1. Gold in USD
The gold price reached a new
all time high of almost US$1,575 on May 2nd. This was followed by a brief and
violent correction that stopped just above the 50-day moving average line.
Since more than two weeks a
recovery is under way which should bring gold up to the upper Bollinger band
at around US$1,545-US$1,550. I doubt that gold can just easily move above the
upper line of the bearish wedge in which gold is running since 3 years. That
means the recovery has not much more upside potential. Therefore a renewed
pullback towards of US$1,460-US$1,440 or at least a test of the 50-day moving
average line around US$1,483 should be expected.
But is has to be noted that
Gold still makes a very robust and stable impression due to the extremly
dangerous situation in which the global financial system is in.
Gold is simply acting as the
safe harbor. The overall trend is clearly upwards. Thus, any major pullback
is considered to be a strong long term buy.
Just for the short term I´d be
cautious. Gold has been rising for 10 years, almost continuously, and a
larger correction would be quite healthy. Feasible and most likely is a
sideways movement at a high levels (as seen in winter 2010 between
US$1,440 & US$1,310 and in spring of 2010 between US$1,260 &
US$1,150) that should finally lead to a successful test of the 150 day
moving average (currently US$1,413.60), probably around US$1,440.
The DowJones/Gold ratio is
around 8,10 points and should for now continue to move sideways between 8 and
9.
Long term, I am assuming
that Gold is still on the way to parity (= 1:1) compared to the DowJonesIndex. The next cycle change is probably
still several years away in the future.
Therefore, we are still in a
super long-term bull market in gold and a volatile long-term (real) bear
market in the stockmarkets.
However, it may take many
years until Dow Jones & Gold actually meet at around 1:1.
2. Gold in EUR
Gold in euros recently was
able to attack the old highs around 1,087€ before a pullback occurred during
the last two days. As long as there will be no horrifying news from Spain or
Italy a summer doll sideways action between 1,020€-1,090€ is to expected for
the coming weeks.
3. Silver in USD
As expected the parabolic rise
of silver did not find a happy end. From the top at US$49.70 silver crashed
down to US$32.30 in just a few days.
Initially the 200-day line was
not reached but the correction in silver should not be over yet. Short term,
prices could move up to US$40.00 - US$42.00.
From here a second downwave
towards the low US$30.00-US$29.00 is very likely.
In the coming years however, I
see much higher prices for silver. Make sure to take advantage of the coming
summer sale in silver...
4. Gold & Silver Mining Stocks
Once again the gold and silver
mining stocks confirmed their reputation as a good precursor indicator. Most
mining stocks had put in the top already in early April.
The following correction
brought the HUI index back down below the 200 day line. The current recovery
is likely to meet heavy resistance very soon.
Around 560-565 points, the
50-day line as well as the upper Bollinger Band are waiting already to push
prices back down.
However for now I do not
expect the HUI to move much lower than 500-510 points.
5. Commitment of Trades COT
Currently no extreme
positioning of the commercials can be observed.
6. Seasonality
Although the extreme imbalance
of the global financial system is increasingly becoming the focus of market
participants, we should not forget about seasonality patterns. The summer
months are usually not a good time for the precious metals.
7. Sentiment
The nasty correction in silver
has cooled down most of the enthusiasm among the gold & silver investors.
We are not at an extreme
situation sentimentwise and many investors probably still licking their
wounds from their latest silver adventure....
8. Conclusion & Summary
As expected precious metals
corrected in May.
Now the big question is
whether this setback is already over or there is yet more downside action to
come.
The experience of the
last 10 years in this bull market is pretty clear: Summer months are not a
good time for gold and silver, especially when a parabolic rise occured
during spring time.
With silver gaining 192% in
the last 9 months this has been clearly the case. Therefore silver should not
exceed US$42.00 - US$47.00 but instead will probably fall at least once more
towards $30.00.
For gold, it looks a bit
different, since the increase was moderate and during the last 3 corrections
Gold did not fall much more than just US$100.
Gold gained from its lows end
of July 2010 to the alltime high in early May at US$1,575 nearly US$420.00 or
36%. This will be corrected now probably more by time than by price.
I expect a volatile sideways
movement between US$1,440 and US$1,550 for the summer months.
However, the dollar is still
in danger of dropping further due to the dramatic U.S. debt situation. The 1-year
CDS on U.S. debt has moved up sharply in recent days. Should this continue it
could send the price of gold quickly towards US$1,600.
