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Bernanke Speech Crushes Silver Rally

Posted on 2012-11-05, By A-Best Staff
By Michelle Smith — Exclusive to Silver Investing News

Bernanke Speech Crushes Silver Rally The week began with silver continuing its push toward another multi-month high. Its climb was ended when US Federal Reserve Chairman Ben Bernanke went before Congress. Investors seemed to react not to what the Fed President said, but rather to what he didn’t say. However, the sell-off was short-lived and today silver has been clawing its way back.

On Tuesday, silver soared, gaining more than four percent. Recently silver has been receiving love from fund managers and other institutional investors who have realized the metal’s value compared to other options.

ETP investors are showing their desire for the metal and have been taking a notable amount of interest in the market lately.

Silver is also benefiting from a positive change of investor sentiment in India. The rupee has recovered and stabilized against the US dollar, and it appears that Indian investors are not only returning to the market, but are also becoming quite bullish on the metal.

On Wednesday, the gold-silver ratio contracted to the lowest level since September. Positive US GDP data helped drive silver to a five-month high, allowing it to breach $35.65. The market was seeing “buy” stamped all over the white metal.

Bernanke testifies

On Wednesday, Bernanke testified before Congress, speaking of the potential for modest US growth and voicing concerns about unemployment. What he said didn’t appear to garner much attention from investors. But, he didn’t say anything about another round of quantitative easing, or QE3, and that moved the metals markets.

Investors wanted announcements of more loose money from Europe and the US, and the EU didn’t disappoint. On Wednesday, the European Central Bank announced a 530 billion euro injection. When these central banks have cranked out cheap money in the past, it has proven positive for precious metals, including silver. Bernanke, however, failed to follow suit and the disappointment was devastating.

COMEX’s May silver contract fell more than $3.50 in less than an hour.

While Bernanke undoubtedly receives credit for dampening the market yesterday, it should be noted that a slight profit-taking attitude was rearing its head in Asia before US markets even opened. And, there are those who believe that investors and traders have been itching for a reason to cash in, and the Fed testimony was just what they needed.

Investors cast lifeline

Silver supporters have quickly regained their nerve. US trading began today with the metal on a positive path. Bernanke went back before Congress, but neither his statements nor omissions warranted any market-moving headlines during the US trading session. According to CME Group, the market typically sees its biggest reactions to initial testimony.

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