Do you know why Gold and Silver have enjoyed a run? Let me ask you this question What does the market think Gold and Silver is for? A hedge against a crisis/inflation If you look at the DOW, it is setting up a potential head and shoulders pattern that is aiming to take the market SIGNIFICANTLY lower. We are currently at what might be the peak of the second shoulder, and the neck line is significantly downtrending. It is my assertion that the current run in metals prices is a precautionary step, exacerbated by short covering in the Gold market. Silver has been screaming that the current rise in Gold is NOT legitimate. The potential sustaining of these prices is predicated on the head and shoulders in the DOW confirming itself. If the DOW does NOT confirm the head and shoulders, there will most probably be a reversal of the price and possibly make a new low (which would be the short term buying opportunity). As we look at earnings in the DOW, we would expect the earnings to justify the higher prices. The head and shoulders pattern is not going to assert itself unless the math (of price to earnings) justify it. Gold rises when spare money is available to invest in it when the market believes the money is over valued. Gold also rises when money needs something safe to go to because the immediate future of money's value is bearish. We (usually) buy gold when we believe the gold price will appreciate, the market buys gold when they believe the OTHER asset prices will depreciate. Our investment outlook is OPPOSITE to the market and that means we are in danger because the market is bigger! I don't believe the fed manipulate the gold market - I believe the fed manipulate the stock market! (which has a flow on effect for gold which is volatile not because of the fed but the hedge funds who deploy very quickly to catch moves. Large tones of paper gold being dumped on the market could easily be some idiot managing 5million dollars and screwing around with leveraged paper contracts. So what I am saying is - to confirm this move in Gold, Silver and Platinum - a confirmation of the head and shoulders pattern in the DOW would have to occure. If that confirmation in the DOW does not occure, and the DOW moves higher or begins a range correction - the gold bought will be let go of and the speculators and hedge funds will jump on to stomp it down. Im not saying 'buy' or 'sell', im just offering these ideas for consideration. I'm currently doing nothing (well that's not true I bought some shares but was going to anyway)
Its probably also worth reminding everyone that when the stock market started its drop in 2008, gold corrected as well as people scrambled for liquidity. Which means if the market still believes the same way - gold may recover much faster than the market but it will still drop with a crash. BUT - also remember the Aussie dollar dropped compared to the usd AS WELL during 2008 and Gold WAS appreciating rapidly in AUD during 2008/09. So keeping all this in mind as a 'big picture' view might be helpful and I offer it for whatever its worth to you.
