Bernanke lights a fire under gold and silver prices

“Party on!” was Federal Reserve Chairman Ben Bernanke’s message to Wall Street yesterday, as he announced that the Fed will be keeping interest rates at “exceptionally low” levels until late 2014, owing to concerns about stubbornly-high unemployment and the sustainability of the current statistical recovery. Bernanke also confirmed that for the first time in the Fed’s 99-year history, the institution will explicitly target a 2% inflation rate, as measured on the Personal Consumption Index (PCI). Other central banks have long had explicit inflation targets, but not the Fed.

Unsurprisingly given their enthusiasm for easy money, the market response to this move was euphoric. The Dow gained 0.64% to settle at 12756.96, while the Nasdaq tacked on 1.14% to settle at 2818.31. Asian and European exchanges have also reported gains this morning. Commodities such as copper and crude oil are up, while precious metals – ever sensitive to signs of more monetary easing from the Fed – notched impressive gains.

The gold price blew through overhead resistance around $1,680 with ease, and is now trading back above $1,700 per troy ounce. Silver broke through the $33 mark easily, which could be technically significant given that the price has been encountering stubborn selling around $32.50-$33 since last autumn. If silver can break through $35, and if we see signs that hedge funds are at last beginning to grasp that both the Fed and the European Central Bank are committed to more-or-less perpetual money printing – whatever euphemisms they may use to disguise this fact – silver has a real chance of starting the kind of trending move higher that we saw in late 2010/early 2011.

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via Bernanke lights a fire under gold and silver prices.

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