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Market Update - September 27, 2013

Last week was a big week for precious metals as our Chairman of the Economy Ben Bernanke decided to keep the foot on the gas of QE3. This so called "surprise" announcement sent gold and silver spiking in a matter of minutes. While Bernanke may have managed to surprise all of the mainstream financial pundits, there was at least one man who was not the least bit caught off-guard. Yep, you guessed it. Peter Schiff was right….again. This was yet another case where the Schiffster saw it coming a mile away and did not blink an eye when it broke the news.

Setting that aside, the rally was short lived. Two days later gold and silver gave up their gains. However, the saga continues with several important topics to consider in the months ahead. Most notably a potential shut-down of the government and the debt-ceiling debate. Read on for how we break it down for you.

Fundamental Analysis:
"Gold is money, everything else is credit." So the famous line goes and it's as true today as it was back then. In fact it's even truer today. Especially since the "credit" that comprises every fiat currency continues to deteriorate. Last Wednesday, Bernanke took us one small step towards a false recovery and one giant leap towards destroying the dollar with his "surprise" announcement to continue the pace of its asset purchasing program. Peter has harped for what seems like years that the Fed has no way out. No matter how badly Bernanke may think otherwise, tapering lets the air out of the "phony recovery balloon." On the other hand, QE simply cannot go on forever. The longer it continues the worse the "credit" that backs the dollar gets. As the world's reserve currency, it can only endure so much. We are already beginning to see some outrage in the international community over Bernanke's decision.

Technical Analysis:
The aforementioned rally in gold last week was short lived. It spiked up to $1330oz from $1305/oz and settled on the day above $1350.00/oz. Since then profits have been taken and we are back in the trading range of $1337/oz to the upside and $1307/oz to the downside. The near term technical advantage goes to the bears at these levels and gold needs a some solid closes above $1337 to swing the tide.

Today's New York Closing prices:
Gold: $1,337.20 (+$12.40/.94%)
Silver: $21.88 (+$.05/.25%)

Moving Averages
Gold Silver
50 day $1,348.50 $21.97

100 day $1,342.85 $21.59
200 day $1,466.40 $25.09

What to look for in the news:
• The debate in Congress rages on over whether or not to raise the debt ceiling. Will gold trade as a safe-haven asset again? Or will it trade in line with other commodities? Opinion: Déjà vu anyone? Of course, you and I hear "debating over raising the debt ceiling so the government can continue to meet its financial obligations", What is really being said is, "we need to borrow more money so that we can pay back the interest on what we already have borrowed." Yikes. One thing is for sure though, gold can never default. I'm not sure the dollar can say the same.
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