Silver prices | Silver Prices Jump Through $20, Yellen Fed "Gold Supportive" as ...

Silver Prices Jump Through $20, Yellen Fed "Gold Supportive" as ...

Posted: 19 Jun 2014 07:29 AM PDT

SILVER PRICES led gold higher Thursday in London, rising 2.6% from last week's finish to break above $20 per ounce for the first time in two months as world stocks, bonds and commodities rose following yesterday's unsurprising US Federal Reserve decision.

Holding rates between 0% and 0.25% for the 66th month running, "Janet Yellen delivered a meticulously balanced message yesterday which was supportive for gold," says a commodities note from French investment and bullion bank Natixis.

Fed bond purchases for the coming month were cut by $10 billion to $35bn – just below the monthly addition to the Fed's asset purchases made in September 2012's so-called "QE3" – while Yellen again stressed that interest rates won't rise any time soon.

"The vote was unanimous," notes one bullion dealing desk. "So even with significant personnel changes the Fed remains in harmony."

Wall Street's S&P 500 stock index ended Wednesday at new all-time highs, with most Asian and European stockmarkets following sharply higher on Thursday as government bond prices also rose, nudging interest rates down.

Crude oil pulled broad commodity benchmarks to 8- and 9-month highs as the US Dollar fell to 1-month lows vs. the Euro and near 6-year lows to the Pound, and the Iraqi army continued battling ISIS militants at the key Baiji refinery just north of Baghdad.

Both gold and silver prices ticked higher in late US trade last night, before flattening in Asia only to rise in London and then jump as New York re-opened Thursday.

Gold hit its highest level in almost 4 weeks at $1295 per ounce. Silver prices rose 30 cents in 90 minutes, hitting $20.24 per ounce – the highest level since 10 April.

Speculative "short betting" against silver prices earlier this month hit all-time record levels, with hedge funds and other non-industry players holding bearish contracts worth $4.2 billion on official US data.

"Momentum indicators are bullish, suggestive of acceleration," said Scotia Mocatta's technical analysis of silver prices overnight, looking "to $20.00 as the next key upside level."

"Silver following gold," said Standard Bank's London team Thursday lunchtime, "up through the 100-day moving average at $20 and similarly running into very light selling."

"Turning neutral/bearish at these levels," the note adds. "Would expect seasonality to kick in: silver up 7% month-on-month at this point is unusual."

While physical gold demand in China has been muted however, according to several wholesale dealers' reports, "bullish silver price expectations" are driving strong imports of the white metal into India, says the latest Precious Metals Weekly from London-HQ'ed consultancy Metals Focus.

After jumping on consumer substitution from gold as India's anti-gold import rules hit in 2013, silver bullion bar inflows to India "have largely continued to rise," says the report, "with combined January-April inflows up an impressive 27% year-on-year.

"Our field research points to strong bargain hunting purchases having emerged" on April and May's silver price drop near 3-year lows.

Gold and silver prices break out as a classic hedge to inflation from ...

Posted: 19 Jun 2014 06:16 AM PDT

Posted on 19 June 2014 with 4 comments from readers

Silver tripped across the $20 an ounce line this afternoon and gold prices added $15 to rise to $1,287 in the wake of a Fed statement yesterday that appeared to indicate more inflation was in the works than presently expected and no plans to do anything about it. The degeneration of Iraq into a state of civil war is also pushing oil prices higher which has direct inflationary consequences on transport and industry.

This is exactly the inflationary scenario that author Jim Rickards warns about in his new book 'The Death of Money' (click here) though he might already be wishing his portfolio allocation had included more gold and silver.

Inflation

So far the global financial markets have avoided a correction. But they surely cannot stand up to much retail price inflation before giving up some of their recent increases in value. For higher energy prices act as a tax on both the consumer and producer lowering sales and profits. Nominal inflation hides some of this damage but it's pretty unpleasant under the hood.

The worry is always that the central banks have kept on printing money just a little too long and that the obvious 'unexpected consequence' follows with a rising supply of money and a more limited supply of goods leading to price inflation. The wonder is that this has taken so long.

However, the chance of the Fed or any other of the central banks which have joined in the money printing party – Bank of Japan, Bank of China and the Bank of England to name a few – getting the exit strategy right is about nil. They know that and their preference is for inflation rather than destructive deflation.

Bottom spotting

Anybody who read the ArabianMoney confidential investment newsletter for this month will know that we spotted June as the bottom in the precious metal cycle (subscribe here). We are therefore not surprised to see this happening.

However, we are surprised by the turn of events in Iraq. With temperatures soaring this time of year even the hottest heads usually cool down. Not so this year and the impact on oil prices just adds fuel to the inflationary fire.

The next conundrum will be to try to predict how far and how fast gold and silver will rise. Maybe that can wait for the next newsletter. It's nice to be right about the breakout first…

Posted on 19 June 2014 Categories: Gold & Silver, Oil & Gas

Silver prices | Silver Prices Jump Through $20, Yellen Fed "Gold Supportive" as ...

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