On the left hand, the monthly XAU index, which carries 16 gold and silver mining stocks. Silver is the big negative spin here, as it dropped much more than Gold but nevertheless Mining stocks also crashed and lost 60% from the top without any correction so far in monthly terms and deep below the monthly Bollinger. The 78/80 level is a good support for the time being and we should see a considerable bounce towards 100 even 110 within 2-3 months once we hit those levels early November. Thereafter, we will drop back to below 80s towards 65 even. Material stocks have been dumped almost without any discrimination in the last 4 months, which is a primarily function of a deleveraging process. This will produce some big opportunities going forward. Hedge Funds and commodity funds were very popular and see huge redemptions currently, which will exaggerate the moves and we will get some bargains soon especially in the Gold area. The point is that we had an artificial world for a while since the $2 trillion Hedge Fund world worked with leverage (that means they brought a speculative amount of demand which does not really exist). That money will partly disappear for a generation at least, but slowly be replaced by the money central banks are printing to cover the losses of banks. That is a slow process since banks are sucking it up like a dry sponge. At some point it will find its way into the system with a huge inflationary push. That is a longer term story, though for now with decreasing inflation short-term the word with rising quotation will be deflation but actually we only have a asset implosion and the only way to fight it is inflation.
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