Precious Metals: Lower

Scenarios for Gold and Silver Are Both Bad
Gold is down about $120 from the all-time nominal highs.  Where now?

Scenario #1: Governmental Fiat Failure
Let's say that Greece defaults and pressure builds on Ms Merkel and the ECB to issue Eurobonds.  It is the view of the LTZ Vortex that Ms Merkel, at the end of the day, will have to cave.  One potential solution: partially gold-backed bonds.  Germany and France reach a compromise by telling the PIIGS: you want liquidity, put up the nation's assets that have a firm price, i.e. gold.  Greece, Italy, Spain, Portugal hit the sell button on Gold to fund the backing.  That would satisfy the rest of the Eurozone who don't want to bail out the weak, and avoid the Lehman scenario (maybe).  Result: gold lower.

Scenario #2: Kick the Can, and the World Buys It
Risky assets get a huge bid because the world is convinced that governments will succeed.  Those investors using gold as the safe haven sell gold to buy riskier assets.  Simple, and well-known scenario.  Actually, risky assets need not appreciate, they just need to stop whipping around 2% a day in order for this to occur.  Result: gold lower.

Recommendation: Sell the rips in gold against your long equities/risk-on assets.

Silver: Only If Fundamentals Change
The worst trade of all is the gold/silver ratio trade.  That is a total punt.  Silver is part industrial metal, and part precious metal.  Which one dominates is anyone's guess, unless you know something VERY specific about the supply/demand equation that isn't reflected in the market prices.
If you want a hedged position with volatility, I'd prefer Gold/Copper, or Freeport McMoran ($FCX).  It is very, very interesting that FCX hasn't participated in the recent 70 handle increase in the S&P.  The experts call that "divergence," ie when there are conflicting signals.  The all-out green light will be if FCX starts to run, but if it starts to drop (and XLF stays muted), then it could be time for a reversal and more volatility ahead.