Gold And Silver Plummet! Now What?

| November 23, 2013 | 0 Comments

precious metalsPrecious metals investors are on one heck of a roller coaster ride this week.  Gold and silver are falling precipitously on the heels of important meeting notes out of the Federal Reserve this past Wednesday.

Take a look…

gold

As you can see, gold is falling back below the $1,250 an ounce level.  At this rate, the yellow metal will likely to test the July low of $1,179 by December, if not sooner.

And now for silver…

silver

The lustrous metal is back below $20 an ounce for the first time since August.  The late July low of $18.17 looks to be the next price target for silver.

Why so much weakness?

Investors are kicking the metals out of their portfolio for two reasons…  

First of all, recent data shows inflation is still benign at a year-over-year rate of 1.4%.  That’s remarkably low considering the $85 billion the Federal Reserve is pumping into the US economy every month.

Speaking of which…

In Wednesday’s release of the FOMC meeting notes, the Fed said they’ll start tapering their stimulus program in “coming months”.

That has some analysts predicting the Fed will start paring back bond purchases as early as this December.

While Bernanke is hardly committing to anything new (after all, he’s been talking about tapering for most of 2013), investors are still fleeing the inflation protection of gold and silver.

Now that the source of inflation concern is apparently ready to be wound down, there’s less urgency to own precious metals.

But notice I said apparently…

Bernanke may be talking the tapering talk, but I highly doubt he’s ready to walk the tapering walk. 

Let me explain…

As you know, the holiday shopping season is fast approaching.  By this time next week, shoppers will be flooding the aisles in search of Black Friday deals.  To be sure, the next 4½ weeks are crucial for big retailers, and the US economy.

Unleashing the economic uncertainty of tapering during this highly important time would be exceptionally shortsighted.

And since the Fed’s next chance to start tapering is in their next rate decision meeting on December 18th, I suspect they’ll punt the ball well into next year.  Unlike many other analysts, I’ll be shocked if they start tapering before March of 2014.

What does that mean for gold and silver?

Short-term fears are overwhelming the precious metals market right now.  The trend for gold and silver has clearly resumed to the downside.  At this point, there’s really no impetus for investors to jump into this market heavily on the long side.

However, once Bernanke actually pulls the trigger and starts tapering, that will be the time to take another serious look at gold and silver from the long side.

Stay tuned to Commodity Trading Research for continued coverage of the hard asset markets!

Until Next Time,

Justin Bennett

 

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Category: Precious Metals

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.

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