Silver appears to be “carving” out a rounding bottom formation against gold. Note the MACD indicator, which is trending higher.
Gold bullion tends to lead silver at the start of a rally.
China is apparently preparing to substantially increase their use of solar power, and a fair amount of silver is required to do that.  Also, India has enacted a ban on gold bar and coin sales.  Silver could benefit from increased buying there, if the ban isn’t lifted soon.

MH2The Federal Reserve chairman recently talked about reducing QE.  The bond market was looking a little toppy before he spoke, but now it looks like a huge bear market may be startingThe technical indicators on this chart are showing major sell signals. This type of situation doesn’t happen very often, and if the technical continue to deteriorate, a bond market recovery may not occur unless the Fed actually increases QE.   The head & shoulders top formation is signaling a decline is coming, to the lower channel.  Note the head & shoulders top pattern.  The target is about 130.
An institutional loss of confidence in the world’s largest market appears to be gaining a lot of momentum.

The gold market is certainly washed out, and hopefully ready to move higher.  Price bounces from downward parabolic moves (inverse parabolas) tend to be dramatic.
Once gold breaks free from the grip of this powerful inverse parabola, I am projecting a violent move to the $1580 area

gold sentimentThis week, I spoke to an elderly fellow who has accumulated silver for decades. He has been buying it since the 1960s, and he’s not concerned about the current price action at all. 
Commercial traders are bullish, and the public is more negative than at any time in recent history, including the 2008-2009 lows.
The public may be correct, but only in the short term.  Their long term track record is disastrous, so this is probably a very good time to accumulate physical metals.

MH8Submitted by Morris Hubbartt:

Silver is testing long term support at $19.50, and that’s a concern. Weekly RSI is oversold, but it still can’t get over 30.
$16.25 is the next key support zone on the downside, and I’m committed to buy more silver there.  Silver bulls have lost a lot of battles recently, but not the war!

m2Submitted by Morris Hubbartt:

As the chart clearly shows,  “smart money” purchases have generally occurred during major price weakness.
We are grinding through a prolonged period of such weakness now, and the commercials have been buying long positions and covering shorts. There are also rumors they are buying physical gold.

The big money in any market is usually made by buying extreme weakness. The latest COT reports may not indicate that the lows are in.  They do indicate that commercial traders believe gold offers tremendous value to buyers.

BernankeThe US economy would have to undergo a major readjustment if QE ceased. Quantitative easing could even be replaced with outright money printing.  One prominent hedge fund manager is already calling for it!
Regardless of day to day moves in the dollar, the US currency has to decline in the long term.
The long term dollar chart looks terrible!

gold dustSubmitted by Morris Hubbartt:

Whether gold has bottomed or not, I expect the next rally to take it up towards the red trendline, on this chart.  That would put it near $1600. Note the position of the RSI oscillator.  On this chart, it’s at a record low.  The Stokes oscillator is also very bullish.
Asian value buyers tend to be attracted to this type of situation.  They aren’t concerned about whether “the low is in” or not; they just believe gold offers good value, so they are strong buyers now.   Their approach has been pretty successful, for thousands of years!

downSubmitted by Morris Hubbartt:

Gold has not traded above $1900 for nearly two years, and most investors are wondering if the bull market is beginning a bigger correction.  My gold cycle analysis suggests that gold is testing the support line that extends back to the year 2009.    If you look carefully at the chart, you can see that the gold price is slightly below that support line now, which is creating technical selling by hedge funds.  I call that the “speed bump”, and it’s happened before, in early 2011.  I’ve highlighted that period on this chart.
Every gold investor wants a rally now, but this technical speed bump  could easily cause gold to decline to $1400 or $1350, before the bigger bull cycle “overpowers” the technicals.

