• 288 days Will The ECB Continue To Hike Rates?
  • 288 days Forbes: Aramco Remains Largest Company In The Middle East
  • 290 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 690 days Could Crypto Overtake Traditional Investment?
  • 695 days Americans Still Quitting Jobs At Record Pace
  • 697 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 700 days Is The Dollar Too Strong?
  • 700 days Big Tech Disappoints Investors on Earnings Calls
  • 701 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 702 days China Is Quietly Trying To Distance Itself From Russia
  • 703 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 707 days Crypto Investors Won Big In 2021
  • 707 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 708 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 710 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 711 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 714 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 715 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 715 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 717 days Are NFTs About To Take Over Gaming?
The Problem With Modern Monetary Theory

The Problem With Modern Monetary Theory

Modern monetary theory has been…

Zombie Foreclosures On The Rise In The U.S.

Zombie Foreclosures On The Rise In The U.S.

During the quarter there were…

  1. Home
  2. Markets
  3. Other

Precious Points

We spent the majority of last week's update outlining reasons why, despite expecting consolidation trading in precious metals, the recent dip would not become catastrophic. We also explored catalysts that could get the bull rally running again. As usual, we focused on the release of Fed-sensitive economic data to mark pivots in price and sentiment. As it played out, the boost metals got on Tuesday from the higher than expected PPI succumbed to profit-taking the next day, essentially text-book consolidation as weak traders yielded long exposure to stronger investors.

What the movements this week revealed was gold hovering about the $620 level, maintaining its position above $600. Silver put in strong support at the $12.30-12.50 level we've been watching for two weeks, just above the September highs. The result is a strong picture that could see the metals continuing to attempt small rallies in the thinner holiday trading with little in the way of significant economic data, though profit-taking and consolidation will probably continue through the new year. Obvious support and resistance levels are present in SLV, which is now trading between its 50 and 200 day moving averages, while GLD rests more comfortably above support at $61.50with plenty of upside potential if a favorable environment appears.

Another factor we discussed last week was the tie between liquidity and Fed funds rates. We've been biased for two weeks now toward an eventual rate hike, rather than a cut, believing that the Fed would rather create liquidity on the open market rather than lower interest rates. This scenario continues to dominate our thinking despite Fed-induced liquidity shrinking minimally in the most recent report. The capital market driving the economy actually seems to be shifting away from inflationary Fed-funds to non-inflationary corporate cash and private equity, which could be the prevailing headwind for precious metals in 2007. In the meantime, while overall liquidity remains high and the dollar low, precious metals should be able to at least remain near current value levels. If the coming year brings expensive oil, geopolitical instability, and/or a recession, however, metals could again outperform the major indexes.

 

Back to homepage

Leave a comment

Leave a comment