HardAssetsInvestor

September 18, 2012

Gold & Silver Pause Just Below Key Resistance, But Record Prices Await As ETF Holdings Hit Records

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We offer our latest analysis on the precious metals market.

The Fed didn’t disappoint precious-metals bulls when it announced yet another round of quantitative easing last week. What some are calling “QE-unlimited” pushed prices for gold and silver to fresh multimonth highs near $1770 and $35, respectively.

The U.S. Central Bank will purchase $40 billion worth of mortgage-backed securities per month, indefinitely. The Fed also extended its pledge to keep its benchmark overnight interest rate—the federal funds rate—near zero from late 2014 to mid-2015.

As we wrote in last week’s Precious Metals Monitor, the Fed’s action opens the door for gold to challenge its record high near $1920 and eventually make its way above $2000.

However, in the very near term, the yellow metal faces double-top resistance just under $1800, which is the high for this year.

GOLD

Similarly, silver has formidable resistance near the $36 level.

SILVER

But while a period of consolidation is possible, even likely, prices in the coming months will almost certainly be higher than they are now. The approaching fiscal cliff in the U.S. at the end of the year—when automatic spending cuts and the end of the Bush tax cuts will go into effect barring intervention by Congress—may add more fuel to the rally in precious metals.