Not a good day for PMs. I have sided with the inflation camp in the inflation/deflation debate generally. But I don't see how anyone can deny the strong deflationary forces that exist right now. Housing, the stock market, weak consumer, strong dollar, economic weakness in Europe and around the world, M3 money supply tanking. The deflationary forces are winning right now. The argument in favor of inflation is how governments and the central banks react to the deflationary forces. At this moment in time the political winds favor austerity, both in Europe and increasingly in the U.S., as much as Obama, Geithner and Paul Krugman, throw a fit about it. Austerity will only accentuate the deflationary trends. My prediction is that austerity and the weak economy in both Europe and the U.S. will lead to the dreaded double dip. Then the public will clamor for the government to do something about it. And the government and central banks will cave to public pressure. They will start restimulating once again. The printing presses will go into all out battle stations, and the inflation genie will come back out of the bottle.
In terms of gold and silver prices right now, as I've said I'm nervous, not only because of the one guru, Tom O'brien, I wrote about. But also because we are in the worst seasonal period of the year for PMs. June through August is often the worst time of year for gold and silver. The best time of year is September through January. I'm hoping that this trend isn't the case this year, but I'm afraid hope may not be enough.