Gold & Silver Daily Market Recap: August 21th, 2012

Precious metals jumped to their highest level in 2 months on speculation that European Central Bank may take further steps to stop the Eurozone debt contagion.

Spot gold finally broke to the upside and traded outside of its well defined 2 month trading range. Gold jumped to $1641, following a stronger euro which moved to 1.2488 as ECB officials are considering setting limits for how far bailout country bond yields will be allowed to diverge from German Bunds, according to a report out of Germany, which could result in additional bond purchases down the road. If this is true the ECB is set to buy unlimited Italian and Spanish debt, if the ECB embarks on unlimited debt buying to keep bond yields capped, they would appear that they are prepared to turn on the printing presses to pay for any amount of quantitative easing.

The Federal Reserve is set release minutes tomorrow from its two-day meeting that ended on Aug. 1. Federal Chairman Ben Bernanke may talk about monetary stimulus options at a conference in Jackson Hole, Wyoming, at the end of this month, which is why we see the sudden upside movement in gold. Gold also gained as a weaker dollar boosted the metal’s appeal as an alternative investment. If Bernanke fails to hint at any such stimulus expect the metals to sell off with some gusto, but with that said, expect the market to find good buying support on lower levels.

Spot silver has been the talk of the market the oft volatile metal rallied to a 2 month high of $29.54 breaking technical upside support at $29.40. Somewhat of a catalyst may have been that the People's Bank of China injected 220 billion Yuan into the economy via reverse repurchase agreements during the first half of August. The infusion is intended to lower money-market rates and spur investment. The gold silver ratio finally broke 56.90 and moved sharply lower to 55.47 a strong indication that the ratio now could continue much lower which would mean silver is set for more gains.