Wednesday 28 December 2011
Starting with the weaker metal, silver has been unable to find
any buyers, notwithstanding how often one hears about the huge
demand and limited supply for industrial usage, in addition to a
possible alternative to currency, behind gold. The doomsayers
camp generates a lot of verbal friction, but it produces no heat
when push comes to shove, and right now, sellers are pushing
The position of the close on any bar tells us who won the battle
between buyers and sellers. It requires no guesswork when looking
at the annual close. Buyers have been totally AWOL. There is a
very high degree, almost a certainty, the a lower low will occur in
2012. What is not certain is how much lower price will go. Looking
at this chart alone, downside has room to retreat back to the low 20
range, around 22. There is additional support around the 26 area,
and that appears to almost be a given in an environment where there
are no givens.
The point is just viewing the annual chart is to dispel all the rhetoric
about the infinite printing of fiat currency, how the corporate central
bank, called the Federal Reserve, is destroying the Federal Reserve
Note, inflating its way out of the economic chaos it created, and how
all of it is setting the stage for precious metals to soar substantially
higher. Price is going in the opposite direction of all the rhetoric.
There is a message there.
That said, we have been advocating the buying of physical over
paper, and we are still of that mind, but we have also been wrong in
the timing, not anticipating the decline seen into year end. The losses
in holding physical is much smaller over futures, but they are losses,
nonetheless, relative to purchases made higher.
With the lower potential already covered, there is reason to be
somewhat optimistic for price to get back over the 40 level. 2012 says
there will be more buying opportunities ahead. First, we need to see
some ending action in the smaller time frames, and we see none on
the immediate horizon. Expectations are for a two-sided affair, relative
to the 2011 close. The new year starts will sellers in control, how it
ends depends upon buyers. Time for them to step up, or keep getting
The 2012 close for gold is just under mid-range the bar. Edge for the
year goes to the sellers. We drew two horizontal lines from the yearly
high and low because that is where we see 2012 will trade, at least
for the first Quarter or two. The peak in gold can last for a few years
without taking away from the bullish chart development, so no need to
be in a hurry until more price development transpires and demonstrates
that there has been a turnaround.
A step back can sometimes be constructive for the next step forward.
2012 may not be a clear trend.