We are seeing precious metals increase in price this morning likely due to Draghi's so-called assurances that the ECB will do whatever it takes to keep the Euro stabilized. This is a common sense result of more fiat money liquidity into the system.
Precious metals become more attractive to investors and traders as more fiat money is pumped into the global system in attempts to avoid an intense crisis or sovereign default. Copper and silver are the two biggest risers this morning in the precious metals complex, with Dec 12 Gold also breaking out above its recent technical resistance level at $1,630. We see it as very important that gold has held key chart support at $1,550 for over two months now, and see the next major chart resistance coming in at $1,800. Our opinion is that gold is very bullish as long as it holds the support point of $1,550. Furthermore, as indicated on the chart below, we find gold has broken an important downtrend line and thus another reason for buyers to come into the market. Granted, much of today's move is based on one thing: Draghi's comments about the ECB.
However, there is a very interesting 'discrepancy' we notice in the metals markets. While precious metals are all having positive days, the industrial metals group (tin, lead, nickel, aluminum, steel) is actually still near its three year lows. There has been a bear market in tin to the point of Indonesia idling 70% of its tin-smelting capacity due to extremely low profit margins on such low prices of tin. We are hearing the concerns of China's consumption is a main cause of an industrial metals sell-off of this year. Refer to the tin futures chart below to see the past 5 years of prices. We notice that tin is currently beneath a major chart support point at 19,000 and is near the low part of a down-trend channel forming since 2011.
Thus while global equities, food commodities, and precious metals are rallying, we look to the industrial metals as the "counterpoint" to the global monetary expansion euphoria.
Past performance is not necessarily indicative of future results. Trading commodity futures and options is speculative, involves risk of loss, and is not suitable for all investors