D-Day For Gold And Silver…
It has been a bit of a roller coaster ride for gold and silver over the past few weeks. As you may know, both metals took a beating last month as investors priced in bullish US economic data and benign inflation.
By the end May, gold was trading at 4-month lows near $1,240 an ounce. As for silver, it dropped to 11-month lows near $18.75.
Take a look at this gold chart…
And now silver…
As you can see, both metals took a steep dive at the end of last month. But you’ll also notice that gold and silver are rebounding strongly off the late May lows. An upwelling of Iraqi violence and political uncertainty is bringing about safe-haven buying amongst investors.
Thanks to the rally, both metals are sitting at pivotal short-term resistance zones (red lines).
What’s the big deal about that?
It’s interesting to note that precious metals are trading at these important technical levels at the same time Fed Chairwoman Janet Yellen is set to release the latest FOMC meeting results.
That’s right, Ms. Yellen is scheduled to release the latest Federal Reserve interest rate policy at 2pm Eastern time today. Investors aren’t expecting any changes to interest rate policy, but they do expect her to announce further cuts to monthly Fed bond purchases.
However, Ms. Yellen may surprise us…
If she slows the rate of tapering from $10 billion a month to $5 billion, it will be viewed as a bullish development for gold and silver. In such a scenario, I wouldn’t be surprised to see the metals rally strongly above the red lines in the chart above.
On the other hand, if Ms. Yellen sticks with the current plan and announces another $10 billion in tapering, gold and silver will likely react negatively. In that case, the metals will fall from the technical resistance noted above.
But here’s where it gets really interesting…
May’s Consumer Price Index (CPI) reading came in hotter than expected yesterday. In fact, the CPI rose by 0.4% month-over-month, which pushed the year-over-year inflation reading to 2.1%. May’s inflation jump was the largest monthly increase since August 2011.
No doubt about it, this is a bullish sign for gold and silver…
As a result, regardless of the FOMC meeting results later today, we may have a gold and silver rally on our hands!
Until Next Time,
Justin Bennett
Category: Gold, Precious Metals, Silver
