Both gold and silver took it on the chin this week as long liquidation mostly by speculative longs was the theme for the week. The majority of the losses were seen after the FOMC rate decision Wednesday afternoon. On Wednesday, the Federal Open Market Committee kept the benchmark short term interest rate at unchanged while announcing that it still plans to raise rates at least one more time this year. The central bank also said it will begin shrinking its $4.5-trillion balance sheet in October. For the week December gold lost $27.50 to close at 1297.5. December silver lost .72 cents to close at 16.98. Certainly a more hawkish tone on rates was the catalyst for the selling this week. But to put things in perspective this market has staged a huge rally since July 10th rallying from 1204 an ounce to 1362.4 in just over two months. Seasonal buying,weak economic data, and geopolitical safe haven buying were three of the reasons for the impressive rally. Because of the ramped up war rhetoric into the weekend, Gold sits at just above 1300 an ounce as of this post. Recent shorts in the market cover their positions just in case the North Koreans test another missile over the weekend which may prompt a response this time for the U.S, South Korea, or Japan. Should tensions ease next week with North Korea, look for gold to test a fifty percent retracement of the third quarter rally. This level sits at 1284.4. A close under here and the shorts will target the 100 day moving average at 1269.6 basis December futures. Resistance sits first at weekly pivot at 1304.2 and above there at 1317.2. A close above 1317.2 and the market will push to 1337. December silver experienced the same sort of safe haven buying in the 3rd quarter in my view. Futures rallied from 15.16 in early July to a recent high up at 18.29. A fifty percent retracement sits at 16.73. This weeks break sent the market below the 200 day moving average at 17.12 and the 50 day at 17.03. The 100 day sits at 1685.5. Aside from the North Korean situation, traders will be looking at the final U.S. Q2 GDP release and Personal Consumption Expenditures (PCE) index, scheduled for publication on Thursday and Friday, respectively. Sunday’s election in Germany is also an important event to keep an eye on, even though no surprises are expected. German Chancellor Angela Merkel is the favorite to win against Social Democratic chancellor candidate Martin Schulz. If Merkel wins, it will be her fourth term in power.
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