Global Currency Crisis & Gold – What’s Really Going to Happen in 2011 – 2012

Following on from the first 2 parts in this series: Whats really going to happen in 2010 Whats going to happen in 2010/2011 – part II Another great writer and analyst makes it into our categories section, Bob Chapman of Global research with a seminal must read piece outlining the road ahead towards a new [...]

Gold & Silver – Correction About to Reverse?

by admin on 23/01/2011

Every time the Gold & silver markets take a pause from their huge breakouts for a  little while, and drop a bit, (usually only trimming a small amount from the top of a large upwards move) one of our  older posts starts picking up lots of Google traffic for “Gold / Silver correction” sort of searches, this one:

Gold  correction – stay focused on the BIG picture

Written back in May 2010, when gold was around the $1200 mark, and people were worrying that was the top, it’s all over, blah blah blah, it basically doesn’t matter what price Gold is at when you stumble across that post, because the message is still the same, we were saying it then, and we are saying it now:

Gold & Silver just got 8-10% cheaper, why are you waiting?

Nothing is fixed, the real financial crisis is all yet to happen, don’t worry about daily or weekly price fluctuations, worry about your financial survival, and there is nothing better in this world, proven over thousands of years and hundreds of regime and money changes, devaluations, defaults, bankrupties, you name it, Gold protects you from it.

However for those of you who are focused on the daily price moves, the good news is that it looks like we’re probably bottoming out soon, and heading back up shortly.  We’ve got ZH’s (usually quite accurate in his predictions) Turd Ferguson staking his reputation on $1600 Gold by June 2011 and a great piece by Clive Maund featured below.

Silver Close to an Upside reversal?

By Clive Maund – CliveMaund.com

While silver has performed as predicted in the last update posted on 11th January and has broken to successive new lows as its correction has progressed, it does not now look like it will drop to the downside targets that we earlier projected. Instead it now looks like we are very close to a reversal to the upside.

It has to be said that the 6-month chart for silver does not look particularly inspiring at this point, as following the failure of the uptrend in force from last August, silver’s intermediate upside momentum has collapsed, as shown by the MACD indicator at the bottom of the chart, and on Thursday it crashed a support level in the $28 area.

Normally such a setup would create the specter of a steep drop back at least to the first support shown on our chart in the $25 area, and this may indeed happen during the early or middle part of next week ahead of options expiration.

However, there several strong indications that what happened on Thursday was a false breakdown engineered by “big money” in order to shake out technical traders ahead of a potentially powerful reversal to the upside, and the extreme reading of the MACD histogram (blue columns) certainly suggests a high probability of an immediate bounce, even if we then see lower lows.

As with gold the latest COT chart provides a strong indication that a reversal and new uptrend is close at hand, although the silver COT is not as dramatically bullish as the gold COT. The COT chart shows that the Large Spec (dumb) long positions and Commercial (smart) short positions have dropped to their lowest levels since last July – since before the huge rally in silver – and are in fact at even lower levels.

As with gold this a very strong indication that a reversal and major uptrend is imminent. This being so we should not expect much more downside in silver – there could be a brief spike down towards the next important support level in the $25 area, but this is looking much less likely now in light of the latest COT data and also the bullish indications on the PM stocks indices looked at in the Gold Market update, so although upside momentum has undeniably dropped out in silver, as shown by the now negative MACD reading, another way of looking at it is that its earlier overbought condition has unwound and thus the potential for another powerful upleg has been restored.

Any positions opened to make speculative gains on this drop should now be closed out (for a big profit). There are times in this business when you can “have your cake and eat it”, as those who bought Puts or bear ETFs to protect open long positions in stocks have the opportunity to sell them now for a big profit that covers the stock losses, and then watch with satisfaction as the stocks go on to recoup their losses as the new uptrend takes hold. The silver bear leveraged ETF ZSL which we bought at a good price and in which we have a good profit should now be sold, except where you wish to retain it as insurance for long positions.

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