Gustav Blows Over And So Do Gold and Silver

The headline pretty much says it all. Gustav didn’t turn into a monster storm and that was the equivalent of a gut punch for crude oil, which has now traded to within a few dollars of the downside target I provided previously (low $100s). Meanwhile, the U.S. dollar might still have some more work to do to the upside. The net result is a rude welcome back for gold and silver investors from their summer break, as silver has given up over $1 and gold almost $40 so far today. This constitutes a step back, a pretty big one, but it is still par for the course in the one step back, two steps forward bottom-forming process. Both silver and gold remain above their absolute August lows as I write this. More importantly, they have the chance today to put in an exhaustion low, something they have not both done so far. Look for a bounce of 70 cents or more from the low in silver and 20 plus dollars in gold by the end of today with some continued strength for a couple of days, ideally taking out last week’s highs. This is not a prediction, just what an exhaustion low could look like (by only referencing price — ideally we also get other signals as well). Frankly, this would be quite a feat for the monetary metals at this point given the rather ugly sentiment out there.

Tom Szabo

Silveraxis.com

Tom Szabo was born in Hungary during the Communist era and escaped to the West with his family, eventually settling in California. After graduating from the University of California at Berkeley with a Bachelor’s Degree in Business Administration, he spent 8 years as a financial statement auditor with Deloitte & Touche, focusing on financial institutions. He has co-founded several precious metal related businesses and investment funds, invests for his own account and runs the website at www.silveraxis.com. His specialty is original, controversial, unpopular and contrarian thinking.