We said yesterday that the cartel would need to smash silver to prevent a short squeeze and a quick run to the mid $40's. Blythe didn't fail to meet expectations, smashing silver from $41 to $38.51 in a 2 wave take-down. A 3rd mini-take down by the LBMA is also visible on the chart during the overnight hours. Don't get too upset, because this is actually decent action from a long term prospective, and also provides us with one more chance to accumulate silver in the $30's.
The action in silver can be summed up: BTFD!
Silver has traded as low as $38.41 this morning, and has the potential to correct further to the $37.50-$38 range, which is substantial support. A move below $37.50 would indicate silver is back in an even broader range trade from $32-$41, and this is unlikely after silver's recent strong breakout above the consolidation zone.
We expected gold to retest the previous all-time nominal high of $1577 as Congress agreed to a solution on the debt limit, so price action in gold is no surprise as well. Gold's 2 stage drive-by shooting by the cartel yesterday is just as clear as silver's on the 3-day price chart. Clearly, a 2nd consecutive close above $1600 was completely unacceptable to Blythe and friends.
The real question now becomes whether support at $1577 will hold, sending gold quickly back above $1600 and off to the races, or if gold corrects further. Should support at $1577 not hold, look for gold to work down towards $1555.
In the long term this is just semantics, as gold is headed MUCH HIGHER from here, and likely soon.