I have a theory for what’s going on with gold and silver: the short sellers are out of breath. Absent the wild stampedes induced by the big guys, these markets look downright placid.

It’s funny to say this, considering how gold just broke out to new highs. But believe me, compared to even one year ago, both metals are very calm these days. They keep moving up, slowly and relentlessly. It’s as if the buyers are trying to buy some more, waiting for their hands to get slapped, and it doesn’t happen. So they buy some more, still fearing that painful sting… then they buy some more… etc.

Very rarely, like when the NFP report last Friday gave the big guys a suitable excuse, there is a slap down. But the ball keeps bouncing back to the surface. Look at silver last Friday. By end of day it was right back to where it started. It was as if nothing had happened.

Having said all this, it still makes sense that the metals will take a rest at some point. Just exactly when is not clear. Seasonal patterns would normally say about now a correction would start and by mid-April there would be a short-term low. But this situation feels different.

Possible targets are $41.20 for silver and $1475 for gold. And when would this happen? My guess is by end of April. We might get some consolidation before or after end of this month. Like today, both metals are practically retracing their exact relatively flat movement of yesterday. That is simply amazing. I have watched these prices every day for the past 10 years and I can tell you I have never seen that before. It’s the most non-volatile consolidation imaginable.

The reason I am thinking about end of April is because of the Fed. In the recently released meeting minutes, it became clear that several Fed governors are intent on removing financial stimulus in the form of QE. This means that in June, QE2 will likely end. And this will be announced at end of the month.

You can read about this in detail here:

[1] http://www.caseyresearch.com/cwc/casey-report-s-david-galland-major-policy-shift-ahead

If this change occurs, there will be a fairly violent reaction in the markets, and it’s likely all assets will correct pretty hard.