15/04/2011 by Philinje.

Gold and silver had a quick retracement this week and are on the move again. The gold breakout has been verified and silver is super strong, catching up in accelerated fashion after lagging for the past few years.

Short-term, there is a target at roughly $1500 for gold and $43 for silver. And maybe this rally will last till the end of QE2 on June 30. In which case, the target could be $1600 and $50. At $50, silver will finally have exceed its all-time high in 1980.

Early this year several commentators had their eyes on $1600, and then there was a brutal shakedown. But now, if gold can overcome $1500, the old target of $1600 is back in play. The level to watch on the US Dollar Index is 74, which may equate to $1500 gold. If the dollar drops below that level, gold could achieve $1600. But we have to watch for a dollar reversal. There will at least be a bounce.

Fed comments at the end of this month could be the decisive factor.

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09/04/2011 by Philinje.

Thanks to an unsettled Federal government budget, the momentum behind the Euro, fueled by the rate hike this week, kept going, instead of turning around just after the rate hike was announced. The Euro has broken its larger downtrend and could keep heading higher.

However, there is some talk of the Fed ending QE2, and as mentioned here previously, that could be confirmed at end of this month. That might be enough to trigger a dollar rally. Another factor is that the bailout for Portugal could turn ugly, with numerous arguments breaking out in the coming weeks. Here is a detailed look at that situation:

http://www.dailyfx.com/forex/fundamental/forecast/weekly/eur/2011/04/09/Euro_Rally_Looks_to_Portugal_Bailout_Talks_for_Added_Fuel.html

What if the US governement announces a budget agreement early next week? Possibly that could trigger a knee-jerk bounce in the dollar. That could affect currency pairs but it’s not clear how much effect that would have on gold and silver. If equities rally, the effect could be muted. For now, the breakout in gold is strong and gathering momentum. But there could be some sensitivity to the dollar based on assumptions about its long-term trend. Next week could be volatile, and then end of this month could be significant.

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08/04/2011 by Philinje.

Targets for gold and silver are rising. The gold breakout looks real, but there is still some reason to be cautious. We may be near a turn on the dollar, which so far this year has not materialized. But the Dollar Index is finally down to 75 and now that the ECB has made their expected rate hike to 1.25%, we may see the Euro back off. Then again, we may not.

And even if the dollar does rally, will that be bad for gold? There hasn’t been such a strong correlation of late. One thing to note is how the dollar has not acted like a safe haven in recent weeks. Revolutions and natural and man-made disasters have not caused a flight into the dollar. In fact, even with sovereign debt problems making Europe look bad again, the Euro rallied!

Here is some reading for the weekend:

http://expectedreturnsblog.com/is-gold-rising-because-of-inflation/

http://www.gata.org/node/9789

http://pragcap.com/the-boj-answers-the-trillion-dollar-question-what-is-causing-the-commodity-rally

http://moneymorning.com/2011/04/08/second-quarter-forecast-three-predictions-three-ways-to-profit/

This last one is very thoughtful and makes the case that stocks will rally for a while longer. The end of QE2 will be harsh, but we’re not there yet. The risk-on trade is still in play. Let’s see how far gold and silver go this month.

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07/04/2011 by Philinje.

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:

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.

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06/04/2011 by Philinje.

One day can make a big difference. Before yesterday, gold was looking tired and ready to take a break. Yesterday, it broke through its all-time high on strong volume. It’s hard to say why exactly. Some possible causes were the Fed meeting minutes, the Moody’s downgrade of Portugal and the raising of bank reserve levels by China. Oddly, the Euro popped up again to recent highs.

Silver made it easily through $39 and looks like it might head all the way to $41.50. Or, both gold and silver could take a break here for a couple weeks.

Here is a site that maps out the near future in gold:

http://thetsitrader.blogspot.com/2011/04/fibonacci-gold.html

This projects $1639 in June. Fibonacci relationships are open to interpretation but the good thing about this analysis is that it covers a long time period with several stages, so the overall relationships are more reliable.

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05/04/2011 by Philinje.

Gold may have topped last week but silver is still going strong. It looks like it will hit $39 today.

There is a cycle top due for silver this week. So that means a short-term top may arrive any day now. But silver is so strong that it may keep going anyway. Regardless, $39 is likely to be strong resistance and we can expect some retracement from there.

Longer term, silver may be looking at $41.50, possibly after a lull this month. The biggest danger at present to silver is weakness in gold and the mining stocks. But since equities seem to be strong, that could outweigh the negative influence of gold.

We might also see a short-term top in equities this week. The QE2 orgy continues, but how much longer? If QE3 doesn’t arrive in timely fashion, I’d hate to see the temper tantrum Mr. Market would throw!

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