MARKET MELTDOWN CONTINUES: Gold & Silver Prices Begin To Disconnect

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by Steve St. Angelo, SRSRocco Report:

As the BLOOD continues to run on Wall Street, gold and silver were the few assets trading in the green today. As I have mentioned in past articles and interviews, investors need to get used to this sort of trading activity. Even though the Dow Jones Index ended off its lows of the day, it shed another 458 points while the Nasdaq declined 190 points and the S&P fell 60.

As the broader markets sold off, the gold price increased $15 while silver jumped by $0.25. However, if we look at these markets during their peak of trading, the contrast is even more remarkable:

At the lows of the day, the Dow Jones Index fell 730 points or 3%, while the S&P 500 fell 3.2% and the Nasdaq declined by 3.8%. Also, as I expected, the oil price fell along with the broader markets by dropping 2.7%. If individuals believe the oil price will continue towards $100, due to supply and demand fundamentals put forth by some energy analysts, you may want to consider one of the largest Commercial Net Short positions in history. Currently, the Commercial Net Short position is 738,000 contacts. When the oil price was trading at a low of $30 at the beginning of 2016, the Commercial Net Short position was only 180,000 contracts.

Furthermore, if we agree that supply and demand forces are impacting the oil price, does anyone truly believe oil demand won’t fall when the stock market falls by 50+%??? I forecast that as market meltdown continues, the oil price will decline as oil demand falls faster than supply.

Now, when the markets were at their lows today, gold at its high was up $20 while silver increased by $0.44. Of course, this type of trading activity won’t happen all the time, and we could see a selloff in all assets some days. But, once the Dow Jones Index falls below 19,000, investors will likely start to move into gold and silver in a much bigger way.

If we look at the following stocks and indexes from the peaks set in 2018, clearly, there’s a long way to go before the bottom is in:

The infamous FANG stocks are down between 14-20% from their highs while the broader markets are down 10-11%. When the Dow Jones Index fell from its high of 14,100 in 2007 to its low of 6,600 in 2009, it lost 53%. However, due to a higher degree of leverage in the markets today, I wouldn’t be surprised to see the Dow Jones Index fall by 60-75%. A 60% decline in the Dow Jones Index from its peak would put it at the 10,000 level… perfectly reasonable in my opinion.

So, what would a 60% selloff in the broader markets due to the gold and silver price?? That’s a good question. If just 1% of the $400 trillion in global assets moved into the precious metals, we could see some insanely higher prices. But, I don’t like to put out price targets because analysts who have done so in the past only frustrate themselves and their followers.

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