Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19
It’s Not Technology but the Fed That Is Taking Away Jobs - 16th May 19
Learn to Protect your Forex Trading Capital - 16th May 19
Gold Ratio Charts Offer The Keys to the Bull Market - 16th May 19
Is Someone Secretly Smashing the Stock Market at Night? - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

Gold and Silver Caught in Credit Crunch Downdrift

Commodities / Gold & Silver Aug 19, 2007 - 11:45 PM GMT

By: Roland_Watson

Commodities At the time of writing this, the Dow Jones Industrial Average is down 9% from its record closing high of 14,000 set on the 19th of July. Since then, fears over defaulting sub-prime funds spilling into main markets has had large numbers bailing out of higher risk assets into the relative safety of government bonds and cash.

Needless to say, this correction has taken on a life of its own as questionable mortgage loans have now been joined by fears over funds failing due to lack of redemption liquidity. The problem is now in the domain of herd mentality and we await fear-driven prices to fall and meet the bottom feeders below. Where that might be is the main question and we can hazard a guess later on.

But silver and gold have also been caught in this downdraft, which has perhaps surprised some safe haven investors. Suffice to say that people flee to high-grade government debt during financial tropical storms but turn to gold and silver during financial hurricanes. The crowd is betting on a tropical storm just now.

But how are the various precious metals measures fairing during this stock market correction? The table below gives the percentage drops since the Dow topped out at 14,000 to the end of the 16th August.

NAME 19th July 16th August CHANGE
Russell 3000
Wilshire 5000
US Dollar Index

General indices are down about 10% while precious metals stocks have taken a 23% bath going by the HUI. The newsletter I write has its own silver stocks index called the SASC, which has fared even worse with a 41% drop since July 19th. Subscribers will shortly receive a ranking of the silver stocks that have fared best during this correction. This is normally a sign of which ones are the most favoured when the bull resumes.

Silver itself has fared somewhat worse than stock markets with a 16% drop. In other words, you didn't do much worse holding silver bullion. The surprise however is gold which has performed admirably in losing only 4.4% during this Dow downdraft. It seems that although investors do not regard these events as our financial hurricane, enough are seeing a hurricane to shore up gold prices with their precautionary buying and holding.

Where will all this end? Some are expecting at least a 20% drop from these highs, which takes us to Dow 11200. My take is that we are correcting the entire move that the stock markets have enjoyed since March 2003. Elliott Wave analysis confirms this using the British FTSE100 as the best example of this completed impulse wave structure.

If this is the case we can expect the Dow and other indices to retrace at least 38% of their entire moves since March 2003. In the case of the Dow this means dropping to about 11500 or an absolute drop of about 20% from 14000.

For gold, silver and their stocks we see them being caught in the initial downdraft but as this correction ensues (I suggest it could last over a year), speculative money should begin to flow back to the precious metals as hope of an immediate Dow returns fade.

Further comments can be had by going to my silver blog at where readers can obtain a free issue of The Silver Analyst and learn about subscription details. Comments and questions are also invited via email to

By Roland Watson

Further analysis of the SLI indicator and more can be obtained by going to our silver blog at where readers can obtain the first issue of The Silver Analyst free and learn about subscription details. Comments and questions are also invited via email to .

Roland Watson Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules