The market is at a critical juncture, and it’s testing my whole paper-versus-physical-metal theory and analysis.

Lowest close in gold and silver: Gold 764, silver 11.17 at the time of this writing. Below the 775 level, many charts pick up on.massive physical buying and, same as last time, it’s paper gold trading down here.

There hasn't been a London Gold Fix below the 775 level in this whole sell-off; note the London AM fix last night was 799+. The physical market will tell us much tonight at the rate-set.  If it sets below 775, I'll be shocked, and if it sets below there for 10 days, I'll have to re-assess my whole analysis.

This is the litmus test. The current 764 price is some $35 an ounce below physical yesterday. If they try and set London Fix there tonight, I can't imagine how much gold will be required to satisfy physical demand down here. It will probably set around 782-78 or so, is my expectation.

Note that gold is down in all currencies, so it's not just a dollar move. That the government bailed out Fannie Mae and Freddie Mac is a disaster, but no one seems to see it that way. Inflation is out of control. Period.

Silver has been canned, and again, it’s all paper silver. Investors for physical silver can’t get enough, and there are large delays in delivery (apart from large bars). The gold-silver ratio (68) is the worst it’s been since 2004. Many have forgotten that silver isn’t just an industrial metal - expect a savage rebound to 12.70 in a few days.