Gold Price Action May Be Signaling the Next Big Move Up

March 3, 2010 | By | Reply More

The price action in gold and silver this week may be signaling the next big move up. Our sample of technical analysts seem to bear this out and we have little doubt that those fundamentals that have been in place for what seems an eternity are now strongly influencing the bullish decisions of many speculators in precious metals. 

After breaching resistance at $1140 an ounce in European morning trade a small hiccup occurred when the spot gold price dropped momentarily to $1139.50 at the NY open before establishing itself in safe territory at the $1143 level at midday.
Silver is following suit as it has moved into the mid $17 an ounce range.

Our earlier recommendation to buy July SLV (iShares Silver Trust) option calls at strikes of $18, $19 and $20 is looking good and moving into profit despite a month in the doldrums that we did not anticipate.

There may be some mileage in $19 and $ 20 July calls for the braver speculators as earlier targets for silver by mid 2010 were being touted towards the latter end of 2009 at circa $20 an ounce.

This was at a time when the recessionary climate was in full swing before we were informed by Mr. Bernanke and his acolytes that the recession was over and that we need not fear inflation.

Now that is no longer flavor of the month and inflationary prospects are growing it seems that a flight to precious metals and their miners may be gathering a head of steam.

Talking of silver reminds us to mention that apart from its virtues as a store of value etc. and its extensive uses in high-end technology its use is also growing at a fast rate in medical applications as its germicidal properties are becoming recognized.

As a point of interest this has been known for many, many centuries, even down to relatively modern times when it was a practice to suspend a silver dollar in water containers to keep them fresh as settlers trekked west.

It is also the origin of the expression used to denote an individual’s unearned wealth. “ Born with a silver spoon in his/her mouth”

If this present rise continues we expect silver to outpace gold in percentage terms as we note that the gold / silver ratio is still above 65, when below 60 by a considerable margin has been the historic norm.

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