Gold Building A Firm Base As Silver Tests Key Support Levels
| Stuppler & Company is proud to provide our clients this Weekly Market Report (WMR). The report gives you my overview of the prior week’s precious metal and rare coin market activity and news. In each WMR, I share the current status of Gold and Silver along with their support and resistance levels. |
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This Week's Headlines: |
Last week, the Gold price traded within $2,010 and $2,050 per ounce as it continues to build a firm base for the next leg higher. Gold closed the week at $2,010.50, down $10.50 for the week. A strong U.S. Dollar and inflation and employment news were the focus of the news cycle.
For years I have shared my concerns about the possibility of China replacing the U.S. Dollar as the world’s reference currency with the Yuan, seriously devaluing the U.S. Dollar. There is a strong belief that with a digital Yuan, backed by Gold, China could make it happen within the next few years. Last Wednesday, Treasury Secretary Yellen said that this could happen if the U.S. destroys its international credit rating by defaulting on its debts and not raising the debt ceiling. I never thought of the possibility that we could do this to ourselves, but it’s possible. I suggest we carefully watch the debt ceiling debate between the President and Republican leadership.
Last time we failed to raise the debt ceiling was in 2011. During that time the Treasury had to decide who to pay with funds available. They selected foreign bond holders over federal employees, many government employees from the military to the national parks didn’t receive a pay check. If we were to default on our debt, it would lead to a global financial disaster and allow China’s Yuan to become a more stable world reference currency.
Central banks around the globe are required to hold the world’s reference currency, their domestic currency, and Gold. Replacing the U.S. Dollar with the Chinese Yuan would result in trillions of U.S. Dollars being sold on the open market, causing an extraordinary devaluation of the U.S. Dollar.
In 2011, between the months of August and September, the Gold price increased from $1,621 to $1,920, almost $300 in a month, while U.S. equity markets dropped 20%. Depending on our politicians, we could see history repeat itself.
Today: Gold rallied this morning, reaching a high of $2,023 before seeing some light selling. The uncertainty over raising the debt ceiling is still a major bullish factor. However, concerns over our Federal Reserve not being done raising the Fed Funds rate is still a threat. Friday’s release of data showing slumping consumer sentiment have attracted haven investors to the precious metal.
Last Thursday night, Silver dropped over $1 during Asian trading on concerns over a weak economic recovery in China as well as a strong U.S. dollar rebound. China's consumer inflation fell to its lowest level in more than two years, intensifying concerns about weaker Silver demand from China, the world's second largest economy. On Friday, Silver tested the key $24 per ounce support level, briefly reaching a low of $23.72 before rallying back.
Silver closed last Friday at $24 per ounce, down an amazing $1.76 per ounce for the week. This week’s sizeable drop in the Silver price has caused the Silver-to-Gold ratio to increase, now at 83.8-to-1, a great value.
Today: Silver traded overnight in Asia and Europe above and below the key $24 resistance level. As Gold moved higher, Silver firmly moved above the $24 level.
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