first majestic silver

It's Super Gold Sunday!

Technical Analyst, Trader, & Founder of Technical Traders Ltd
February 7, 2011

While Ben Bernanke says we are not seeing any inflation, I think most of us know that is a load of BS as other countries like Egypt see food prices surging. Over the past couple years everyone has been talking about how inflation will soon start and that has been one of the main driving forces for higher precious metals prices.

As we all know the market does the opposite as to what the majority of investors are doing. And while everyone has been buying metals in anticipation of inflation, I find it amusing how inflation for the first time is clearly presented on TV (Egypt issues) and we see gold and silver trading lower than they were a month ago. Seems like the buy the rumor sell the news lives is playing out. But the question everyone is starting to ask is how far will the metals correct?

Personally, I do not think they will drop much further but I do think it's going to take 6-8 months before we see new highs in both gold and silver. They have had a nice run but now it looks as though they may cool off for a while.We could see some strength in the dollar for a little while and that should keep some pressure on metals even though inflation is clearly starting to show up around the world. Then the metals should start to climb the wall or worry again.

Below I are my updated charts on gold, silver and the gold miners index. Not much has really changed from last week analysis other than both gold and gold miners are getting deeper into a resistance level forming a bear flag pattern.

Gold Daily Chart

Gold is working its way up into a key resistance level and forming a possible bear flag.

Silver Daily Chart

Silver has been testing its key resistance level for a few days. It is normal to see silver push the limits and make larger moves simply because it is thinly traded and much more volatile. It looks ripe for a pullback at this area.

Gold Miners Daily Chart Index

Gold stocks have put in a nice bounce from the strong selling in January. As it pushes up into a resistance level it's starting to look more attractive as a short play also. I still think the market has a couple more days to upward/chop before metals see possibly another thrust down, but that also depends on what the dollar does this week. The dollar does look ready to rally this coming week and that will put pressure on metals.

Sunday Night Super Gold Conclusion

I'm am still neutral to bearish on gold, silver and gold stocks. Last week's report showed these same patterns and it takes time for patterns to mature. The market always tends to take longer than we think to start a move.

At the moment I am waiting for metals to form a low risk entry point, which looks to me like we could take a short position for another downward thrust, as the market unfolds. Subsequently, we would buy gold for another long term hold as inflation rises.

 

You can get my daily trading videos, intraday updates and trade alerts by subscribing to my newsletter: www.thegoldandoilguy.com

 

Chris Vermeulen

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several financial hubs like MoneyShow.com.

 


The King James Bible mentions gold 417 times. Not once does it mention a paper currency.
Top 5 Best Gold IRA Companies

Gold Eagle twitter                Like Gold Eagle on Facebook