Metals & Markets: One Last Metals Smash Ahead as Fed Prepares to Taper?

silver smashIn this week’s show, The Doc & Eric Dubin cover:

-The Doc’s report on the retail physical market, including record Silver Eagle sales
-This week’s metals trading action vis-a-vis mining shares, 10 year breaks 3%, econ data
-GOFO slips into positive territory, only to go negative again while prices declined (cartel footprints)
-Military strike?  Congress? What’s up? – Meanwhile Putin threatens Russia will retaliate for any US strike on Syria
-September FOMC meeting/statement looming, expect the Fed to announce a $10-15 B taper to QE– how will it affect gold & silver?
SD Weekly Metals & Markets With The Doc & Eric Dubin is below:

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This has certainly been an usual week.  We have Team Obama tucking their tail between their legs while framing the situation with Syria in such a way as to blame Congress for a “failure” should Congress ultimately vote against military action — in which case, no doubt, Obama would figure out some other means of justifying action all over again.  Meanwhile, gold and silver have sustained repeated cartel attacks and selling by speculators while physical demand remains high.  Let’s here it for contradictory forces!

We’re producing this week’s show a day early – on Thursday, Sept. 5th.  Friday will be an important day.  Non-farm unemployment will be reported at 8:30am EST.  Consensus expectation for the initial August report calls for an increase of 175,000 jobs, up from 162,000 in July, but below the 188,000 level reported for June.  Based on the 176,000 job addition estimate released by Automatic Data Processing today, odds are pretty good that we’re not going to see any major surprises with the Government’s numbers on Friday. Traditionally, non-farm payroll release Friday’s are the kiss of death for precious metals.  The cartel loves to “paint the tape” on unemployment report Friday’s.  But this time around, given the damage we’ve already seen, with RSI measures diving off their recent highs and mining shares brutalized, we’re probably going to see silver and gold make an effort to stabilize Friday.

To put the selling in mining shares into perspective, check out the downside volume at the close today in the GDX exchange traded fund:


Selling was substantial.  It speaks to at least partial capitulation, as some longer-term investors appear to be taking money off the table ahead of this month’s Fed meeting.

The 10-year bond touched 3% today for the first time in years.  That is a reflection of the pricing in of tapering and outright bond selling by international and domestic investors.  At some point, the 10-year rate will reach a high enough level to put the breaks on any notion of economic recovery.  That, combined with investors in bond bear market mode will demand the Fed step-up as the buyer of last resort.  The Fed may put on a good show this month, performing a small taper.  But falling bond prices (and rising yields) will weaken bank balance sheets faster than any benefit banks can generate by playing the yield spread when borrowing “cheap” at the short-end and making longer-term, higher rate loans to businesses and consumers.  The Fed is stuck.

Keep an eye on Friday and through the weekend. We’ll be posting exclusive stories about developments in the Middle East.

Thanks for tuning in — Eric Dubin






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