Gold & Silver Are Testing Their Support Levels - $1,200 And $14.00 Per Oz
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Gold closed last Friday at $1,206.40, down $24.60 per ounce (2%) for the week. What caused the 2% drop in the Gold price? Well, it wasn’t the results of the November 9th mid-term elections. The election was pretty much as expected, with the anticipation that there will be congressional gridlock for the next two years. What caused Gold to sell-off was a combination of four things.
1) The U.S. Dollar Index has moved above 97, which is a 16-month high.
2) At last week’s Federal Reserve news conference, it was made clear it’s highly likely interest rates will be raised at the December meeting.
3) The PPI (Producer Price Index) came in on Friday up .6% for the month of October, and triple the forecast by economists.
4) On Friday, it was reported that there was a sizeable redemption in the Gold ETF market.
After these four bearish facts hit the market, Gold could have tested the important $1,200 support level late last week, but it didn’t because of heavy buying. The CME December Gold contract trading volume on Friday was the highest for the week, and double Monday’s volume.
This week, we could see the test of the $1,200 support level, then the start of the year-end rally. Since Monday is a holiday (Veteran’s Day), I believe the key day will be Tuesday. A test of the $1,200 level, followed by a strong rally would be a very bullish short-term signal.
Today: Concerns of Brexit in Britain took Sterling and the Euro lower today, driving the U.S. Dollar Index to a record high. A negative for Gold, but buyers came in at $1,202 and support looks good today. The U.S. Dollar also benefited from some tough talk on US-China trade negotiations from White House Trade, which has driven down U.S. equities. At 11AM PT today, Gold is trading at $1203 per ounce.
Silver closed at $14.10 last Friday, down $0.60 per ounce for the week. The close was a 2-month low for Silver and just above the key $14 per ounce support level. With Gold dropping 2%, Silver’s drop was 4.25%, which takes the Silver-to-Gold ratio to an amazing 85.50-to-1. Silver could test the important $14 level this week, and with the spot price of Silver below $14, it would be an extraordinary value for long-term investors.
Today: Silver dropped with Gold, hitting the key $14 per ounce support level. Considering this is a holiday, the trading volume on the CME December contract is excellent. At 11AM PT today, Silver is trading at $14.06 per ounce.
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