We are seeing precious metals increase in price this morning likely due to European Central Bank head Mario Draghi's so-called assurances that the ECB will do whatever it takes to keep the Euro stabilized. This is a common sense result of more fiat money liquidity into the system. Precious metals become more attractive to investors and traders as more fiat money is pumped into the global system in attempts to avoid an intense crisis or sovereign default.
Copper and Silver are the two biggest risers this morning in the metals complex, with Dec. ‘12 Gold also breaking out above its recent technical resistance level at $1630. It is very important that gold has held key technical support at $1,550 for over two months now. The next major resistance level is at $1,800. Expect the market to remain bullish gold as long as it holds $1,550. Furthermore, gold has broken an important downtrend line providing another reason for buyers to come into the market (see chart). Granted, much of today's move is based on Draghi's comments about the ECB.
However, there is a very interesting 'discrepancy' we notice in the metals markets. While precious metals are all having positive days, the industrial metals group (tin, lead, nickel, aluminum and steel) are actually still near three-year lows. There has been a bear market in tin to the point of Indonesia idling 70% of its tin-smelting capacity due to extremely low profit margins on such low prices of tin. We are hearing concerns regarding China’s consumption are a main cause of an industrial metals sell-off of this year. We notice that tin is currently beneath a major chart support point at 19000 and is near the low part of a down-trend channel forming since 2011 (see chart).
Thus while global equities, food commodities, and precious metals are rallying, we look to the industrial metals as the "counterpoint" to the global monetary expansion euphoria.