Volatility Reigns: Weekly Silver Recap

Silver traded above $16.20 on Tuesday this week, but that was as high as it could go before falling the next day to the 15.30 level, rocketing back to 15.90, and then crashing Friday under 15.20, before closing at $15.28, down 3.1% for the week.  Yes, it is getting volatile after the strong 5 week advance since late April.  Gold fell from $980 to $956 for the week, putting the Silver:Gold Ratio at 62.6, up a half point on the week after getting below 61 on Tues.

The argument that silver has started a basing period is still valid with this price action, but with these turbulent economic times, any major fundamental development could completely take over the price action, driving silver right through support/resistance levels.  Of course, looking at the fundamental background – money printing, higher interest rates, record deficit spending, record investment demand, continued excellence as an industrial and medicinal metal, along with flat to down production – that move is more likely to be up than down, I would think.

The real volatility this week was in govt long bonds, where yields jumped around all over the place in the continued bursting of the treasury bubble.  In the last two weeks, the 10 yr yield has moved at least 15 basis points in 5 of the 9 trading sessions, remarkable volatility.  10 Yr yields jumped from 3.72% to 3.86% on Friday, closing up 11.2% from last week’s close and now up 72% on the year since closing 2008 at 2.24%. 

The Fed is actively attempting, and failing, to artificially suppress long rates.  All short term rates are near zero, and we send Tiny Tim to beg the Chinese to continue to buy the U.S.’s latest version of toxic debt – its own (‘of course we’ll repay you, we can always print more dollars!’).  These are the acts of a desperate nation still scrambling for quick fix solutions to major fundamental problems, and completely disregarding fiscal responsibility.

Other Markets of Note:

Govt Bonds – 30 Yr yields jumped from 4.34 to 4.66% this week, a nice 7.3% move, while the aforementioned 10 yr went from 3.47 to 3.86%.  Think how far yields still have to go to accurate reflect their risk…it could get ugly.

$Dollar$ – the dollar index stayed with its inverse bond market theme, rallying for the week 1.8% to close 80.7.  On Tues it traded under 78.50.

Oil – After bursting 8% last week, black gold rallied another 4% this week to close at $68.95, officially double its late 08 and early 09 lows…tell me more about deflation please?  It’s inflation in necessities, and deflation in non-essentials.

S & P 500 – amazingly, the S&P was up exactly 3.6% for the 2nd week in a row.  Great news that only 345,000 jobs were lost last month, and unemployment is now at 26 year highs of 9.4%…and those unemployment numbers are radically understated as well. Check http://www.shadowstats.com/ for the true numbers.