Submitted by Morris Hubbartt:

Ultimately, markets are driven by fear and greed. In the current gold market, there is a lot of fear.  Also, most mainstream money managers believe a full economic recovery is underway, so there is no need to own gold.     My worst-case scenario model shows that gold could fall to $1350, but I don’t see that happening.
Only a small amount of gold is brought to market each year. Most assets can be substantially diluted in one way or another, but not gold.  Physical gold and silver are probably the highest quality assets that an investor can own.  Fear of lower prices should not deter anyone from holding gold.  Note the oversold condition of the slow Stokes indicator and RSI on this weekly chart. There is only one thing for long term investors to do, and that is to hold their positions.  Buy more, if additional weakness comes.

stock market collapseSubmitted by Morris Hubbartt:

At this point, quantitative easing is pumping about 85 billion electronically printed dollars a month, into bonds and other “quality assets”. Without the artificially low interest rates that QE creates, the economy would probably implode.  I view the current market as a dangerous place to allocate investment capital. I targeted 13,500 initially, for the Dow.  Now I’ve added a 2nd target, which is 12,200.

Down-day volume is beginning to overwhelm up-day volume, which is extremely bearish. The Dow could soon form a huge double top pattern, just as the infamous “Sell in May, and go away!” period of time arrives!
Overall, the stock market continues to be a huge beneficiary of QE policy. How long can this stock market rally continue? To help answer that key question in more detail, I am focused on two leading indicators.

gold stress testSubmitted by Morris Hubbartt:

Corrections are a cleansing process.  They shakeout weak investors, and get the market poised to move higher.  Technically, key oscillators are already in the “basement”, but that does not mean you can ignore the possibility of one or more rounds of price weakness, before gold begins to rally.

Note the expanding channel on the weekly chart, which portrays what is really my worst case scenario. Most bullish analysts, including myself, think the lows for gold are occurring at this point in time.  Still, it’s important to look at the other side of the “price prediction coin”.

The channel suggests that the gold price could fall to about $1350, without doing any technical damage to the big bullish picture.

double_bottomSubmitted by Morris Hubbartt:

In the case of gold, the consolidation has gone on now for nearly a year and a half. The larger the base is, the greater the rise out of it.
There are actually two triangles in place, and gold has just staged a near-perfect pullback to the top of one of them.

Note the trade signals on the chart.  Silver has a double bottom pattern very similar to the one I showed you on the gold chart, and $29.15 is the necklineA move over the neckline should produce a rise to $30.43, and begin a trending move to the $40 area!

twilight zoneSubmitted by Morris Hubbartt:

The base building process over the last 18 months has been frustrating.  There is strong support under market, coming from commercial traders.  This is the “platform” that should propel gold to higher prices.   Commercial traders are now holding positions comparable to the 2006-2007 timeframe.  Gold gained over 70% after that, and it could happen again!

When Fed officials make comments that the end of QE is coming, it’s probably a verbal sleight of hand.  A rally in the T-bond is what the gold market desperately needs!  As the price has softened, the public has fled the gold market. The old saying is, “If you can’t handle the heat, get out of the kitchen.” Well, the public clearly cannot handle the heat. Look at the extreme sentiment reading. It looks like something from the twilight zone!   I’ve never seen the sentiment for gold stocks this bearish, which means potential upside reward has never been bigger!

m9Submitted by Morris Hubbartt:

The public’s level of ownership has declined to a level not seen since the lows of 2008. This indicates gold is probably making a major market bottom.

GDXJ has moved lower, with gigantic volume. This type of selling has driven the key RSI indicator to historical lows.   A rule of thumb is that once RSI goes below 25, buy orders can be placed.   Bearish analysts think that GDXJ has broken down from major support, but I think this is a huge bear trap.  Sentiment, climactic volume, and oscillator action suggest that junior gold stocks are about to reverse and surge higher, stunning the bears!

m3Submitted by Morris Hubbartt:

Fundamentally, the US dollar is at great risk. Even if politicians make headway in spending cuts in the coming months, it won’t stop the debt from growing.   According to CNS news, about 11,000 people sign up for the Supplemental Assistance Nutrition Program (food stamps) every day. As the United States heads back into recession, maintaining a social net will be priority number one.

So, leaders can attempt to make progress, but the debt is now over $16.5 trillion.  Unfunded liabilities are more than seven times that amount.  A debased currency or much higher interest rates are the government’s ultimate choice.

