Isra-Mart srl: Gold & Silver Slide: Dead Cat Bounce In Stocks?

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Bad news for precious metals traders on Wednesday: the “risk-on” trade appears to be back on.

But how long it’ll last is a matter of much debate. As Gluskin Sheff’s David Rosenberg observes in a note to clients today, many are scoffing at whether stocks can keep climbing. He writes that today’s move up by equities is looking more like a “dead cat bounce”:

“It is unlikely to last. Selling into strength is always a good strategy at the onset of a recessionary bear market, where 27% of the stock market loss occurs before the actual GDP contraction occurs; there is 73% to go once the slippage in the economy and earnings actually takes place.”

Today’s fall in precious metals is likely being driven by “concerted governmental selling,” asserts economist Dennis Gartman.

But the price action today is taking place despite a backdrop of a “very, very well defined upward sloping trend,” he points out. As long as that continues to be the case, Gartman says he’ll “remain bullish in the long-run.”

Meanwhile, gold futures — which hit intraday lows of $1,793.80 an ounce about half an hour ago — are now rebounding somewhat. The most actively traded December contract on the Comex is down $66.60 at $1,806.70 an ounce.

Still, between today’s low water mark and yesterday’s settlement, gold futures experienced nearly an $80 an ounce drop-off. Gold futures reached an intraday record of $1,923.10 an ounce on Tuesday, but ended lower.

December silver is trading off by $1.02 to $40.85 an ounce.

The PowerShares U.S. Dollar ETF (UUP) is slightly down on Wednesday, slipping by 0.4%.

Richard Hastings, a strategist at Global Hunter Securities, believes the decision by the Swiss National Bank on Tuesday to cap the value of the Swiss franc against the euro might be in-play today. He says that while a long-term positive for gold, such a move could have negative short-term implications for the yellow metal. (See video above.)

Barclays analysts also pointed to the fact that safe-haven buyers now have less options. Although that number is only depleted by one, such plays “have become increasingly scarce.”

As a result, the Swiss National Bank’s decision should over time add “to the attractiveness of the U.S. dollar, the Japanese yen and gold … ” Barclays added.