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My thinking is that gold and silver will drop because the FRN will go up if it stays as a reserve currency and China is saying the FRN is the world reserve currency.

Here is my logic. I may be missing a bunch. Let me know what you all think.

The US lost its AAA rating, Pensions and other funds that said they will only hold AAA rated bonds and securities will be forced to sell US bonds and this will drive up FRNs because to sell you must buy FRN. Gold and Silver are priced in FRNs so if FRNs go up then gold and silver will go down.

I know FRNs should go down and gold and silver should go up but the opposite could happen if my reasoning is sound.

Im all ears... or eyes in this case.

I think it depends on what they do with FRNs after they sell. If they keep them in FRNs, maybe. But generally they will be looking for another investment class asset. I think gold will go up a modest amount (for now, tonight) while the market equilibrates. I think the Asian markets will go down a bit tonight, but may be volatile up and down. I think everyone is now holding their breath wating for the NYSE open. If there is a big sell-off, and TPTB don't keep it in control, then I think gold will go up big. Ironically, Treasuries may also go up (in demand, which means price goes down), as indecision and insecurity will cause to some to sell, while others see US bonds - even as a AA+ - as a safe haven. So bonds may actually go down in price as demand for them increases.

A lot of maybes above. Not much of it would be guesses I would bet much on. I'm in cash and PMs only, and staying there (moving in and out a bit as may make sense on a given day) until this shakes out a lot more.

"Eventually", and that's a slippery word, the FRNs will lose most of it's value against everything. FRNs are fiat money, "faith and credence", and one party came into power with the support of people who are actively destroying the faith and credence anyone on the planet can have in the US and the other party is rationalizing going along with it for short term profit, year by year, again and again.

Eventually the bill is going to come due.

"Short term" as in the next month or so? My opinion: 75% chance the FRN loses half it's value over the next four weeks.

75% chance the FRN loses half it's value over the next four weeks.

Perhaps the scariest words I've read on this site.

OneBiteAtATime wrote:

75% chance the FRN loses half it's value over the next four weeks.

Perhaps the scariest words I've read on this site.

Yeah... no crap! Me too! If ever there were a statement that I WANTED to disagree with... but feared it may be truth!

Pennybug wrote:

OneBiteAtATime wrote:

75% chance the FRN loses half it's value over the next four weeks.

Perhaps the scariest words I've read on this site.

Yeah... no crap! Me too! If ever there were a statement that I WANTED to disagree with... but feared it may be truth!

I think if silver and gold were going to drop they would have already done it.

QE3 is being priced into Gold