Gold and Silver Split Ways With Bernanke

As Federal Reserve Chairman Ben Bernanke neglects to mention any type of stimulus, gold and silver have decoupled from their relatively consistent ration with the price of gold down over $10 in intraday trading at the end of last week while silver futures jumped 4.1% for July delivery.

The spot price of gold was hovering in the mid $1,500-range on Friday after continuing a downward streak in the past few weeks. Spot price stood at $1577.30 per troy ounce; down almost 1% from the $1589.15 per troy ounce spot price registered the previous day. In the futures market, the losses were more readily seen as gold futures contracts for August delivery down 2% in intraday trading at $1556.40.

It was widely speculated by many investors that Ben Bernanke would be announcing a round of fiscal stimulus known as Quantitative Easing during this past week. The recent economic news out of the United States, particularly the disappointing job’s report, has widely been taken as the impetus the Federal Reserve has been waiting for in order to institute more stimulus.

Precious metals, like every market, benefits nominally from the injection of stimulus. Investors and speculators, therefore, look forward to the market events as main drivers of price. Recently, the trend has become an adverse one in which market prices drop when no mention of stimulus is made at times completely independent from the gold and silver market.

Gold and silver are both in a correctional stage and were consolidating before these market influences cause fluctuations in price. The divergence suggests that market participants are seeing more difficulty ahead in the US economy and a greater flight to gold and silver as optimal monetary instruments. The market itself is not providing any inherent reason for either the strong price moves or the surge in demand that we are seeing, but is rather an effect of QE on markets and investors.

At this point, both gold and silver need to regain their equilibrium and complete the consolidation, move forward with the correction, and in time reestablish a strong upward price trend in an overall long-term bull market.

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