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Written by Administrator
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Thursday, 02 June 2011 05:06 |
IS A LONG WAY OFF!
The last time I published these charts in my "To the Moon" series was two months ago, at which point I predicted almost exactly the events which transpired. Gold and silver both remain precisely on-trend and I don't see that changing anytime soon. Back at the end of March, I was noting that gold was kissing its trend line at $1420. Guess what? It's still hugging it tightly, but now at $1540.
On April 2nd, on a discussion forum I frequent, I observed...
"Gold and silver are in seriously bullish pennants right now, poised to explode past the $1440 and $38 levels imminently. Targets are $1550-$1600 and $46-$50, respectively."
"Silver has a much wider range than gold, but at this point, the trend indicates that the minimum value for silver now is around $25. By the end of the year it will be $30. I could certainly see it going all the way up to the mid $40s and then dropping back to the high $20s. That would be an awesome buying opportunity... I'm not predicting a massive swing down again, but recognize the possibility. Gold not so much. If gold were to fall in the near future, it would break the trend, which I find doubtful."
"I think that the next upswing is virtually inevitable and likely to start on Monday [4/4]. That will probably bring us into May at which point seasonal weakness will set in and gold may retreat to $1500 to kiss the trend line again. I have no idea where silver will find a bottom during the summer, but probably not all the way down to the trend line. Either way, my current guidance would be to buy if you still can maybe Monday morning, and then sell or put on protection in the mid $1500s for gold and mid $40s for silver, and then buy both whenever gold hits the trend line again probably in July or August."
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I have to pat myself on the back for that call, because it was spot on. Well, except that now I no longer think the bottom is in July or August, but probably just passed. As I mentioned, gold is still right on its trend line again after going as high as $1565 at the end of April and retreating back to around $1500 in mid-May, pretty much as expected. If it had gotten closer to $1600, we might have had a longer correction, but now it has no choice but to keep moving upward unless it were to break the 10-year trend, which is highly doubtful.
Silver is still more ambiguous...
Certainly the medium-term direction is quite predictable -- it's going to the Moon! But silver could follow the general economy and wider markets downward further this summer still. It is not constrained the way gold is to its trend line. Silver is floating out in the middle of its range. Ultimately, silver is going vertical much faster, but not without at least the possibility of further weakness for a little while.
All the fundamentals driving gold and silver higher remain intact. The fact that we're about to hit the national debt ceiling again is a reminder that fiscal and monetary policies will continue to devalue the Dollar and create ever more demand for a stable alternative store of value. I'm also of the belief that the Fed cannot practically end Quantitative Easing (although they may call it something else) because the federal government simply could not afford the debt service at higher interest rates. Therefore, the Fed will keep printing money and buying Treasury bonds to keep the rates down. This is even more likely now that it looks like the housing market and stock market are trending downward yet again.
So where to from here? We had a decent correction in gold and a rather severe one in silver throughout May, so I think everyone who was going to has now sold, and bargain-hunters are rounding out the bottom in preparation for another wild ride upward. The precise timing is hard to pin down, but I think we'll start moving significantly upward by July. At least in gold. Silver may lag a little. Or it might flip right around and burst upward in response to short-covering and any number of black swans. Watch for a bullish cross out of a pennant.
To reiterate my prediction of two months ago: if the trend remains intact, and at this point there is every indication it will, then by November we'll be to $1700 at minimum for gold and end the year near or above $1800. Again, that's at minimum. If we had a move proportional to the 2005-2006 rally or the 2007-2008 rally, we could go to $2200 this year. It's clear blue skies to the upside, with only the Moon in sight.
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Last Updated ( Thursday, 16 June 2011 01:16 )
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