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May Metals Market Update

Spot prices and Technical Analysis:

Although gold and silver haven't seen a tremendous amount of volatility over the last few months, we've shown signs of a new uptrend forming. Both metals have made a series of higher highs and higher lows and we've tested gold's low of $1180 a number of times without breaking significantly below. This is a classic bullish setup and indicative of a potential uptrend in place. Since last week however, gold has covered $60 worth of territory. First rising from $1190 to close to $1224 in two trading days, and then, after touching $1230 has since come back down to under $1212/oz. Silver has had a similar trajectory, rising over a $1.00 and recently giving back close to .50 cents in today's trading session. Despite the recent movement both metals are still range bound. Support and resistance ranges are as follows for both metals. $1180 - $1225 and $15.80 - $17.50. Below is current snapshot of spot prices. .

Gold: $1212.00 (+3.50)

Silver: $17.25 (+0.25)

Moving Averages based on NY Close

 

Gold

Silver

50 day

$1,192.90

$16.47

100 day

$1,212.00

$16.65

200 day

$1,216.50

$17.00

Market Commentary:

Metals shot up based on more weak economic data reported over the past week but look to be running out of steam. While the data seems to be getting worse and worse, not all data points are created equal. Employment numbers in particular seem to be the most important in the eyes of the Fed. As long as employment numbers stay low then the Fed can continue with its narrative on when to begin to raise rates. Yesterday housing starts had the best number since 2007 and there are more Fed minutes being released this afternoon at 2:00 pm EST. The target for an initial rate hike has been moved back to Q3-Q4 2015 making this FED even more dovish than under Bernanke's reign. It's worth noting that this decision has been delayed by the Fed for over a year, going back to the first announcement of a rate hike in April 2013. Of course no one seems to bring up the elephants in the room: unprecedented debt levels and unprecedented levels of Reserve which no one really knows what effects they may have when they eventually make their way into the marketplace. Higher short term rates a la Yellen's plan will propel these reserves out.

What's our take and Why

That weak economic data will continue to be the reality the Fed faces despite their attempts to put a positive spin on bad news or blame…the weather. Central Bank injected liquidity is not how economies sustainably grow, but it is why they periodically crash. We are 7 years deep after the last one and it's beginning to seem like another one could be just around the corner.