Gold and Silver Unmoved by Quiet Wednesday

After yesterday’s mild, but perfectly timed, raid in the precious metals pits both gold and silver spent Wednesday in churning in a wide range but at the end of the day were essentially unchanged much like the Dow and the S&P 500.  Gold was off $1.90 to $1649.30 while silver was off just $0.06 to $32.12 per ounce.

U.S. treasuries rose sharply along the yield curve today as the 30 year bond rallied to force the yield back towards the 200 DMA at $3.38%  The 10 year note ended the day with a yield of 2.294%   The 5 year note fell back 1.138%.  The bond market yields are all reacting against the 288 EMA as overhead resistance.  Yield have risen sharply in the past two weeks and the 288 EMA is a natural form of resistance.  Blowing through the 200 DMA (Simple Moving Average) with as much ease makes all the headlines, but truthfully a trend change is not for real until the 288 EMA has been broken with extreme prejudice.  I’m loathe to believe any move in these completely manipulated markets until I see a weekly close above or below the 288 daily EMA.

Rising bond yields will be short-term bearish for gold as long as the market continues to believe that rising bond yields are equity bullish, which at this point they are.  At some point, though, given the U.S. fiscal situation coupled with the long term effects of using SWIFT as a foreign policy tool rising yields are going to signify a loss of confidence in the U.S. Dollar and at that point gold and silver put the word biblical into the vocabulary of the naked shorts in both markets.

Inflation expectations continue after bottoming on Monday to rise as 3 month OIS rates are pulling away from the 10 year TIPS yield.

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Tom Luongo

About Tom Luongo

Tom Luongo is a professional chemist and self-taught economist who has been following and trading stocks for nearly 12 years. He has no formal ties to the financial industry and considers that an asset in his analysis of the interplay between monetary policy and capital markets.

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