Up, up, up

23/09/2010 by Philinje.

There’s a pretty straight line up to $1300 gold and $21.50 silver. So does the line keep going?

It could. At least for a bit more. Let’s look at some surrounding factors:

The Euro is strong, and the dollar is down to 80 on the dollar index. The dollar is now below its last low in early August. So if the Euro gets to 1.40 then there is more room to run on the downside for the dollar, which could get as low as 78 on the USDX. It’s all-time low back in March 08 was 72-ish, and if it gets anywhere near there, that raises doubts about the dollar moving up any more.

But assuming the Euro moves higher and the dollar moves lower a bit more, before turning around, we could still see higher highs in the dollar. And there is some talk of a crash in equities in mid-November. Bonds might have topped or they might have one last panic-driven top in November.

It does look like gold could get to the $1350 projection that I talked about numerous times, very soon. But it depends on if equities keep rallying or some kind of panic sets in. Maybe we have some time before there is a crash.

In terms of mining stocks and silver, they are now approaching their all-time highs, finally. So if they breach those levels easily, then there is more room on the upside for sure. If they have trouble breaking through, they could lead a decline in precious metals.

Gold is showing strength in the face of a falling Euro and a falling dollar. So it’s definitely acting like a global currency safe haven. If bonds head south definitively, then money flows into gold could take a big jump.

So all in all, it’s good to stay in if you’re in. If you’re not in or you want to get back in, then that’s a tough call. Maybe we’ll have a short-term pullback soon and then using a small position with a tight stop could make sense. Otherwise, it could be worth waiting a month or two.

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