After almost three months of consolidating, gold and silver have broken out of their bases. Though they continue to be well below their 2011 peaks, this seasonal move is expected to produce about a 10% advance.

Gold and silver often start a seasonal move in September and continue into November or December. 2011 was a prime example. Gold jumped from $1600 to over $1775 and silver shot up 10% from $30 to $33.

Seasonal buying pressure normally comes from the Indian demand for wedding jewellery. This year that pressure is down. Due to the weak rupee and a hike in import duties, gold imports are expected to be 35%-40% below past years.

Bottom line: Gold and silver have started a mild seasonal bounce. Though the demand has been muted, there is still expected to be a 10% movement over the over the next month or two.

Investment approach: Gold and silver ETFs provide a vehicle to capture this advance. In US dollars, look at GLD and SLV. In Canadian dollars, CGL and SVR will follow the metals closely.

By Donald W. Dony, FCSI, MFTA
www.technicalspeculator.com

COPYRIGHT © 2012 Donald W. Dony
Donald W. Dony, FCSI, MFTA has been in the investment profession for over 20 years, first as a stock broker in the mid 1980's and then as the principal of D. W. Dony and Associates Inc., a financial consulting firm to present. He is the editor and publisher of the Technical Speculator, a monthly international investment newsletter, which specializes in major world equity markets, currencies, bonds and interest rates as well as the precious metals markets.

Donald is also an instructor for the Canadian Securities Institute (CSI). He is often called upon to design technical analysis training programs and to provide teaching to industry professionals on technical analysis at many of Canada's leading brokerage firms. He is a respected specialist in the area of intermarket and cycle analysis and a frequent speaker at investment conferences.

Mr. Dony is a member of the Canadian Society of Technical Analysts (CSTA) and the International Federation of Technical Analysts (IFTA).

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