Market Update 23 Aug 2013: Silver at Resistance
This was a mixed week for everything but government issued currencies, which were all lower. Bitcoin gained more than any other asset class, while cotton and coffee showed the greatest losses. Precious metals gained slightly, and gold stocks were unchanged. This assessment is based on the London PM fix; if the New York close was used instead, most prices given would be about 1.5% lower, and every asset class but silver and Bitcoin would be in the red for the week.
Government-issued currencies declined, with the Canadian Dollar leading the way, falling 2.2% and the Japanese Yen losing 1.1%. The USD closed at 22.6 mg, down 0.6%, now 46.2% above its half-life curve. Bitcoin, the free market internet currency, rose 8.4% to close at 2.7 g. Volume increased to 61 kg, but was still very light.
Bonds were mixed, with the short term SHY falling 0.7% alongside the underlying USD, while the long term TLT was little changed, gaining 0.3% to close at 2.35 g. Note again that based on the NY close for gold, TLT was actually down 1.2%.
Most stocks were lower, again led by the Dow Jones Industrials, which lost 1.1%, while the S&P 500 was almost unchanged, giving up only 0.1%. The HUI Gold Bugs Index was also unchanged at 6.2 g. Japan's Nikkei Index fell 1% to close at 3.14 g.
Commodities were mixed, with platinum and silver rising while the rest of the complex declined. Cotton and coffee were the weakest asset classes this week, giving up 10.3% and 6.7% respectively. Crude oil pulled back 1.6% while copper lost 0.9%.
Based on the London PM fixings, silver rose 0.4% to close at 0.521 g/oz, while platinum gained 0.3% to close at 34.7 g/oz, now 11.6% above gold parity. However, using New York closing prices, platinum fell 1.2% for the week, closing at 34.2 g. Silver's price was the same at London fixing and at NY close.
On Monday, silver reached 0.529 g, just above its multi-year resistance level of 0.525 g, but quickly declined to 0.518 and closed at 0.521, failing this first test. If history is any guide, it may take several more attempts before we find out if this resistance will hold, pushing silver lower. I think this is a strong possibility. For more details on why, check out Keith Weiner's excellent commentary over at the Monetary Metals blog.