Tuesday, September 18, 2007

The Future Is Now

This morning we find that Gold and Silver have made strong moves overnight. No doubt the "banking crisis" in the UK has lit a fire under the Precious Metals. When the government has to promise me that my money is safe, I have to wonder if it really is.

Trading in Northern Rock halted

Northern Rock, Britain's fifth-largest mortgage lender, issued a profit warning on Friday after the Bank of England agreed to provide it with liquidity.

The British Broadcasting Corporation reported on Sunday that customers had withdrawn nearly £2bn from Northern Bank accounts in recent days.

Treasury Secretary Alistair Darling again sought to assure Northern Rock depositors that their money was safe.

"Whatever happens, people can get their money out of the bank, they don't need to worry about that," Darling said in an interview on GMTV.

Silver finds itself at a crossroads this morning having taken out resistance at its 100 day moving average AND breaking its long downtrend line coming off the February 2007 high. Silver remains at least 15% undervalued in relation to Gold here, and should be trading in the high 14s imo. A major explosion in price for Silver could be near. Silver's close yesterday above 12.70 was key as Silver had tried to crack that line 4 of the previous 5 trading days. 12.70 now becomes near term support in Silver followed by 12.47.

Gold broke through 700 on September 6 and has hardly looked back since. Silver has been dragged along and remains the most undervalued asset on the planet. Oil has cleared 81 more on fears of a plunge in the Dollar than on continued strong demand if the Fed cuts rates today as some have suggested this morning. All commodities will benefit from a continued fall in the Dollar...particularly Gold and Silver.

Lost in all the Fed speculation are today's economic numbers. PPI will be released at 8:30AM this morning. The headline estimate is 3.2% and the core estimate is 0.1%. Weak inflation numbers will make it more "comfortable" for the Fed to cut its key Fed Funds Rate this afternoon. Also released today is the too often ignored TIC report. The Treasury International Capital report for July will also be released at 8:30 est. The July trade deficit was $59 Billion. A TIC number below 59 Billion will be very bad for the Dollar.

It should prove to be an interesting day. My one overriding concern is that IF the Fed cuts interest rates, Gold and Silver have a "sell the news" reaction to the much anticipated cut. Much of the run up in both the past two weeks has no doubt been in anticipation of the cut as the Dollar has fallen fearing the same. It's something to consider if the Precious Metals don't explode on "the news" as you'd probably expect. Any dip should prove short lived.

Also, please be informed that this Friday is Triple Witching in options and futures.

Triple witching hour (sometimes referred to as "Freaky Friday") is the final hour of the stock market trading session on the third Friday of every March, June, September, and December.

Those days are the expiry of three kinds of derivatives,
Stock index futures.
Stock index options.
Stock options.
The simultaneous expiration's often set off heavy trading of options, futures and the underlying stocks, which can cause large fluctuations or volatility in the value of their underlying stocks.
With the introduction of single stock futures expiring on the same days, triple witching has become quadruple witching.

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