"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, November 30, 2011

Fundamental Spark for Silver and for Gold?

Today's actions by the Fed, in concert with 5 other Central Banks, plus the move by China to lower bank reserve requirements 50 basis points, the first time they have done so in three years, has provided today's fireworks across the commodity and equity marks. It is RISK ON time once again for the hedgies.

I mentioned in my analysis of the COT report yesterday, that the metals needed some sort of fundamental spark to break them out of their respective trading ranges. Perhaps we have that, at least for today, in the form of easing of liquidity concerns. That is unclear to me at this point since this really does not do anything to address the structural issues leading up to the sovereign debt issues. It is simply keeping a liquidity crisis from becoming a full-blown insolvency crisis.

This might explain why after the initial blast higher in the markets on the euphoria around the Central Bank actions, that the markets have not been able to continue adding to their early session gains. Traders are maybe having second thoughts about all this. I know I sure am. While it will temporarily help ease lending concerns, it still does not address the sinking value of all that sovereign debt on the books of the big European banks, nor of that on the books of some US banks. It seems to me we are going to have to see a very clear, unambiguous signal that Germany is going to go along with a large role for the ECB and maybe even a Eurobond market before traders will get more aggressive to the upside.

Regardless, silver has been able to capture its first line of technical chart resistance centered near the $32.50 level. This is its first visit back to this level in a week's time. That has served to reinforce the support level that formed just below the $31 level. For this market to now get anything going to the upside, it is going to have to first convincingly clear $33.50 and then exceed $35. Only then will it have a shot at anything more than a return to the top of its recent trading range.

Charts to follow later....

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