It is one of the unwritten rules of the market, “Gold cannot make the FOMC Chairman look bad.” Yesterday’s Humphrey-Hawkins testimony by FOMC Chairman Ben Bernanke was the catalyst for the hit on gold and silver during the COMEX hours.  And it happens every time the chairman is due to speak in public. The efficacy of monetary policy is too important to be left to the market.  And gold must be shown to be a bad investment every time the Fed chairman speaks to ensure that everyone gets the message as to who is in charge.

Once the U.S. markets were closed, however, gold was mostly free to make another assault on $1400.  By the time the dust settled this afternoon it had regained the $1390 level, rallying alongside Brent Crude which bounced hard off of the $100 per barrel level and the Euro which regained $1.29.

Silver followed the gold chart in late afternoon trading, leaving $22.00 behind and pushing back towards $22.50.  For silver to regain any upside momentum at all it will have to mount an assault on $24.00.  If last night’s rout on the Nikkei is the beginning of an avalanche out of equities i would suspect we will see a stampede back into the precious metals as bond yields are still awful and equities are over-priced.  If fear begins to grip the market — and a 7.3% on the Nikkei is fear-inducing — then hated asset classes will become treasures.  Regardless, into the teeth of this, gold and silver may have more downside but only in the futures market.  The physical market is still on fire and the longer prices stay here the worse the supply and demand fundamentals will get.  Accumulate now while prices are cheap and Bernanke continues to open his mouth in public.