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Gold and Silver on Precipice as Dollar Strengthens
Fed Admits It Won’t Unwind Past Monetary Stimulus
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Welcome to this week’s Market Wrap Podcast, I’m Mike Gleason.
Well after successfully avoiding a plunge over the abyss of a critical technical level, silver futures having now cleaning broken through support and we’re now seeing prices lower than we’ve had since the big advance in metals began in the fall of 2010.
Until today the bulls had successfully defended the $18.50 level, but that gave way this morning and now it looks like the bulls may be unable to keep silver from a technically bearish weekly close. Prices for the white metal are getting slammed once again today. Spot silver prices now trade at $18.09 an ounce, down another 3.4% for the week. Gold currently trades at $1,219, posting a smaller weekly decline of just 0.8%.
On Wednesday, Federal Reserve Chairwoman Janet Yellen spoke to the media. As expected, she reiterated the Fed’s interest-rate guidance and continued to stress the Fed’s data-dependent flexibility. She also indicated that "it could take until the end of the decade" to bring the Fed’s $4.4 trillion balance sheet back to more normal levels.
Fed skeptics argue that the Fed may never be able to unload the massive quantity of bonds it holds onto the market. Especially if investor appetite for Treasuries wane as the federal government’s debt spirals higher, something that appears to be an inevitable certainty.
For now, everybody seems content to kick the can further down the road. And investors seem to be as complacent and short-sighted as ever, preferring for the time being to hold dollars rather than hard assets.
Precious metals have struggled over the past few weeks against the headwind of a rising dollar. Since early July, the U.S. Dollar Index has put together an uninterrupted string of weekly advances. The dollar touched the 85 level early in the week before settling back down to 84.39 on Thursday.
Some currency traders have been bidding up the greenback over fears of economic stagnation and political unrest in Europe. On Thursday, voters in Scotland went to the polls to decide whether to separate from the United Kingdom. Some worried that if Scotland separated, chaos would ensue and spark a spread of separatist movements to other countries.
As it turned out, the Scottish secession effort failed. A clear majority voted of No. Perhaps this news will help boost the euro and British pound and allow the U.S. dollar to pull back from overbought levels.
Meanwhile, another national vote of significance to currency markets will take place in Switzerland this November. Swiss voters will decide whether to force their government to shore up the franc with gold. The November ballot initiative would prevent the Swiss National Bank from selling any more of Switzerland’s gold reserves and require it to keep at least 20% of its reserves in gold at all times.
Not surprisingly, Switzerland’s top politicians and central bankers oppose this initiative. They want to be able to debase the franc at will. But in Switzerland, democracy rules. If the majority votes to re-impose gold discipline, we could see a big boost to the franc and potentially the gold price as well.
Speaking of Swiss gold, I’d like to tell you about a unique and versatile gold bullion product from Switzerland that’s now available at Money Metals Exchange. It’s called the Valcambi gold CombiBar. One version of this Swiss-made product comes in the 50-gram denomination and breaks into 50 individual one gram gold pieces.
We’ve also recently added a one-ounce gold Valcambi CombiBar to our inventory. It conveniently separates into ten 1/10th oz sections. A tenth of an ounce is more than three times the size of a single gram. Now, ounces are more familiar to most Americans than grams, so the dividable one-ounce gold CombiBar may be easier to barter with here. However the 50-gram bar gives you more flexibility, since it can be divided into 50 pieces.
Both versions of the Valcambi CombiBar are priced at quite a bit lower premiums than tenth-ounce gold rounds and coins due the reduced labor requirement to produce the larger scored bars by the mints versus the individually struck coins or rounds. The CombiBars are quite simply the most cost-effective way to obtain gold in fractional sizes.
And finally, before we sign off for this week we want to remind you again of our generous September promotion. If you haven’t yet done so, make a purchase of just $1,000 or more at some point during the month of September and get $25 off. Order $2,500 or more and you will also get free shipping.
Just visit www.MoneyMetals.com to view these items as well as all of our other products, up to the minute pricing, or to place an order. And of course you can always call one of our Specialists at 1-800-800-1865 if you have questions or wish to place an order by phone.
Well that will do it for this week, thanks for listening. This has been Mike Gleason with Money Metals reminding you that we remain fully committed to getting you the most value for depreciating dollar…with speed, with accuracy and with top notch service. Have a great weekend everybody.