Gold, Silver and the precious metals complex (including platinum & palladium) are having significant positive moves today, with silver leading the charge at 3.48% as of this writing. In fact the top three gainers in the commodities complex are all precious metals: Silver, palladium, and platinum. We think this rally is boosted by yesterday’s Fed minutes indicating a much more open tone to future easing and stimulation. This seems to easily trump the fundamental uncertainty which still remains in Europe.
The stock market has placed a very impressive rally this month of August, and is a perfect example of buying the rumor, selling the news. Stocks rallied in anticipation of a more positive tone from the Fed regarding stimulus. They received what they were looking for when the minutes were released, and sold stocks this morning in what we see as profit-taking (as opposed to a trend change). We think the S&P 500 might range-trade up until next week's Jackson Hole address of Ben Bernanke.
We focus on the silver market today. With this week’s rally, the silver futures market has broken a key monthly downtrend line dating back to the highs of last April and August. On the weekly chart (see below), we also notice silver has formed a multi-month supportive base at $26.
On the daily chart (see below), our view is that $29.25 for the Sept. ‘12 contract is a key decision area. If silver stays above this area, we look for silver to travel to the top of its recent 12 month range, and approach the $36 area. The next important levels to watch above this area on the weekly chart are $44 and $48.