The Phaserl


Market Report: PMs Appear to Be Breaking Out

by Alasdair Macleod, Gold Money:

Gold and silver drifted this week, continuing last Friday’s end-of-week profit-taking, until the FOMC announced on Wednesday afternoon EST that there was to be no change in the Fed Funds Rate.

This was the signal for gold to gain some $20 and silver 75 cents. These moves represented an apparent break-out from the last month’s consolidation, and prices for both metals could now be on course to challenge the highs of early July.

Yesterday was a day of consolidation with a fall for gold limited to $2.50, and this morning in early European trade gold opened slightly lower still, at $1330, and silver at $20.00.

This market report will be longer than normal, because there is much to tell about what is going on behind the scenes. Some market followers, presumably relying on overbought indicators, such as the record longs held by the Managed Money category on Comex, were telling us earlier this week that the gold price was due a substantial fall.

Furthermore, the maturing August contract, which ahead of its delivery month ran off yesterday, has been a negative factor. Large amounts have been rolled over into the December contract, a situation that normally allows the bullion banks to work prices sharply lower as Open Interest contracts.

While gold’s OI has indeed contracted from record highs, the bullion banks have had only limited success in this quest, and the negative price effect is now behind us.

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