Archive for 12/12/2010

More dips

What a strange week. Prices got to new all-time highs in gold and silver then got whacked, and instead of a quick relief rally, got whacked again on Friday, probably because of the news that China asked its banks to boost reserves for a third time. This had little effect on equities, which rallied because of the Obama tax cut deal, but it seemed to be enough of an excuse for the big boys to pounce on gold and silver again.

The funny thing is, prices declined and then rose almost exactly as they did on Wednesday, though silver acted a bit stronger than it did two days earlier. Gold had a spike low to just above $1370 and finished the week at $1385, while silver had a rounded bottom at just above $28 and finished the week at $28.68.

It’s possible that gold and silver will exhibit some more weakness in the week ahead, but it also seems that attempts to take them down keep getting rebuffed at the same levels. Which is a bullish sign.

Lots of economic stats are out this week including an FOMC meeting, so the markets will be volatile. It seems quite strange that bonds are tanking badly, and volatility in equities is dropping. There seems to be a growing awareness that reflation is back on big time.

This will most likely be positive for gold and silver, but be cautious this week. Either the current decline has ended at roughly a 38.2% level, or there will be a further drop. Either way, a rally could start shortly thereafter with a top in February at possibly the $1600 level.

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