As a long term gold and silver investor I am getting a little tired of the same old play book. Just when the fundamentals and technicals look most bullish for gold and silver and most bleak for the economy and the US dollar, in steps the invisible hand. The take down of gold for 7% and silver almost 10% on Monday with no news, no move in the dollar is almost unbelievable. However hitting the gold price ahead of major economic releases has been the modus operandi for all eight years of this bull market. You could have predicted a worse than expected jobs number in the US on Friday by how hard gold was smashed on Monday. This makes little difference in the medium to longer term but it is very frustrating when trying to trade the market on a short term basis. If you wish to learn more about the blatant market manipulation in gold and silver I suggest you go to GATA.org or watch these videos.
The good news is that the strong technical base is still in place for both gold and silver. The take downs breached medium level resistance in silver at $10 but the more significant resistance of $8.93 silver still remains in tact. Weekly MACD will record a cross over very soon and the divergence of RSI and price trends remain very bullish. Despite the big losses this week my forecast for $13.66 by year end remains. $10.60 is still the key upside resistance but if we can break this decisively expect a brief pause at $11.39 but from there its straight to $13.66. Time is now working against my forecast but those of you who understand the silver market will understand how quickly the price can move. $8.93 remains as support. A breach of this level on a weekly basis would be very significant and undermine the validity of the bull market which began in 2001.
Silver weekly in USD (click on image for larger view)
Last week the technical set up for gold was the best it has been since 2001. Unfortunately thats all the motivation the invisible hand needed to get involved. Their coordinated action on Monday has done considerable short term damage. Whilst am confident that the MACD cross over will still occur in coming days (and therefore rectify the short term damage), the decisive break below the key resistance of $770 is worrying for short term price action. It is not my forecast but there is a small possibility we could see a retest of the recent lows next week. Retest or not, my call is still back to the $1000 level by years end. However for the short term traders out there I need to highlight the risks in this forecast have increased. Long term investors need not worry the bigger picture has not changed.
Gold weekly in USD (click on image for larger view)
Gold in Australian dollar terms breached the short term resistance of $1226 and settled right on the key resistance of $1168. We need to hold $1168 or we will drop back to the $1040-$1060 area fairly quickly. I remain cautiously bullish with an upside target of $1400. My bullish bias would not change unless we decisively break $952 on a weekly closing basis.
Gold weekly in AUD (click on image for larger view)
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