Same Play - Different Act

Nothing much has changed since my last post which is why I have refrained from posting any recent comments since this past weekend.

Gold is stuck below $1785 - $1800 and Silver is stuck below $35. Until these respective resistance levels are convincingly cleared, the market is going to sit here with the risk of the shorter-term oriented speculative longs getting impatient and bailing out.

Thus far bears cannot break down either market but neither can the bulls blow past the obvious overhead capping action. This week's COT report will be informative in allowing us to see what kind of , if any, spec liquidation has been occuring.

Some sort of trigger seems to be needed for a fresh leg higher. With crude oil getting thumped lower today and now below $90, the initial rush to buy everything looking like a commodity on the heels of the QE3 juggernaut, has obviously dissipated. Both of the precious metals need the inflationary expectation psyche to advance strongly. Crude oil weakness is currently undercutting that; so is weakness across the grain complex I might add.

I want to point out to some of the more wild-eyed grain bulls something I mentioned a while back - drought or no doubt, that impacts only the supply side of the equation. The demand side of the equation is a totally different thing. I warned that grain prices were rising into levels that were effectively trimming demand. A buyers' strike appeared.

These same buyers are now taking advantage of the selling pressure due to farmer delivery pressures as new crop supplies are now entering the pipeline. That is where the pressure in this complex is coming from. Once the bulk of harvest pressure is past, we should see grain prices stabilize and possibly work higher again as end users secure coverage and the market takes some time to evaluate whether or not sufficient liquidation pressure has occurred across the livestock and poultry industries.

HIgher grain prices will aid the cause of gold as an inflation hedge. We will have to wait and see how the dust settles across the complex in the next couple of months.