Gold and Silver Thanksgiving Thoughts

By: Anthony_J_Stills

I want to leave you with some thoughts on gold and silver as we head into the long Thanksgiving holiday. The airwaves are filled with opinions, conjecture, commentaries masquerading as fact and just plain old misinformation designed to scare you out of your positions. There’s a lot at stake right now as the central banks around the world feel threatened by the rise in price of both gold and silver. They understand the well guarded secret that gold is the only real money out there and fiat paper is just a poor pretender to the throne. The unbridled printing of fiat paper is the tool used by central banks to separate you from your wealth.

In particular the Fed wants you to believe that it’s in your own best interest that they engage in a process we now call “quantitative easing”. QE as it is affectionately called is the almost exponential expansion of the money supply for the purpose of increasing jobs and consumption. The first round came about in March 2009 when unemployment was at 8.6% and now it stands at 9.6% while GDP was 1.6% one year ago and 2.0% now, although 1.6% of that is inventory build-up. So we spent two trillion dollars to put people on the street and stock a few shelves with items they won’t buy because they’re unemployed or afraid they could lose their job at anytime. Now The Fed comes out and says we need QE2 “just in case”! Personally I am sure that it’s a case of way too little, way too late.

Gold recognizes all of this and has recognized it for a long, long time. Since 1999 to be exact! In 1999 gold bottomed at US $252.00 an ounce and then retested that bottom in 2001. The retest has since been followed by ten straight years of gains that have the current price at US $1,377.20 as of 10 am EST today. Throughout that entire run-up Wall Street has warned that gold is dangerous, risky, a relic, overvalued and my personal favorite “in a bubble”.  And let’s not forget everybody’s choice for analyst-of-the-year, Robert Prechter from Elliot Wave, who has called the top on numerous occasions starting at US $450.00 an ounce. Ol’ Bobby is just a little off his game when it comes to gold. All of this of course is false and/or misleading, and it was meant to be. The idea was to keep the investing public in the dark about gold so they can preserve the power of the central banks. They succeeded as 98% of all Americans don’t have the slightest idea that gold is in a bull market.

All major bull markets tend to move in three phases. The first is characterized by the so-called smart money taking a long term position in total silence, the second involves institutions taking a position and the third is where the general public piles in and produces what we now love to call a “bubble”. As far as gold and silver are concerned, we’re near the end of the second stage and the average investor remains clueless about gold. Hence, no bubble in sight!! The primary trend is up and as you can see in the preceding three-year weekly chart for gold, the secondary and tertiary trends are also headed higher and in no immediate danger of being violated. Gold recently experienced a seven day reaction whereby price fell 6.7% from US $1,424.00 to US $1,330.00 and now gold has recovered 50% of that decline in three sessions.

Back in mid-October gold moved above what had been very strong Fibonacci resistance at 1,372.80 and subsequently made a half-hearted attempt to test equally strong resistance at 1,447.50. Then came the previously mentioned reaction. Right now I see gold consolidating between good support at US $1,321.90 and good resistance at US $1,372.80, a tendency that we’ve seen time and again with gold. Once gold breaks out above the resistance, and that could happen today, it will move up to test the US $1,447.50 Fibonacci resistance and will probably move even higher. Gold is nowhere close to being overbought and could easily reach US $1,522.20 or even US $1,596.90. As you can see in the Point & Figure chart:

gold has a bullish price target of 1,610.00, and with a Fed induced printing frenzy, anything is possible.

Gold’s poor cousin, silver, is in a similar situation and may even hold a stronger hand. As you’ll see below it never really experienced much of a sideways movement and is close a break

out to new highs. December Silver recently revisited the US $25.48 support and is now trading at US $27.52 with nothing in its way until it hits US $31.90. I suspect silver will test this support before Christmas and could possibly run as high as the resistance at US $34.18.

Bernanke’s commitment to QE2 is tailor-made for gold and the fact that the yellow metal is making a nice move today in spite of a big rally in the dollar, and big losses in commodities, is a sign of its resolve. Commodities are getting smoked today, especially cotton, as investors learn the dangers of a bear in a bull’s costume. What’s more stocks are down more than 150 points and gold is acting strong, and I find that the most reassuring statistic of all. It tells me that big buyers are in the market, they’re ready and willing to take on the Fed, and gold is going a lot higher. I bought gold/silver over the last couple of sessions, and again this morning, and now I will just sit tight and try to enjoy the ride. Volatility will be extreme so you should prepare accordingly.

Anthony J. Stills
analyst@theablespeculator.com

www.theablespeculator.com

© 2010 Copyright Anthony J. Stills - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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