22/10/2010 by Philinje.

Now that the correction in gold and silver seems to be underway, it becomes a tricky game to predict the bottom.

There are two factors to consider: price and time. In terms of time, it seems mid to end of November is the right time to jump in. In terms of price, it could be the $1250 level that I guessed about previously (actually, my favorite guess is $1230-40, because gold always overshoots support levels on the downside). But here is a view that says $1265 is a likely bottom, which was the recent breakout level:

http://goldscents.blogspot.com/2010/10/bottom-in-sight.html

Take your pick. Another scenario, which is looking very unlikely, is that gold gets driven down to $1100-$1150 over the next few months. This could potentially happen if a severe crash in equities occurs and lingers around for a few months. In fact, a mild crash in equities is probably what would cause gold to overshoot $1250 or so on the downside. So a third factor to consider is the degree of weakness in equities toward end of November.

So far, it looks like we’ll have a mild but substantial rally in the dollar and a mild decline in equities. Then the dollar will sink like a rock and equities could rally substantially, in anticipation of inflation. Gold could go parabolic at that time.

So in conclusion, we need to be very alert in mid November.

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15/10/2010 by Philinje.

Gold spiked to $1387 and silver to $24.90 yesterday, on low volume. So far in this bull move, corrections have been quick and shallow. It’s not a rule written in stone, but a big prologued move up that has been seriously overbought is due for a big correction, at some point.

But markets can keep heading up and remain overbought for months, or much longer than common sense would dictate. So it simply doesn’t make sense to guess that a turn is happening, until it is absolutely confirmed. Nevertheless, I wouldn’t be surprised if we just saw a local top.

Given the relentless strength in gold and silver and the pathetic weakness of the dollar, it seems likely that a low in a coming correction wouldn’t drop that far. Here are some rough guesses for gold: $1250, somewhere between $1200 and $1250, and $1100 in worst case. I would put the most weight on $1200-1250, like say $1230.

Let’s see if equities turn around and the dollar reverses. The dollar is showing some signs today that it may have bottomed, finally. Yesterday it got almost to 76, and fell to 80.8 against the Yen. It’s a pretty sick puppy, but that’s exactly what markets want you to think before they turn around.

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06/10/2010 by Philinje.

Gold and silver moved strongly up yesterday and gold hit our target of $1350 from the inverse head and shoulders formation. Though by some measures the target is $1400 or $1420. Could it go farther from here? Sure.

Mining shares have broken through their all-time high from March 08, finally, as of yesterday. Silver is definitely there now - it’s already a dollar past that. So, many signs are looking good.

However, the dollar has broken below 78 and the Euro is at 1.39. We are due for a reversal in the dollar and that could happen when the Euro hits 1.40, which could be later today. So extreme caution is warranted here.

Silver is looking parabolic. It might keep going but its climb is getting awfully steep. Gold is not as steep but getting there. When silver reverses, it could fall sharply. So be extremely cautious with silver.

And are equities really as healthy as they seem? We could be getting to a local top or maybe the rally will keep going. No one seems to know. It’s been like this for more than a year - completely divergent views co-exist and both sides seem reasonable. So who knows.

Mortgages apparently evaporated in a legal ruling recently, and people like Jim Sinclair think that is one more reason the financial system will blow up. Housing is till in the dumps, unemployment is still high - but corporate earnings are through the roof. It’s a weird world.

Hang on to your sanity, and hang onto your gold! One thing that seems sure is even if gold does decline, it won’t drop that far. So at most it will offer a good point of entry for some people.

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