29/04/2011 by Philinje.

I thought about what I said about May 12 or 13,  and I think there is a better way to time a top in gold and silver.

Just look at the Dollar Index - when it gets to 70, that’s probably it. That was the all-time low a few years ago, the last time gold peaked in March 08. So like silver and mining stocks, the dollar is finally coming back to its previous low (high for the others). But gold and silver are much higher today than they were back then, and silver is finally getting to its all-time high in 1980.

Gold is looking quite healthy right here. Whereas silver was leading the charge in recent weeks, now the leadership might shift to gold. The monthly pattern is for prices to firm up around end of month and make some strong moves early in the new month, so at minimum we should see what happens next Monday/Tuesday.

Anyway, when the Dollar Index hits 70, chance are it will bounce, and a normal correction in gold would take it down to the mid 1400’s potentially - though there is no guarantee of that given how strong gold has been. Some folks are seeing a higher high in June, so this near-term correction might be brief and shallow.

Price targets remain in the high $1500’s for gold and possible above $51 for silver. Then maybe $1600 + and $60 in June.

Here is some useful reading. This article provides downside targets for silver, assuming a large correction occurs soon:

http://pragcap.com/downside-targets-for-silver

The conclusion is a possible bottom at $33 - 34.

Here is an interesting piece about how silver is not yet parabolic, bsaed on momemtum or price velocity:

http://www.skoptionstrading.com/updates/2011/4/26/think-silver-has-gone-parabolic-1980-was-5-times-faster.html

Here is a good oveview on silver that covers all the bases and provides a useful tip at the end:

http://moneymorning.com/2011/04/29/the-/

Sprott Physical Silver Trust (PLSV) sounds like an excellent way to invest in silver.

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28/04/2011 by Philinje.

The Fed funds rate and comments yesterday, including Bernanke’s first ever press event, satisfied the market that the Fed is killing the dollar. Naturally, gold took that as an excuse to finally break free after acting so sluggish recently. Silver, on the other hand, was previously going wild with the other rising assets and now is acting more subdued than gold.

Historically, silver has a habit of running up to its high before gold and then gold rallies, even though silver often does its parabolic stunts toward the end of consolidation periods for both metals. In this case, silver is simply catching up to its previous all-time high around $50, and getting the gold:silver ratio more in line with historical averages. So gold has been way ahead in general terms anyway. Now that the death knell of the dollar has been solidly rung, gold can truly fly.

The cycle top in May, around the 12th, is a good target in terms of a top. In terms of price, my guess is $1600 will be hit by then, and maybe higher. The kind of big moves we’ve seen in silver could now show up in gold.

May 12 is Thursday, so Friday the 13th could be the fateful day when this rally comes to an end. We are witnessing history in the making! Hang on, the ride is about to get even wilder.

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25/04/2011 by Philinje.

Exuberance in silver earlier today in Asia was amazing, causing a move to $49.80 roughly. When NY opened, the traders were pretty cranky after a long weekend and have been selling off all markets, but silver got taken down by $2.50! Amazing, but getting to be commonplace. Nevertheless, is this it? Meaning, is a top in?

It seems that a certain target was hit, but it’s hard to say if this is the beginning of a decline. It is still the case that a cycle date is coming up around May 12. We could see a bit of consolidation here and then maybe a double top in mid-May. Or silver could head to the mid-50’s. Gold, on the other hand, could head to $1600. It all depends on the dollar.

Here is an excellent analysis of what could happen, based on the newly started dollar crash last week, which is threatening to reach its all-time low in the next couple of weeks.

http://thetsitrader.blogspot.com/2011/04/gold-c-wave-tops-and-us-dollar-crashes.html

In other news, China did not re-value its currency over the weekend. Instead, it is talking about diversifying $2 trillion of its $3 trillion in foreign currency reserves, meaning it will use a massive amount of dollars to buy lots of other stuff, including gold. Undoubtedly, that had something to do with the spike up this morning. But after the $2.50 drop in silver, does that news go away? I think not. Check out what Zero Hedge has to say:

http://www.zerohedge.com/article/china-proposes-cut-two-thirds-its-3-trillion-usd-holdings

At this moment, it’s noon in NY and both gold and silver are bouncing back nicely, and both are already above their closing highs of last week. We will have some turbulence on Wed potentially because of the Fed meeting, but once again the bear raids are looking pathetic. Isn’t this exciting?

