore today's gold move as meaningless.

*Readers: Like this article? Chip discusses market action, the GM bailout and John Boehner in this week's episode of his podcast, Market Neutral. It's a good one--be sure to check it out!

-Jim Slagle, Executive Editor

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