The last Wednesday of every month is the expiration of futures contracts on the COMEX (NYSE:CME) and with the breakout from range last week by both Gold (AMEX:GLD) and Silver (AMEX:SLV) it is expected that a short-term price capping action would take place to limit the damage to commercial shorts as we approach that date.
Activity has shifted to the December contract for Silver and the price was up just $0.09 over Monday’s close to $30.92 at the end of the afternoon Globex session. Gold was similarly moribund trading withing a $10 band, making a few attempts at $1680 during Asian trading Tuesday morning and ultimately settling up $2.30 on the December contract at $1667.25.
It would not surprise me in the least to see an attempt to break down both metals by trapped shorts tomorrow and shake out as many longs potentially standing for delivery come Monday, the first day of the delivery month. It’s been 6 months since the Leap Day Massacre which took a surging Gold down more than $100 and began the slide which lasted until last week.
The timing would be good, coinciding with a near-certain disappointment from the central banker love fest happening in Jackson Hole, Wyoming. The wordsmiths will be earning hazard pay in preparing Ben Bernanke’s remarks that we can all agree on.
Silver’s action today, however put it in a good position to run higher and if it does it may take Gold with it. Handicapping markets before major central banking events, however, is a fool’s game.
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