Quick Post: Where's Gold & Silver Headed?

Quick Post:

A quick post to contrast the two metals to chart their paths and where they may head next.

With gold on an uptrend, prices are currently challenging resistance at $139 for the third time. However price is above the 14 day moving average and 50dma which has been providing it with support. As such, I expect prices to drop in the short term, possibly back to the 50dma. As support has been making higher lows, I also expect a break out is in the making. Any pullback would provide a terrific buying opportunity though. 

Silver price on the other hand, has soared past resistance bulling its way upwards. However, like gold, price is above the 14 dma which has been providing it with support. Despite the uptrend also intact, I expect prices to dip and take a breather as the RSI turns down, possibly back to the 14dma. With its strong run up, a correction to the 50dma would be possible as well. Again a terrific buying opportunity for anyone looking to be invested before prices head up further.

Cheers,

~K

Precious Metals Outlook 1H2011

James Turk is a very prominent precious metal figure. As the founder and chairman of Goldmoney, here's what he had to say about them going into 2011.

Note that his predictions are only for the first half of 2011.

1) Gold will reach $2000 per ounce ($64.30 per goldgram) in the first half of 2011.  Look for gold to exceed $1,800 by the end of Q1.  The low for the year will be made in January, probably in the first week.  Thereafter, look for gold to continue the hyperbolic uptrend it is already tracking. 

2) Silver will reach $50 per ounce, probably in Q1 2011.  It will then take a breather by moving sideways, trading in a range between $50-$38.  It will do so in order to consolidate its tremendous gains, which if my $50 target is reached will be a more than three-fold increase in price from the year’s low of $14.82 in 2010.

3) The gold/silver ratio will continue its downtrend.  It will break below 40 during Q1 as silver soars in a massive short squeeze.  The ratio is likely to reach 30 during 2011, and I do not expect it to climb back above 52.

4) This year will be a great one for the mining stocks, which have been out of favor all decade long.  The bear market in mining stocks began with the collapse in Bre-X back in 1997, and it ended with the collapse of Lehman Brothers, when the juniors were totally decimated and even the best mining stocks were selling at unbelievable values.  Consequently, I expect the XAU Index will exceed 300, and I expect most of that gain to occur in the first half of 2011.

5) I expect another “Lehman Brothers” event in the first half of 2011.  It might be a bank, but it could just as easily be a government.  However, if another Lehman-like event occurs, the response by gold and the mining stocks will be completely different than 2008; this time they will rise, not fall.  The event this time will be a ‘failure’, not a ‘collapse’ like Lehman.  The Lehman collapse resulted in a rush by countless overleveraged debtors to get liquid.  The failure I expect in 2011 will have a different result.  There will be a rush to safety, meaning the avoidance of counterparty risk.  The best way to avoid counterparty risk is to own gold and silver.  The second best way is to own the shares of top quality commodity producers.

How to Profit? What to Avoid?

So my recommendation for 2011 is the same as it was for this past year, and in fact is the same as it has been all decade.  Continue accumulating the precious metals, and if you are so inclined to take the investment risk, the mining stocks as well.  Focus on owning tangible assets that make sense – gold, silver, useful commodities and the shares of well-run companies that produce these things.  Avoid the dollar and other currencies.  Avoid all government paper, and if you own a corporate bond, make sure it is convertible into equity. 

Become self-reliant, and most importantly, do not rely on any government.  Learn from those who were not prepared for Katrina.  Even though they lived in a hurricane zone, they thought they could rely on the government to help them, but everyone who ended up in the Superdome looking for help suffered as a result.  A financial Katrina is coming, and I think it will hit in the first half of 2011.  It will be an unprecedented crisis because the US government is tapped out and the serial bailouts of governments and banks worldwide are coming to a head.

As a result, government policies that have led to monetary debasement for decades are going to accelerate in 2011.  Be ready for it.  If governments continue to follow the wrong policies and make the wrong decisions when confronting some critical moments in the months immediately ahead, then the sky is the limit for gold and silver as national currencies hyperinflate and approach a total collapse.  Consequently, everyone needs physical gold and physical silver now more than ever. 

To read the complete report, which is rather lengthy, refer to The Outlook for 2011.

Just for laughs, I found a cartoon that illustrates the imminent disaster Mr. Turk is talking about.

Now that you're all cheered up, check out these recent videos/radio interviews for more views by James Turk.

On the US economy and gold

Posted on 6th of Dec 2010

On the looming hyperinflation

Posted on 13th of Nov 2010

On the gold/silver ratio with David Morgan

Posted on 11th of Nov 2010

On Silver Heading to $50 by 2012

Posted on 27th of Jun 2010

Going back to the predictions and as a last point related to the highlighted sentence in red, this is something to really think about. Should the financial disaster occur, this may provide another fantastic buying opportunity. As such, it may be time to start hoarding and accumulating cash again. Else when the chance arrives, you may find yourself sitting on the sides lamenting another missed opportunity.

Food for thought,
~K

Breadtalk Challenging Resistance

In my previous post on Breadtalk, Quick Post: Breadtalk Still In Uptrend, I mentioned that prices dipping to the 14 day moving average at $0.62 would be a good entry point for those who missed the $0.60 chance. 

Lets see how that played out.

Prices indeed bounced off $0.62 support and have now risen to challenge its resistance of $0.65 once again. But the biggest question on my mind is, "Will it succeed?"

The weekly chart shows that the uptrend is still intact, with moving averages aligned properly. However, price has moved higher than the 14dma which has been providing strong support. 

Turning to chart patterns:

Here, we continue to see an uptrend but it also seems that a triangle is about to complete its formation. With higher lows and resistance remaining the same, this is the third assault on the resistance.

Volume however has remained low through this which may indicate that the push is weak and that prices may fall back to its 14dma support before a fourth push upwards. That said, with volume remaining so low, it could indicate a lack of not only buyers but also sellers who realize the value of their company and are not letting the shares go without demanding better prices. As such, prices may hover around the $0.65 resistance for a couple of days to allow the 14dma to catch up, completing the triangle formation and breaking out thereafter. Furthermore, a golden cross between the 14dma and 50dma looks to be soon. This may provide the push to break out of the resistance.

Onto indicators:

Despite prices being at the top of the Bollinger Band range, Parabolic S&R indicates buying momentum still present. However, ADX doesn't show any strength in the trend. Furthermore, RSI and Stochastics are in overbought regions which increases the chance of a short term pullback. OBV has been gradually rising which is an indication of accumulation. MFI too has risen higher. It was in oversold regions since mid-Nov. Currently, it is starting to round which may indicate profit taking. Like the OBV and MFI, the MACD is gradually rising as well. However, there is no signal to buy or sell and doesn't look like it'll provide a signal any time soon.

My take: With all the info provided, I personally feel that prices are not going to break through resistance just yet. However, it's looks more and more likely that the resistance will be broken which I expect to happen within the month. The 14dma still provides a good entry point for now to anyone interested. Should the price break resistance, prices are expected to head upwards thereafter.

~K