Global Macro Commentary

Silver has broken above a 3-month downtrend line and closed above it’s previous high. As I mentioned before, it seems like precious metals are finally resuming their role as the anti-dollar. Ever since Lehman fell, precious metals had taken the role of a safe haven (along with the dollar, which also rallied), and while other commodities were getting crushed from deflationary pressure, gold and silver rallied more than 30%. But as stocks started to rebound and quickly took the form of a recovery rally, more and more capital exited safe haven trades, erasing all of precious metals’ gains ytd. As precious metals kept forming lower lows and lower highs, stops were triggered and shorters became merciless; this is where we are now, and it’s imperative that precious metals hold on to their current support levels.

I never felt comfortable with precious metals in “safe haven” mode…why? Because unless we’re in for another great depression, economic recovery will likely occur sooner or later in some shape or form; this is not something that will extend gold’s secular bull market for years to come. At the end of the day, it’s the rise in fiat money supply (not only in dollars, but in all other currencies) that will drive precious metals’ long term bull market.

Silver: 6-month (breaking above)

USD: 6-month (breaking below)

Here’s a long term look at silver. Wow, I sometimes forget that silver was at $21/oz just 14 months ago.