Gold and silver face key pivot points

In the Lead: “Continuing Commodities’ Conundrum”

Against this background, precious metals trading opened on a firmer note on Tuesday in New York. Gold added about $5 in the initial minutes of trading and it rose to $1,522.00 per ounce. Silver outperformed once again, gaining more than 2% and adding 76 cents to last night’s closing values with a rise to the $35.83 level on the bid-side. Platinum reversed Monday’s losses with a climb of $11 to the $1,760.00 mark per ounce, while palladium gained $5 to touch the $733.00 per ounce price quote. Rhodium was unchanged at $1,880.00 per troy ounce.

Market analysis issued late on Monday by the Elliott Wave-based team of observers notes that gold appears to be in the process of the “quick pop” we mentioned last week that is offering the potential to lift it as high as $1540/45 prior to resuming the downtrend that may have begun with the fall from its May 2nd high at $1,577.60 per ounce. One is advised to keep an eye on the possible breach of the $1,471.40 level on the downside; a point which might usher in additional selling in the yellow metal.

As for silver, the so-called “sideways meander” that began on or around May 12 is still presenting the white metal with a chance of rising back to as high an area as the $39 to $43 value zone before it too resumes the larger declining pattern that could take it down to at least the just-sub-$30 level. The pivot point to watch at this moment would be $36.50 – a point which, if taken out, could usher in the rise to the aforementioned $40+ zone. Breaking last week’s $32.98 low however would imply the opposite scenario.

Speaking of scenarios, the one recently offered by Marketwatch’s Paul B. Farrell sounds rather disturbing but it appears to have been “validated” by a former administration official. It turns out that David Stockman, former director of the US’ OMB under then President Reagan, wrote a NY Times op-ed piece last fall, in which he flat-out asserted that the GOP (the Republican Party) “destroyed the US economy.” While not sparing the Democrats from certain criticisms either, Mr. Stockman singled out the legacy of “Reaganomics” as the principal culprit for what ails the USA at the moment and he predicts an “American Apocalypse” as a result of certain economic decisions that the GOP has made since the days of the Reagan presidency.

In fact, Mr. Stockman goes a bit further back in time and skewers Richard Nixon for starting the process of America living beyond its means and for breaking the dollar-gold link in 1971. Milton Friedman and his advice to “spend, baby, spend,” are also nailed with iron spikes by Mr. Stockman. Such huge spending sprees have led to the “utter failure of spending control” and have also resulted in money becoming the swing factor in America’s electoral process. The appetite for war, tax cuts for the uber-wealthy, and “crony capitalism” are just a few of the “top ten” agents that are shaping the “American Drama” that Mr. Farrell is obsessing about these days.

In a way, reading about the fact that more than 50% of Americans are in an “financially fragile” paradigm in which they do not know where, or how, they might raise $2,000(!) in 30 days for unforeseen emergency expenditures, comes a little of a surprise in such an environment. It might just be a reflection of how their own government has come to operate in the post-Reagan era. But, don’t feel too bad, the UK and Germany are both in the same boat when it comes to their denizens’ capacity to come up with emergency funds.

Score one for the “Great White North” on this one, however. Only 28% of Canada’s residents believe they cannot come up with the dough inside of one month. And then (who would have guessed?) there’s Italy; only one fifth of persons polled felt they could not raise the emergency cash. So much for the myth of “La Dolce Vita” of “carefree” Italian living. It is more like “La Prudent Vita.”

Until tomorrow,

Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America

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About the Author
Jon Nadler Jon Nadler is a Senior Analyst at Kitco Metals Inc. North America
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