Thursday September 19, 2013 08:51Th

Thursday September 19, 2013 08:51

The 10-year bond over the past few weeks was flirting with 3%, which in itself was affecting both the housing recovery and the equity markets - the two primary drivers in the Fed’s sights to build wealth, confidence and continued growth. Almost every expert guaranteed the Fed would begin tapering yesterday. Not only did Bernanke hold the course, he reiterated that the Fed’s targets to consider “tapering” were still somewhat down the line. He also touched on other fiscal issues that had the possibility of derailing the economy. Maybe too subtle, but, he was in my opinion, taking a shot at the President and the Republicans over the upcoming debt ceiling debate.

The carnage to the shorts, both in the metals and equity markets was immediate. Our suggestion to enter the market at $1,292, with an expectation of a move to $1,350, if the Fed stood pat was realized. The market has now succeeded in retaking the $1,357 level and “should” remain supported against the back-drop of the debt ceiling debates. I say “should” because this is not the 2008 scenario. The financial system is “not” in immediate risk of collapse. Inflation is “not” yet an issue. Yield assets are “not” yet under pressure, in fact they are at all time highs, and the momentum suggests even higher. Technically, the market is constructive, But, I would have hard stops at $1,355. Should we hold these levels, the $1,425 level is in play.

By Peter Hug
Global Trading Director
Kitco Metals Inc.