It seems a bit counter-intuitive but since we’re living in Clown World it does often take a bit of effort to try and make sense out of market events. Sometimes things just don’t make sense - Period. However I think I can try to make sense out of this one. The news event today is that a high profile Ratings Agency called Fitch yesterday downgraded the Credit Rating of the United States from AAA to AA+. Ok, so what’s the big deal here? It’s only a minor change to the untrained eye but the important thing to note is the direction. It’s a Downgrade and Mr Market did not like it.
The Stackers here at SGS are well aware of the Fiat Currency Ponzi Scheme and the seeming inevitability of currency failure amongst our Western Nations and particularly the Worlds Reserve Currency – the USD. It’s one of the main reasons why we stack Precious Metals. So this kind of news of a Downgrade is no surprise to us, but the logical question most would have is that if the US Credit Rating is going down then surely the Smart Money would be trying to get away from the US Dollar and thus be moving into Safe Haven assets – like Gold and Silver? But no, that’s not how these markets work in the short term.
Instead what we see is a Deflationary Wave where the first Safe Haven Mr Market rushes back into is Cash because it's liquid. Since the Financial System is so Highly Leveraged, even a slight selling wave in markets can cause Margins Calls and Forced Liquidations amongst the Highly Leveraged Wall Street Bros. Mr Market knows this and we have plenty of examples in recent years of how devastating a Deflationary Wave can be as the Selling momentum can Cascade within a Negative Feedback Loop and spill into other markets. It’s often metaphorically referred to as Financial Contagion. Even during the disastrous Global Financial Crisis of 2008 which inevitably resulted in significant money printing the price of Gold and Silver initially took a pounding alongside all the other markets before taking off.
So today that’s what I think we are seeing. A Deflationary Wave where people just sell everything. At time of writing Gold is down 0.82% and Silver is down 2.77% just from todays selling alone. These are fairly big moves for a single day by the metals, but don’t be spooked. If the US Credit Rating continues dropping over the years ahead the Smart Money will eventually realise that Precious Metals is a good place to be. All that we Stackers need to do is ride out these Deflationary Waves, hold our mettle metal and we’ll be ahead of them all when the party really starts.