Previous weeks were quiet but it is not possible to tell the same story about this one. We repeated in principle the April´s plunge. First two days of the week were quite calm. First down trend appeared on Wednesday and both metals were just slightly down compared what happened the next day. Both metals experienced a huge sell off from the beginning of the trading day on Asia markets. Gold ended the day on $ 1277 and silver crossed below $ 20 and ended on $ 19.6. Friday´s session was calm compared to the previous day but everything would look like quite compared to Thursday.
Gold finally closed on $ 1298.6 per ounce what was $ 92.9 lower compared to previous week. Silver closed on $ 20.12 per ounce what was $ 1.96 lower compared to previous week. The gold/silver ratio is 1 to 64.54 (i.e. you could buy 64.54 grams of silver for 1 gram of gold, it was 63.04 week before). So silver was hit much more compared to gold this week. HUI index (index of the most important gold mining companies) was kicked to $ 230.82 and was down $ 30.37 compared to previous week. XAU index (index of gold and silver mining companies) was kicked down as well to $ 91.41 what was $ 11.15 down compared to the previous week. Bullion banks significantly decreased their net short concentrated positions on COMEX on gold and increased a little bit their short positions on silver. But we will know the real numbers just next week because these data are just till Tuesday. We can assume that moves on commercial shorts will be huge.
Everybody was waiting for the FOMC meeting´ press release about monetary policy of the FED on Wednesday. Expectations were twofold; either the FED will try to taper its purchase policy or will continue with it. Press conference and press release were from mine point of view as usual. You can choose whatever you want. If you want to hear that the FED will taper the policy you could and vice versa; just as an example: “The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes”. I think that investors were more prepared to hear that the FED will taper its policy. I am personally persuaded that the FED is not able to do it because of huge U.S debt. The overview of FOMC participants’ assessment of appropriate monetary policy is indicative in this way. And I think that the FED is more prepare to continue with its policy at least to 2015 than to stop it. But markets sentiment was opposite and we could see the outcome during the late Wednesday and Thursday. All important markets were down and gold and silver were no exceptions.
So we broke very important technical levels on both metals. We can very easily to test $ 1200 on gold and $ 18-17.5 on silver. The ratio 1 to 70 or something around could be our real target. We will see next week what happened on short positions of bullion banks on COMEX. From the longer point of view I am still persuaded about gold and silver as good investment opportunity because there are no changes in monetary or fiscal policies of global players and economic problems were not definitely solved.
Overview of the prices of gold and silver for the remaining periods:
Source: upner.com, kitco.com