HardAssetsInvestor

Written by Sumit Roy  |

August 28, 2012

Gold & Silver May Spike Much Higher As All Eyes Turn To Key Bernanke Speech

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We offer our latest analysis on the precious metals market.

As expected, gold and silver prices surged over the past week to trade at the highest levels since April.

The latest leg higher began on the back of a rally in platinum prices. The autocatalyst spiked due to a labor strike at the No. 3 platinum miner in South Africa.

Today platinum is underperforming after the South African government said it hopes it can mediate a peace agreement between striking workers and their employer, Lonmin—the No. 3 platinum miner—by Wednesday. That would be the first step in negotiating a compromise and ending a feud that has left 44 dead.

But despite the sell-off in platinum prices, gold and silver are rising today. That’s because traders’ attention has shifted from South Africa to Jackson Hole, Wyo., where Fed Chairman Ben Bernanke will make his annual speech. Investors will be keen to see if Bernanke uses this year’s speech as a platform to unveil a third round of quantitative easing (QE3), especially after the minutes from the Aug. 1 FOMC meeting suggested that Fed officials were strongly considering more stimulus.

Price action in gold and silver over the short term will be heavily influenced by Friday’s speech, which is scheduled for 10 a.m. ET.

If the Fed chairman clearly indicates the central bank will take action, expect gold and silver to easily blow past their next levels of resistance at $1700 and $32, respectively.

On the other hand, if Bernanke issues a generic pledge to act only if economic conditions warrant, that may be interpreted as bearish and lead to a correction in prices. Initial support for gold and silver can be found at former-resistance-turned-support at $1630 and $30, respectively.

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PLATINUM

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