Coming into tonight’s State of the Union address both Gold and Silver were in serious danger of washing out to recent spike lows.  Bulls, however, came in to support gold at $1640, well ahead of the $1626 spike low from January which is the current downside magnet.  There is little to do at this point other than wait.  The take down and failed breakout at $1696 month has the speculative portion of the market piling on any help engendered by the Fed and the ESF to keep the price of gold from responding to the obvious inflationary pressures building all around us.

Silver, according the to structure of the open interest on the COMEX,  may be the real culprit here as a desperate (and trapped) JPMorgan continues to try and shake out a large contingent of silver longs who could very well stand for delivery in March.  So, it’s very important at this point to make it as painful for them as possible to do so.  But, the frequency with which the raids are being conducted –with what amounts to near infinite volume — has the bulls simply crying ‘Uncle!” and bailing on the market.  Open interest in Silver is high enough to scare the exchange. Dropping the price near $30 only brought out more longs, the same way that $1640 did for gold.  Most importantly, it did so without liquidation the day before.

The G-7 trying to talk down the idea of a global currency war was as laughable as it was transparent.  The backpedaling began right after the damage had been done to the metals.  They even trotted out George Soros to warn about a Euro breakup again.  A two-day correction in the Euro and it’s end the of the world.  The noose grows ever tighter.