Gold ran up $10 to $649/oz breaking key resistance at $640/oz – MKS

(OroyFinanzas.com) – Is the beast barking or biting? In last 24 hours, we have seen the metals stabilize relatively quickly, after the mini sell-off during Asia time zone. Whilst the global metals equity markets have continued to rebound, the PGMS have also picked up again. The gold ran up $10 to $649/oz breaking key resistance at $640/oz. Silver climbed 40 cents to $14/oz.

Alongside is a set of relatively weak USD, the precious metals market quickly returned to acknowledge that the bulls are back again. They are stronger this time. Nevertheless moderately slower growth in US is consistent with our friendly environment view for risk-taking. The dollar fell to 14-years against sterling and 20 months against euro. Market players are not only concerned about the recovery of U.S. economy, but expect an interest rate to cut sooner than later. Which also mean lower US interest rates is the opportunity cost to general public holding a zero-yielding gold.

The bull-eye view is that we think, it is still positively for both gold & silver rather than metal equities or currency markets in particular. The combination of slower US growth and moderating inflation, our guns are aiming toward an unimaginable forecast. We are expecting gold to touch $700/oz and silver to feel $18/oz in order to celebrate the New Year.

However, to understanding the nature of the beast, we should jitters across its three legs. On the currency side, the dollar will continue to move substantially lower mainly across the majors. On the US equities will drop substantially across the board with many of the biggest recent out performers hit the hardest. And finally, the hind leg of a huge natural demand for crude.

With the scars from the last sell off in the metals, our experience still relatively fresh, we are understandably nervous about today’s move in the gold & silver. Looking back at the last 14 days of trembling price action, three common alternative explanations come to our mind for what we have just experienced:

A) A change in risk appetite by under performer fund managers. Were this true then we would be running a big risk of heading towards December or even worse a long-lived bear market for risky Dollars. They will wag the beast harder.

B) There is speculation that during the last few days towards the end of the year, there is often a substantial portfolio restructuring in the proprietary books for the fiscal year closing. And fresh trades are ignited for the year ahead. As we hear the wind of unwinding these short-term speculative positions, they do not usually derail the underlying trend. Normally, they tend to create entry opportunities for the crowd.

C) The main fundamental is risks. If the market believes that the Fed cannot stabilize the system, either because their policy remains focused on inflation risk or because the market judges that growth is slowing more quickly than the Fed can handle. Irregardless to Bernanke’s recent speech which was relatively hawkish but we see these pressures will not ease soon, and the market will go for a wild ride. At the end of the day, Do NOT tame the beast.

MKS Gold & Silver, Daily Report
by Bernard Sin

© OroyFinanzas.com

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Marion Mueller

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