Tuesday October 5, 2010 - 14:14:50 GMT
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Silver and Gold React to Central Bank Decisions
December Silver and December Gold are mounting strong
rallies this morning after the Bank of Japan and the Reserve Bank of Australia
surprised the currency markets with their monetary policy decisions.
The BoJ unexpectedly cut its benchmark interest rate to
between zero and 0.1% from 0.1% and promised to maintain its policy until
prices stabilize. It also decided to implement a new asset-buying fund.
The Reserve Bank of Australia unexpected left its
benchmark interest rate unchanged at 4.50%. A moderation in inflationary
pressure is the main reason cited for this surprise.
The move by the BoJ is exerting the biggest influence on the
gold market. The decision to increase new asset-buying is generally seen as
potentially inflationary and a sign of increasing economy uncertainty.
The weaker Dollar is also contributing to the rise in gold
and silver along with lingering doubts about Euro Region sovereign debt.
December Silver is recovering this morning with an expanded
range after 2 out of 3 trading sessions ended with higher-high, lower-close
formations. This pattern usually indicates increasing selling pressure, but
until one of these reversal tops is confirmed, there is no reason to get short.
Silver has been following an uptrending Gann angle higher
since the market bottomed at 17.79 several weeks ago. This angle is at 22.43
today. This market could launch a spectacular rally should the market regain
and establish support on this angle today.
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