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22/04/2011 by Philinje.

There has been a strong tendency to call tops in silver, and frankly that has been a losing bet. Now, of course, is a good time to think about whether we are at an important top. In addition to being wildly over-extended, the all-time high in 1980 was at $48, and we are getting quite close.

Technical targets of this rally have moved up day by day because the price movement is so strong. Right at this moment, the targets are at $47.50 to $48, and that has nothing to do with the old high, which happened 31 years ago.

The following two articles are excellent examinations of the current silver rally from very objective points of view. The first one is a well rounded technical analysis:

http://blog.afraidtotrade.com/look-at-these-etf-charts-slv-zsl-before-calling-a-top-in-silver/

The point of this piece is to convince traders not to short silver here, which is extremely tempting when anything goes vertical. The weight of evidence is simply not there. Now for people who have been watching silver every day for the past few years, the opposite consideration is the issue - whether or not to sell. This article says no.

The next piece is an excellent look at indicators that would strongly confirm or non-confirm a move. Most of these indicators are not ones traders look at day to day, such as PMO or the premium in the price of CEF.

http://www.financialsense.com/contributors/carl-swenlin/silver-still-soaring

Apparently Carl Swenlin is something of a guru in the trading world. That makes sense when you read this. His observation that an implied resistance level at $48 is irrelevant is a good example of someone who understands things deeply. Such areas of resistance often act as repellers of price because people have been waiting for the price to return to their entry and will finally sell at that price, in order to avoid a loss. I remember in the old days waiting for maybe three months, maybe longer, to finally get back there - before I knew better than to get into that situation. But most people will jump in at the top of anything and hang on for dear life because of the psychological bruising that occurs when taking a loss.

The point he makes is that 31 years is simply too long ago. If there is anyone holding onto a position in silver from 1980, they have bigger problems than financial to deal with. But sure, when gold broke through its 1980 high of roughly $800, it hemmed and hawed a bit. In this case, it turns out the $48 price is an actual target, and that has more to do with what will happen than the old all-time high price.

As readers of this blog know, the reasons behind silver’s rise are many and extraordinary. We are seeing consistent short covering in recent days, and the short position held mostly by JP Morgan is monstrous. I think the rough estimate of how large a loss that position represents is about $150 billion at the current price of roughly $46. The standard conspiracy theory about this short position is that JP Morgan is doing the bidding of the Fed in order to suppress the silver price and by extension (and a smaller short position) the gold price. Why? Because the US needs to mask the true weakness of the dollar.

Regardless of the conspiracy theory, such a large short position is what will cause a parabolic, runaway move, and congratulations, you are witnessing history in action. Be careful, there is always the other side of such a move, which is a swift move down. And when things get really extreme, trading can be halted on the exchange, which can trap people in painful positions.

But right now, on this quiet Friday before Easter, the weight of the evidence says silver may run up even higher. The dollar is still in freefall until the Fed whispers anything along the lines of ending QE, which could be as early as next Wed. So let’s see if silver gets to $50 before the Fed rains on the parade. Of course, the Fed may not do that, or they may say something intended to reverse the dollar’s freefall which then gets ignored after an hour - after causing a massive whipsaw in gold and silver. The next NFP on the first Friday in May, which is May 6, could be the actual turning point. Or not. Possible cycle high dates are May 12 and June 18.

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21/04/2011 by Philinje.

