More Precious Metals Pornography...

Rumors are starting to swirl around that Germany is getting ready to lead a bailout of Greece.  Apparently Germany is working behind the scenes to head off speculators from profiting on any bailout.  As per a Reuters article yesterday:  "Germany has moved to identify speculators in Greek debt to try to prevent them from profiting from any bailout of the euro zone country's ailing economy, a source with direct knowledge of the matter told Reuters...While publicly Chancellor Angela Merkel has insisted that Athens solve its own problems and there has been anger over Greek comments about war claims dating back to the Nazi occupation, privately German officials say they have an emergency plan. 'There is a moral responsibility on Germany (to help Greece) given European history and they know it,' said Olle Schmidt, a European liberal parliamentarian. 'Together with others, they will be obliged to help.'"

Today Reuters was carrying this story:  "Ever-cautious Chancellor Angela Merkel has made comments which could be seen as preparing the ground for some sort of aid and in a clear shift, some influential newspapers have started running editorials arguing Germany may have to act."  Here's the link:  German bailout imminent?

IF Greece is bailed out, and it is my view that if Germany does not lead one, then the U.S., via the IMF, will spearhead a bailout because of AIG's known CDS exposure, expect that the markets will party hard to the upside, especially gold, silver and mining stocks.  I believe part of today's ebullience in the precious metals market (HUI +2.57%, gold +1.45%, silver +2.79%) was related to these news reports.  The reason this development would be positive for the precious metals is that any kind of bailout like this means there is a de facto devaluation of the fiat currency involved.  In this case primarily euros, but to the extent the UK and the U.S. are involved, secondarily sterling and greenbacks. 

With this as a backdrop, please enjoy the chart below, provided by DC of New Jersey and created by Carl Swenlin of Decisionpoint.com (green commentary is mine):

(click on chart to enlarge)