Well one thing is for sure-today’s metals markets are never lacking excitement. It has been another interesting and volatile week. This week started off on a very negative tone as the precious metals gapped won on Sunday night and for a while it seemed that the selling could get even uglier. Sunday night saw silver prices get to the lowest level since 2010. The market was however, able to regain its composure and it filled the gap throughout the day to close higher.
This created a key reversal on the daily charts and could indicate that a near term low is in. Prices spent yesterday basically in consolidation mode as the markets were awaiting today’s commentary by Ben Bernanke as well as the release of the most recent FOMC meeting minutes.Today’s action has seen a wide range of prices throughout the day as investors tried to digest Bernanke’s remarks and the Fed minutes.
The metals were sharply higher to begin the day as it seemed that Bernanke was indicating that he was inclined to keep the pedal to the metal in regards to the fed’s bond buying program. This was in contrast to much of the commentary heard in recent weeks consisting of a more hawkish tone.
Bernanke’s initial remarks sent the greenback lower and perhaps forced some shorts to cover. As his commentary went on however, it appeared that a lot of investors became confused as to the timing and degree of any stimulus removal. This caused silver prices to drop throughout the morning and trade sideways to lower until the FOMC minutes release.
Following the release of the minutes, gold continued lower while silver has appeared largely unaffected. Stocks began to sell off, and with a lot of day to go it is not yet clear how equities will finish the day. The U.S. dollar however, has held the bulk of its gains and is likely weighing on gold and silver prices.
The minutes indicated that several Fed members were open to some QE tapering as early as June. Clearly there are some mixed messages being sent here. Just yesterday in fact, St. Louis Fed President James Bullard and New York Fed President William Dudley indicated through their commentary that the Fed was not yet ready to tighten. Today however, saw Ben Bernanke state that the the rate of bond purchases could slow “in the next few meetings.”
Well this would seem to indicate that yes-the Fed is close to tightening. Time will tell but the bottom line is this-it would appear that the punchbowl is going to be taken away. No one knows for sure how this will affect stocks and risk assets, but it is likely to keep the greenback moving higher and therefore keep the pressure on the precious metals complex.
A break below $22 in silver prices will likely invite more selling into the market and a continuation of the downtrend.
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