For reasons set out in full in the Gold Market update we are now adopting a more cautious tack with both gold and silver than that expressed in last week‘s updates, with the steep drop in the Precious Metals over a week ago now being considered to mark the start of a deeper and more prolonged corrective phase.
Although both gold and silver remain within intermediate uptrend channels that did not fail as a result of the plunge, even though gold’s trendline was tested, they both broke down from parabolic accelerating uptrends, with silver’s failed parabolic uptrend being shown on the 1-year chart here. What normally happens after the failure of such an accelerating uptrend is a lengthy straggling correction, the early stages of which can be violent, as we have just seen, or a flat-out bear market. Thus both gold and silver’s intermediate uptrends are expected to fail in due course, with an obvious initial target for the silver correction being the support level in the $15.00 - $15.50 area, not far above its rising 200-day moving average. Silver rallied from a deeply oversold position last week, as predicted, and is now once again vulnerable to a steep decline. Before this occurs we may see some further insipid upside action, but this is considered unlikely, so it is thought better to position yourself for another sharp decline.
As set out in the Gold Market update, whether or not the corrective phase in gold and silver morphs into a full blown bear market, will probably depend on whether or not a bear market develops in commodities generally, and that will depend on whether or not powerful deflationary forces continue to be offset by the powerful inflationary forces in the system which are already glaringly obvious. This in turn will depend on the future actions, or perhaps reactions of the Fed and the world’s Central Banks. With ominous bearish patterns appearing on many commodity charts and on many stock index charts, as well as on many individual stock charts, caution is the watchword for the immediate future.
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