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Gold And Silver Break Out! 6 comments
But I'm no longer front-running the charts. Now the break-out has actually occurred, as you can see. We've broken out of the pennant formations, especially convincingly with silver, which is always the more energetic of the two precious metals. We should now expect fairly rapid appreciation, just as in previous bull moves following consolidation. Upside targets are defined by previous moves.
I would expect the next top to be reached before the end of May for the typical seasonal sell-off. That means at least $2,050 gold and $50 silver, which isn't all that much higher than the previous highs. However, the next consolidation should be significantly smaller (probably a re-test of the old highs around $1,900 and $48) before we resume the next bull move, possibly to $2,500 and $75 for gold and silver, respectively, in the autumn.
I'm not sure yet how this impacts the previously delineated trajectory for our moon-shot. It's possible that the Euro troubles and subsequent capital flow into U.S. Treasuries has permanently changed that trajectory -- not the destination, just the trajectory. I'll watch what happens over the next few weeks to analyze what, if any, impact this consolidation has had on it.
We still remain in a strong up-trend which should culminate in a blow-off top, but we may have been handed a little more time before that happens. We'll see. All the fundamentals driving gold and silver higher remain intact and have only grown stronger. The U.S. government will spend another $1+ trillion in debt before the summer is out. The national debt is now well over 100% of GDP, having blown through the first debt ceiling hurdle since the August deal. Europe continues its rapid decline. And warmongering with Iran has reached a fever pitch. The upside in gold and silver against this backdrop is limitless.
I highly recommend signing up for a BullionVault account right now and loading up on as much as you can afford in their Swiss vault. You will probably never ever see gold this cheap again and will kick yourself for not taking advantage of this opportunity. As this global financial collapse progresses and fiat currencies go down the proverbial drain, physical gold and silver in your possession or in a responsible vault in a foreign jurisdiction will be your only insurance and protection.
Gold and silver mining equities are also severely oversold here. Even more so than the metals themselves. Expect company stock buybacks and mergers and acquisitions to increase. I think we definitely have a floor under stock prices at this point. Call options could leverage a spring-back in mining equities into a fortune. Although I prefer individual stocks, I won't go into specific ticker symbols here, but suggest that if you're not savvy at picking companies, using the GLDX (gold explorers) or GDXJ (junior gold miners) ETFs may be a good way to play it. But paper forms of gold and silver such as stocks should always come after a good foundation of physical ownership.
Disclosure: I am long GLD, SLV, GLDX, GDXJ.
Additional disclosure: I receive credit for referrals through BullionVault's referral program, which provides a small monetary reward. This does not impact my strong advocacy for BullionVault, which I personally use regardless.
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This post has 6 comments:
You mention GLDX, not GDX.
Looks like a newer ETF, any reason you recommend GLDX ?
All good.
The charts above are a stark contrast to your work in December with the nearly asymetrical shape of the lines at that time.
On February 8th, we posted our gold stock indicator which has been reasonably accurate about the declining trend in gold stocks since Nov. 2010. You may find some value in it.
Regards.
In Amethyst's only other Instablog titled "Gold Poised for Imminent Breakout to $2,150 (found here: http://seekingalpha.co...) [originally published July 15, 2011 but revised and republished on December 8, 2011], we discussed at length the accuracy of the interpretation (that a pennant formation is strictly a continuation pattern).
Amethyst was gracious enough to entertain the discussion but was unyielding in the belief that the pennant formation, unto itself, was suggestive of a continuation pattern and that gold was headed to $2,150. At the time, our analysis of the exact same pattern suggested that there was also the possibility that gold could go to $1,349.
It was really a 50/50 proposition based on the pattern and therefore an easy interpretation once going above/below the support level drawn by Amethyst. We may never reach $1,349 but the prospect was just as likely as the alternative, just needed to wait for the confirmation.
The technical structure was drawn correctly. It was the bias in favor of gold that made the analysis APPEAR incorrect. It could have gone either way.
Our Gold Stock Indicator referenced in the comment above on December 13, 2012 provided the following buy recommendation of DUST on February 8, 2012 (found here: http://seekingalpha.co...). Subsequently, DUST increased +54% by the time we recommended selling DUST and recommended preparing for a buy indication of NUGT on April 4, 2012 (found here: http://seekingalpha.co...).
Regards.
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