The surge in gold and silver exchange traded funds Wednesday following coordinated liquidity actions from central bankers has raised hopes for a year-end melt-up in precious metals
However, gold and silver ETFs need to contend with important trendline resistance before any rocket launch.
The Fed working with other central banks to made dollars available to troubled European lenders, and China cutting reserve ratios, is triggering speculation that more support and easing measures are on the way. [Gold ETFs Boosted by Fresh Currency Debasement Fears]
“In the aftermath of the Fed-led, U.S. dollar injection into the global financial system earlier today, all eyes should be on spot gold prices because a world awash in liquidity just became more awash in liquidity,” writes Mike Paulenoff at MPTrader. “If nothing else this should drive more flight to safety flow into the precious metals as a hedge against either a forthcoming bout of serious inflation or failure of the central banks to stem an apparently exacerbated credit (deflationary) squeeze.”
He recommends keeping an eye on gold to see if it can break resistance along the trendline from September. Meanwhile, silver is facing a similar test.