This article is excellent for pointing out what could happen until the May NFP report (which follows shortly after the next Fed meeting):

http://goldscents.blogspot.com/2011/04/dollar-cycle.html

The point is that gold and silver may continue to rally until the May NFP. Especially silver is already in a runaway rally. It might spike explosively if short covering turns into panic. It’s obvious that any attempt at a bear raid is futile.

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20/04/2011 by Philinje.

Gold just hit its first target of $1505. Silver is very strong at $44.50 and change. Gold may go a bit higher and then reverse, or it might just hang at the highs.

If it doesn’t collapse below $1500 for the next few days, the chances of moving to $1576 this month become good. Silver could then be targeting $47.50. If they overshoot, $1600 and $50.

Anyway, we are at interim resistance. Both are acting incredibly strong so it’s hard to say if there will be a significant retracement, meaning even to the typical 38.2% level. But then, there is a bird in the hand.

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19/04/2011 by Philinje.

The miners are lagging. Here are two versions of why and if there is something to be worried about.

http://traderdannorcini.blogspot.com/2011/04/hedge-fund-ratio-spread-trades-continue.html

This is a straightforward explanation of the spread that hedge funds are using, and the reasons for the declining volume in these stocks. Keep this in mind when you look at this:

http://thetsitrader.blogspot.com/2011/04/is-it-too-late-for-miners.html

So there are some reasons why the miners are less popular in recent years, basically since the advent of ETFs. And clearly that has resulted in a very long consolidation. But they have exceeded their previous high and are still hanging around that level.

If there will be a turning point, it could be explosive. Both analyses point to that possibility. But in the meantime, it is hard not to be worried that the mining shares are a non-confirmation of the recent gold break-out. Anyway, they haven’t collapsed, so maybe they are simply consolidating.

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18/04/2011 by Philinje.

Gold and silver spiked up then down, and silver went a bit lower than its starting point, but both seem to be settling down - or rather, up. Quite possibly the highs for the day are in. But it’s hard to imagine they won’t move higher again soon.

Here is an interesting article about what may one day be seen as the tipping point for gold:

http://www.zerohedge.com/article/golden-tipping-point-university-texas-takes-delivery-1-billion-physical-gold

The second-largest academic endowment in the US has just taken delivery of 1 billion dollars of gold bullion. That is amazing, and this author speculates that this will cause a chain reaction among institutional investors. That would cause the most interesting market behavior, because paper gold exceeds physical gold by a factor of 100!

Something like this could be what finally causes a run on gold and a default of the Comex. This is not necessarily good for holders of paper gold, so be warned.

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18/04/2011 by Philinje.

Isn’t this interesting. The Euro was in trouble on renewed worries about Greece, and then S&P downgraded US debt. So the Euro stopped sinking against the dollar and guess what? Gold spiked! That was a picture perfect postcard to send home to momma.

What I mean by that is the declining spiral of all currencies is really what is driving the precious metals higher. On a day-to-day basis, it’s not so obvious. But on a day like today, it couldn’t be more obvious. The dollar has been losing its luster as a safe haven. And as that happens, the Euro is the main alternative. But the Euro ain’t that great either.

Some folks might be of the opinion that the spike highs are gonna be it in terms of targets for this week. Heck, silver is not so far from a monthly target of $44.27. If gold gets over $1500, then yes, maybe it’s time to look at a partial exit. But on the other hand, this could be the beginning of a severe decline in equities and a general disgust with both dollars and Euros. So who knows how high gold and silver could go? If we get a convincing close in gold over $1500 sometime soon and stay there, I think $1600  and $50 come into play, for sure.

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15/04/2011 by Philinje.

This excellent article points out something interesting: rate increases by central banks around the world may require more QE in the US. He doesn’t say that - instead, he’s worried about speculation ending abruptly as interest rates rise. But that is a pressure that could keep the Fed stimulus-oriented.

http://moneymorning.com/2011/04/15/rate-hikes-by-foreign-central-banks-could-end-the-party-for-u-s-investors/

Food for thought.

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