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If we take a look at the weekly bond market chart below we can conclude that bond prices have reached and completed what appears to be is a major long-term double top in terms of price.

The 52 week high was $153.11 made on July 25, 2012. The 52 week low of $134.08 was made on March 20, 2012. With the current price of US 30 year bonds at $146.09 it translates to a 2.93% yield. This is an increase from the lows in July 25, of 2.25%.

With the eurozone crisis lingering on and central planners continuing to ignore the risks of a global meltdown, the world bond markets are beginning to account for the risk of owning world government securities, particularly long-term US obligations.

There is too much risk in owning 30 year US Treasuries. As interest rates increase, it raises the cost of borrowing in every sector of the economy. This makes it even more difficult, more expensive and risky for banks to make any kind of loans, especially in a zero base interest rate environment.

The interest rate payment obligations on the outstanding US debt will explode. The real estate market will collapse. Commodities, currencies and precious metals will explode.

The risk of owning US bonds and the risk of principal loss is the highest in recent history!

According to Eric Sprott of Sprott Asset Management,

I have always believed that one of the world's fundamental flaws is the leverage in the bank system. As you might be aware, the typical leverage of a European bank is something like 30 to 1. This means you have roughly 3 cents of capital supporting $1 dollar of assets, and as these economies have run into a bit of a roadblock (the best examples are Greece and Spain), you find out that values were too high.

It seems the market will have to adjust rates for that risk with much lower bond prices (higher yields), to compensate for the risk and prevent flight of capital out of US Treasuries. This translates to a higher yield for investors but carries a much greater risk of principal loss if prices continue to decline. As bond investors become aware of the serious risk consequences they carry by owning US securities and the impact on the US and global economy, they will begin to look for alternative investments and specially precious metals.

As investors begin to look for alternative investments, there are very few conventional investments globally that offer a realistic risk reward ratio like precious metals.

Let's take a look at the weekly gold and silver chart technical indicators below and see what we can look forward to next week.

The December (Comex) gold contract closed at $1,619. The 52 week Range is: $1,535 - $1,934.

The market closing above the daily 9, 18 and 36 day MAs on a weekly basis is confirmation the trend momentum is bullish.

The market closing above the weekly VC Weekly Price Momentum Indicator of $1,613 is confirmation the trend momentum is bullish.

Look to take some profits if long as we reach the $1,624.50 $1,628 levels early next week. If stops are taken out here, we could see a sharp rally up to the $1,635 to $1,650 weekly resistance levels.

Buy corrections at the $1,614 and $1,609 levels to cover shorts and go long on a weekly reversal stop. If long use the $1,609 level as a SCO/GTC (Stop Close Only and Good Till Cancelled order).

The December (Comex) silver futures contract closed at $28.09. The 52 week Range is: $26.20 - $44.19.

The market closing above the daily 9, 18 and 36 day MAs on a weekly basis is confirmation the trend momentum is bullish.

The market closing above the VC Weekly Price Momentum Indicator of $28.00 is confirmation the trend is bullish.

Look to take some profits if long as we reach the $28.29 to $28.50 levels early next week. If stops are taken out here, we could see a rally up to the $28.50 $28.80 per ounce weekly resistance levels.

Buy corrections at the $27.73 and $27.31 levels to cover shorts and go long on a reversal stop. If long use the $27.31 levels as a SCO/GTC (Stop Close Only and Good Till Cancelled order).

Source: Weekly Gold And Silver Report For August 17, 2012: What Happens If Bonds Prices Collapse?

Additional disclosure: Precious metals products trading involves significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.