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In the gold chart below, prices climbed above the weekly trading range and appears to be headed toward trendline resistance. Until the market closes above resistance, the bias toward a correction remains intact.
Likewise, silver showed strength on Thursday and Friday. The Doji candlestick on Friday indicates indecision between bulls and bears. Keep watching the trendline resistance shown below
Fridays strength in the XAU was lackluster, a possible gap and trap scenario. If the market continues to lose momentum, the first major corrective target remains the large unfilled gap shown below:
On Tuesday, The Dow Closed Up 136, above the elusive 11,000 point for the first time in 3 months, due to a big decline in oil prices as well as commodities. On Friday, the S&P 500 climbed 20 points to close at 1288 and the Nasdaq rose by about 25 points, closing near 2288. Another story leading stocks higher this week was positive earnings reports from Phizer and Coca Cola. KO announced that it boosted its quarterly dividend by 11 percent, and closed near $42 per share, up almost a point for the week. In this weeks top economic stories, Ben Bernanke took over the helm at the Federal Reserve only two weeks ago on February 1st, replacing Alan Greenspan's after his 18.5 year reign. Bernanke, the former chairman of the Princeton economics department, is known for his inflation oriented views. Yet He talked tough on inflation this Wednesday at the Fed meeting before the House of Representatives financial services. Bernanke made it clear that further rate hikes would be needed to curb inflation. However most traders are expecting the new Federal Reserve chairman to continue his predecessors expansive monetary policies in the years ahead. The markets are already discounting another rate hike at the upcoming Fed meeting on March 27-28. At the Senate Banking Committee hearing on Thursday this week, The new Fed Chairman had this to say about ajusting interest rates: "There are two possible mistakes. One is to go on too long and one is not to go on long enough, And, it's a very difficult balancing act." On Friday, the market was disappointed with a 0.3 percent rise in January's PPI figure, which grew faster than economists' 0.2 percent target. The Core producer price index -- excluding volatile energy and food prices -- added 0.4 percent, according to the Labor Department. "The PPI number is one data point that suggests the Fed is going to go further (with its rate hikes)," With six weeks before the next Fed policy meeting, "the market is going to pay increasing attention to the implication of (economic) data for inflation," noted one trader. Looking at commodities, in the energy sector worries over the inflation hawkish comments from the new Fed Chairman Bernanke lead most commodities lower this week. Natural gas and crude oil continued their downward trek, but found support by Friday. Interestingly, unleaded gas prices firmed this week. Guru
Predictions Although gold and silver have lost momentum in the past two weeks, bullish analysts continued to predict higher prices ahead for precious metals: Christopher Laird pointed out this week: " Now, if I take a gold price of 450$ in 1983, and correct that into 2006 devalued dollars, that comes to $450 times 4 = $1800 US. That is what the real inflation adjusted price of gold should be RIGHT NOW. The fact that it is merely $560 indicates that the so called gold bull right now is way overrated! The fact is, the real inflation adjusted price of gold is now 25% of what it was in 1983!forecasts." Mary Anne & Pamela Aden at the adenforecast.com had this to say this week: "Gold's secular bull market is clearly up and gold's steps have solidly been in place. Chart 2A shows that gold entered the fourth step in December when it broke above $500. It then surged, which isn't surprising considering what a milestone $500 was. If gold now stays above $500, the fourth step will remain solid, gold's super strength will be confirmed and $850 will be the next target, which is at the top of the fourth step." Fernando Gonzalez expects higher prices: "On the Gold chart I have, for the time-being, marked the 'big' Fib retracement values in gray: 50% retrace at 560, and 62% retrace at 635. For this time scale (long-term), $635 is in play with any trading over $560." Bottom Line The Gold Guru Award of The Week Award, goes to Christopher Laird for his very aggressive $1,800 gold target. When we take the average of our intermediate-term pundit estimates this week we find a single price target of, $742 an increase of $25 from last weeks consensus of $717. $635+ $850 = $742 We'll be watching the trendline resistance in the gold and silver charts shown above.. For now, we remain on the sidelines and are waiting for lower prices to build gold and silver positions in the weeks ahead. Thanks for reading.
*Interviews with Bob Chapman & Jack Chan* On the Saturday February 11th program at radio.goldseek.com, Bob Chapman shared his views on the gold and silver market. Bob was the largest gold and silver broker during his near two decade tenure. Our next guest, Jack Chan, has an incredible trading record. He has earned his clients 30% per year for the past 5 consecutive years. You won't want to miss these two interviews on the Saturday, February 18th show, here are a few highlights: Since Bob believes that this new gold bull market will be the biggest bull market in history, he thinks that people should be investors not traders. He thinks that as prices continue to correct it is a great time to accumulate or add to a gold and silver related position. Bob Chapman thinks that gold could move as high as $3,500 in three stages and that it could ultimately reach $5,000-$6,000. To hear Bob's thoughts on when to buy gold and silver, please listen to the show: www.radio.goldseek.com For investors that are new to the gold and silver market, Jack agrees that pullbacks are a great time to begin dollar cost averaging. By taking a portion of ones money and buying during dips, it is possible to get discounted prices within a bull market. Jack Chan agrees with Bob Chapman that investors should continue to ignore the market and hold gold and silver related assets for the long term. However, for traders Jack alerted his subscribers to a very timely buy signal in the HUI in November 2005. He thinks that gold will find support at 500-525 an ounce before moving to a new high point at $600. To hear Jacks advice to engergy as well as gold and silver traders: www.radio.goldseek.com You won't want to miss our show next week with Steve Forbes! CONTACT
INFORMATION Please visit my blog and web site for free daily market articles and analysis. Click Here. The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
