Normally when a new bullish wave within the precious metals bull market begins it is Gold (AMEX:GLD) that leads the charge. Silver’s (AMEX:SLV) industrial characteristics usually allow it to lag behind, languishing along with the mediocre equities and other secondary commodities while Gold and oil (AMEX:USO) take center stage. Then, when Gold is finally too expensive does money rotate into Silver, a much thinner and more volatile market, and it explodes to the upside, destroying over-confident short-side operators and making short-lived millionaires of the few crazy enough to play its game.
But, sometimes, what a game it is!
Tuesday saw Gold finally follow Silver’s lead. After Silver broke through the months-long resistance near $28.30 per ounce on Monday, Gold followed suit and broke through $1633 on the COMEX open and pushed to a high of $1641.45 on the October contract. A close above this level for the week would be a strong indicator that the market has shifted and the year-long consolidation in Gold is over, paving the way for the next wave higher.
Given the circumstances into which these breakouts are occurring: rising commodity and equity prices, monetary statistics rising without overt printing from the Fed, massive budget and trade deficits, etc., this could and should be a very powerful move for both metals. At a minimum the all-time highs will be tested in this move higher. And some central banks will fight it every step of the way. But, the physical market is what is setting the price in the futures market now and until that demand slacks off considerably, the only way for the metals here is up.
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