Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus Coming Storm Act Now to Protect Yourselves and Family to Survive COVID-19 Pandemic - 19th Feb 20
Future Silver Prices Will Shock People, and They’ll Kick Themselves for Not Buying Under $20… - 19th Feb 20
What Alexis Kennedy Learned from Launching Cultist Simulator - 19th Feb 20
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Gold and Silver Analysis - Precious Points: Approaching the Moment of Truth

Commodities / Gold & Silver Sep 30, 2007 - 10:18 PM GMT

By: Joe_Nicholson

Commodities There can easily still be a higher high before this move is done. Silver could also easily see an extension of this move, probably as high as $14.20... if investor sentiment and underlying economic conditions continue to drive money toward inflation safe havens. Caution requires we not ignore … the certainty of increased housing defaults, the ongoing uncertainty of toxic asset ownership, the (un)health of the American consumer as assessed based on outstanding credit instead of retail sales, and now the pessimism of the Fed. Blowoffs end ugly for everyone except those who are forearmed with the knowledge they are taking short term positions and choose their trade vehicles appropriately. ~Precious Points: Is This the Big One, September 23, 2007

As anticipated by last week's update, precious metals flexed their muscle again this week even as economic data came in mixed and a Fed president tried to put the genie back in the bottle by saying additional rate cuts are not guaranteed. Though for months this space has lauded the policy of the Bernanke Fed and the likelihood that it would preside over record high metals prices, it's important to remember the 50 basis point cut in the overnight target rate simply reset the 100 basis point penalty for discount window borrowing and doesn't represent a commitment to further accommodation – though it's fair to say the outlook would have been downright pessimistic without it.

That the heralded repo injections last Thursday didn't even total the amount maturing that day may appear to signal that the Fed is trying to scale back from its liquidity pumping, but for the week total sloshing funds increased by about $10 billion. So, with money supply in fact expanding at a rapid pace, we're now approaching the moment of truth when we'll finally learn whether the economy rebounds in the fourth quarter or if Bernanke will have to cut again.

In the meantime, new highs appeared in gold again last week as the European Central Bank is expected it would stay on hold at their October 4 meeting and not follow the Fed down the path of rate cuts… yet. Of course, this propelled the dollar index to all time lows, as the Euro whooshed to record highs, with gold also a primary beneficiary. And without giving away the target for this move, available only to TTC members , it's clear this now parabolic move in precious metals can have further upside next week. With the RSI now reaching overbought levels, though, it would irresponsible to dispense with the caution preached here for the last few weeks as bullish investors looking for sustainable gains would be better served with either a stratospheric leap to almost $800 in the short term, or else some consolidation and base-building.

Silver finally had all the right moves this week, successfully retesting the 5-day simple moving average early in the week and vibrating around it before breaking higher to end close to psychological resistance at $14.

The weekly chart looks even more optimistic for silver, with an RSI still not reaching overbought levels and a positive crossover in the 5- and 50-week moving averages now looking inevitable. Last week's target at $14.20 is still operative and, now that gold has convincingly taken out its May 2006 highs, silver could be looking to do the same – meaning a potential move over $15 in the front month futures contract that would be powerfully bullish for all precious metals if it occurs.

The biggest threat to metals right now is still the May 2006 highs and the perception that we could still be in a corrective pattern from those levels. If so, the summer's lows in gold would have to be taken out, though probably not by much given the strength of the underlying fundamentals and the beginning of positive seasonality. A move through $15 in silver could be the nail in the coffin of that analysis, but it would be unwise to ignore it without confirmation. Either way, precious metals themselves are approaching a moment of truth.

Metals were able to move higher despite tame inflation readings last week on the back of a sinking dollar. But even members of the dollar-going-to-zero camp probably don't expect complete annihilation of the greenback to occur this week, this month, or even this year. And now that the market may have priced in a further domestic rate cut while the ECB holds steady, any change in this perception (not to mention technical factors) could have the Euro topping and the dollar finding support. In fact, Deutsche Bank added its name this week to the growing list of firms expecting cuts from the ECB in 2008 as signs of subprime contagion continue to appear in Europe and London . And, if the dollar rallies on Euro weakness as global money supply continues to swell, this only further supports the idea that any selloff in metals will still retain historically high prices with the next sustainable bull leg in metals still around the corner, only after a bit more weakness first.

There should now be little if any doubt the Bernanke Fed will cut if economic or financial conditions deteriorate. Though spending and income data bought a little more time and again staved off the notion that the American consumer is completely spent, at least for now, the smart money still seems to think the wolf may be at the door. If the Fed is forced to cut October, it's hard to imagine precious metals getting stuck in any sort of serious decline. But though it's too soon to predict what horrors may emerge from the Halloween meeting, betting on another cut now is risky to say the least. Therefore, the note of caution should continue to play, meaning tight stops for the traders and only small, tentative purchases for the physical buyers. The market's response to a busy week for economic data, including ISM figures, auto and truck sales, and employment reports, and the ECB meeting, will give a clearer picture by next weekend.

by Joe Nicholson (oroborean)

This update is provided as general information and is not an investment recommendation. TTC accepts no liability whatsoever for any losses resulting from action taken based on the contents of its charts,, commentaries, or price data. Securities and commodities markets involve inherent risk and not all positions are suitable for each individual.  Check with your licensed financial advisor or broker prior to taking any action.

Joe Nicholson Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules