Tuesday, August 12, 2008

Gold: a Couple More Waves to Go

December Gold hit a low of 808.60 last evening and Silver nearly touched 14 bucks. 14 was the target I've had for Silver since the highs this spring. during the last two big sell-offs, in 2004 and 2006, it crashed about 35% from the top on both of them. I never thought this time would be much different. 14 is around 65% of the intraday high in March. but the highest London Fix was 20.92 and 65% of that comes to 13.60. so we've gotten pretty close to the neighborhood with Silver, but I'm not positive that we've quite found the right house yet.

I feel that ultimately gold should trade below 800. for at least a little while. so if that happens we'd be shopping for a low somewhere between 790 and 760ish. likely closer to the lower end of that range. 760ish fits with some Fibonacci retracement numbers that I won't bore you with, plus the support level on the long-term December 2008 chart (see below), and also if you look at the COT numbers from last year you'll see that that's the price level around which the Commercials (Known as the Gold Cartel in the comic books) added the meat of their net short position.

so yeah, there's some stuff for you to keep in mind, but really it's all just guessing until the price action demonstrates its resolve not to go lower. if we're lucky we'll notice it.

oh, and I'm not sure but don't be surprised to see a pretty good rally higher the next few days or week or so. Gold could bounce up to 860 or even a little more. then we'll get the final wave down. that'll be fun, when those turd-burglars on the financial channels trot out the Deflationists for interviews. that's when you Know you should buy some more metal.

(if you are looking to buy physical Gold or Silver, my friend Lou Lindstrom at Investment Rarities provides excellent service. his number is 800.328.1860)