Sunday, September 25, 2011

Have Gold & Silver Bottomed?

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What a brutal week it was for gold, silver and commodities market. Several factors contributed to the selling we had the FOMC statement and assessment on the economy..."Significant Downside Risk".

That adjective wasn't what the markets needed to hear to rally. Operation Twist was basically the Fed rolling short term debt into long term and not increasing the balance sheet. Strike Two - Europe- not being able to deal with the pending Greek default. The China news of a third consecutive month of slowing manufacturing. Add in the CME raising margin requirements on gold and silver.

All this made hedge fund managers nervous, not only were they getting margin calls, thus forcing them to sell winners like gold. Now they had both equities and commodities under for the year and redemption's kicked in. The safe have gold was trumped by short term money flow issues. Gold didn't get hit as hard as silver, because of its industrial use. But gold hasn't seen a move down like this since the '80s.

Looking at the technicals for support -- Silver broke below 50% Fib retracement as well as 61.8% $29.20 is support. Next would be a drop to $25. Silver needs to break over $32.50 for bears to get nervous and to get bullish on silver a break over $34.

As for Gold $1650 is support next followed by $1620/$1610 and resistance is $1700, but gold needs to get back above $1780 for bears to become flustered.
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