Precious Metals Fail to Continue Rally

In retrospect, the inability of precious metals to continue the rally on Wednesday, following the very weak GDP report and benign FOMC statement, was certainly a sign that our market was running out of steam despite gold and silver breaking above resistance levels at $1,210.00 and $16.50. The rout began yesterday with recent long positions in gold being liquidated when it failed to hold $1,200.00, as an unexpected strong reading on U.S. employment hit our market hard when the Labor Department reported initial jobless claims had fallen to a 15-year low.

While the USD has continued to weaken the second half of this week, our market appears to be more focused on global interest rates which have spiked higher and have added pressure to our complex. With gold in the driver’s seat, we have quickly gone from attempting a further break out on the upside to now looking for support from physical buyers as gold has returned to the lower end of the recent trading range in the low $1,170.00s. As often happens, our market manages to stage a rally when it feels most vulnerable and that may yet happen again, but I would expect the short sellers to push us back towards $1,1150.00 before we talk about another look at $1,200.00.

Have a good weekend,