The fundamental issues that are negative for the dollar are also very bullish for gold.  With the long-term trend of gold being up, this enormous symmetrical triangle is likely to breakout to the upside.
A symmetrical triangle is usually formed during a consolidation period. In the case of gold, the consolidation has gone on now for nearly a year and half. The larger the base, the greater the rise out of the bull market consolidation pattern. 

triple hammerSubmitted by Morris Hubbartt:

If the implosion of Lehman could only get the dollar to 89.11, is there really any hope for the bulls now?  I don’t think there is.  I’ve labeled the dollar chart the “Triple Hammer Chart”, because I see 3 powerful chart patterns, and all of them are very bearish for the dollar.

Silver is setting itself up for a nice rally.  The set-up is very similar to last fall. At the bottom of the chart, note the bullish breakout of the Aroon indicator.    Silver is my favorite asset in the precious metals group, for adding fresh risk capital.  The Bollinger bands are tightening, and that is usually followed by an explosive move.

morris4Submitted by Morris Hubbartt:

US debt negations have been delayed again, by squabbling political parties.  We are told that in May everything will be fixed, but the debt continues to grow, and so does pressure on the US dollar.    
The US dollar is vulnerable to a “loss of confidence” event.  That could create a stunning decline, and a powerful move higher in the price of gold. A key level that I watch on the US dollar chart is the 80.50 area, which never seems to hold for very long.

This chart has numerous head & shoulders top patterns on it, and it closed out the month of January below 80.50, which is a very ominous sign for dollar holders, and great news for gold! 
As this debt crisis continues to unfold, I expect more investors to transfer money from paper gold products to physical gold.  

morris4Submited by Morris Hubbartt:

The dollar’s huge head and shoulders top formation is maturing.  The target is 72. It will be activated when the dollar closes under 78, for two consecutive days.  A breakdown under 78 should be accompanied by gold breaking above $1800.

Over time, markets oscillate from undervaluation to overvaluation. The chart below demonstrates how gold stocks go from one extreme to the other, forming a channel that can be bought and sold.
In terms of undervaluation, gold stocks are now stretched to the point of challenging the 2008 panic low! 

morris5Submitted by Morris Hubbartt:

Public participation in gold is near the lowest levels of the bull market. This is a good sign that higher prices are coming.   My upside targets are $1850, $2350, and $2750.  At $2750, I’m projecting that the public will become eager to own gold again, and the price will begin the next major consolidation.

There is a big positive divergence on the gold chart. Once gold trades above $1800 for 3 consecutive days, gold stocks should have their technical shackles removedAt that point, I will be looking for an enormous 100% rally in most gold stocks, from the double bottom that was established in the $39 area on the GDX chart.

imagesSubmitted by Morris Hubbartt:

I see the dollar soon beginning a decline akin to a snowball tumbling off a cliff of gold.
Note the bullish long-tailed candlesticks on the gold and silver charts. Last Friday’s jobs report created an exciting hammer candle formation, and it came on climactic volume.

Submitted by Morris Hubbartt:

Note how oversold gold is, compared to the euro.  A strong buy signal for gold is now in play, and the last time one like this occurred, gold doubled in price, over the next three years.    I don’t want to be predicting pies in the sky, but any rational investor can see that buying some gold here against the euro is a reasonable course of action!

Silver is one of my favorite assets to purchase on weakness, for long term capital gains. Today’s prices offer a great opportunity to do that, but remember that silver is far more volatile than gold.  Note how drastically oversold RSI and the slow Stokes are.  These powerful indicators suggest that investors who endure the pain caused by the FOMC minutes, could soon be greatly rewarded!

 Submitted by Morris Hubbartt:

This is a ratio chart of silver versus gold, and it suggests silver is set to dramatically outperform gold, in the intermediate term.  RSI is close to confirming the latest CCI spike, and the Stokes oscillator at the bottom of the chart is flashing a significant buy signal.
A bullish Doji candle recently occurred, just outside of the lower Bollinger band.  No technical pattern has a 100% success rate, but a Doji is highly dependable.  The silver bears are treading on thin ice here, and the bulls are looking good.

The best trade for 2013 could turn out to be buying silver now.