Silver shot higher following the FOMC meeting minutes get released Wednesday afternoon.  The daily chart of SLV tells the story pretty clearly.  Guess when the announcement came?

slv ishares silver trust

(credit Fidelity.com)

In light of that big jump, you’d think the Fed actually did something.  But no; rather the Fed “signaled” that they might do something in the future.  More specifically, more Fed members were willing to cut interest rates in the foreseeable future than not. Lower interest rates essentially means free money to the markets because lower interest rates encourage people to keep on borrowing to fuel their spending habits. Even those of wealthy folk borrowing money to invest.

Bottom line is that means higher price inflation. Probably not a lot more than we’re seeing right now, at least not for the near future. Because we’re not talking about a big interest rate to start with.  The Fed’s current interest rate range is just 2.25-2.50%, still at the low end of the historically normal range of 2.5-3.0%.

And higher inflation means higher precious metals prices, which is why traders quickly bid up both silver and gold.

Many mining stocks popped in the afternoon too. The Global X Silver Miners ETF popped up to 25.43 shortly after the announcement, then backed off slightly to close up 0.8% for the day. Not exactly a huge pop, but enough to put a smile on silver bulls’ faces.

International silver powered through $15/oz and still faces tough resistance ahead at $16/oz. But at least it’s a start. Today’s move may continue the unwinding of short positions as traders feel the pain of being on the wrong side of the chart. There may still be some ways to go; as some market watchers have noted, JP Morgan’s perpetual short on silver makes for tough sledding in silver.

Signed,

 

The Gold Enthusiast

DISCLAIMER: The author is long the silver sector via small positions in PAAS, SVBL, and AGQ, with no intentions of trading these in the next 48 hours.


About the Author: Mike Hammer


For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group More...