Are gold and silver poised for another take-off?
A look at the gold and silver markets and whether they are likely to collapse, or are just in a consolidation phase getting poised for another take-off.
Posted: Thursday , 19 May 2011
The gold bears and doubters - and the silver bears in particular - have had great success in driving the prices of these two precious metals downwards but are we looking at more of the same to come, or perhaps consolidation and another take-off?
The pattern of price movements we are seeing currently, with strong upwards and downwards fluctuations for both metals, but particularly for the more volatile silver, suggest to this observer that, although there may be some more short term shocks in store, the volume of buying for physical metal which has been flowing in at the lower prices suggests both gold and silver are in a consolidation phase and are likely to see another very sharp upwards movement again, if not now perhaps at the end of August when the usual summer price doldrums are past us.
Silver may be the best example here. As we have noted in another article today (see: Silver crash not a correction but a ‘drive-by-shooting' and ‘criminal act') - , the huge dive in the silver price in just a few short minutes over a holiday period when trade was absolutely minimal, smacks of manipulation by some major players about to lose their shirts on short positions in the metals bar a substantial price fall. This they were effective in achieving and caused other cautious souls to dispose of their holdings too in fear that the ‘correction' which many were predicting was upon us and there was further downside to come - to an extent a self-fulfilling prophecy. In this instance the collapse in the silver price brought down gold with it (although not nearly to the same extent), creating much nervousness in the precious metals markets, and this earthquake in the precious metals sector has been followed by a number of aftershocks which have so far kept the gold and silver space volatile with sharp up and down movements most days since.
But what is apparent here is that there is, at the moment, considerable resistance to gold falling below $1480 and silver below $33 - both levels which only a few short months ago would have seemed to many to be out of reach on the upside! This looks like a strong consolidation phase and once the aftershock tremors die down there could be a very sharp move upwards again which could probably take gold to new highs and silver up to above $50 - and to this observer again, if silver does breach $50 (which is the big psychological barrier here) it could rise very sharply indeed beyond that level and , with the tail wagging the dog, bring gold up alongside it.
The fundamentals which have seen the overall increases in precious metals prices are still with us - indeed look to be getting stronger by the minute with western economic growth faltering and deficit-related economic turmoil worsening. It may not happen right now, but to the writer all the stage is set for a further significant rise in gold and silver sooner rather than later.
There are some predicting, however, a further downturn in precious metals due to continuing dollar strength into the summer months. They do tend to be very U.S. focused in their analyses though and are perhaps not taking into account the seemingly ever-growing volume of buying from the East. Their forecasts should not be discounted totally, although the troughs they predict as being the next big buying opportunity may not actually be reached. But even they are suggesting a thrid and fourth quarter upwards movement in precious metals prices.