Friday, March 30, 2012

Hurting metals still have a bright future.

Gold and silver prices holding above important support


Silver bars Gold and silver are holding above important support levels, despite selling pressure yesterday. The gold pricemoved back above $1,660 this morning, after flirting with $1,650. The silver price sunk below $32 briefly yesterday afternoon – hurt indirectly by talk from the US, Britain and France about releasing petroleum reserves, thus temporarily lowering oil prices – but has moved back above support at $32.James Turk discusses the significance of this price action in his latest King World News Interview.
Though the gold market has been struggling for direction in recent weeks, this price action in combination with increased chatter about “QE3” in America and Spain’s debt problems may help the bulls. Though there have been times in recent years – notably during the spring of 2010 – when gold performed well during periods of EURUSD weakness, a lot will depend on how the dollar performs. The Dollar Index has again fallen below 79.00 in trading this morning, and is struggling to maintain the kind of upward momentum seen at the end of last year, when euro fears were dominant. Further dollar weakness will encourage gold buying.
During your lunch break today you might want to read “Four Numbers Add Up to an American Debt Disaster” by Bloomberg’s Caroline Baum. A key point she raises: “The U.S. is more dependent on short-term funding than many of Europe’s highly indebted countries, including Greece, Spain and Portugal”. Not enough attention is paid to the US Treasury’s reliance on short-term financing – something that could easily backfire in the years ahead.
This dynamic is not limited to the government either, given the precarious state of so many overly indebted companies and households. In the words of Peter Schiff: “America is on the mother of all adjustable rate mortgages”.

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