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The past
few months have been tough for those holding precious metals stocks, PM
futures contracts or physical bullion. With silver is trading down 41%,
precious metals stocks down 30% and gold 15%. It has people scratching their
head.
The question everyone keeps asking is
when can I buy gold and silver?
Unfortunately that is not a simple
answer. With what is unfolding across the pond and the bullish outlook for
the US Dollar index the next move is a coin toss. That being said, I do feel
a large move brewing in the market place so I am preparing for fireworks in
the first quarter of 2012.
If you step back and look at the
weekly trend charts of the dollar index and the SP500 index you will see the
strength in the dollar along with a possible stop in equities forming. What
these charts are telling is that in the next 3 months we should know if
stocks and commodities are going to start another multi month rally or roll
over and start a bear market selloff.
With the holiday season nearing,
hedge fund managers sitting on the sidelines just waiting for their yearend
performance bonuses, I cannot see any large selloff start until January.
Selloffs in the market require strong volume and the second half of December
is not a time of heavy trading volume.
This leaves us with a light volume
holiday season, major issues overseas and no big money players willing to
cause waves.
So let's take a quick look at the
charts as to where the line in the sand it for the dollar index, gold and
silver.
Dollar Index Daily Chart
This week we have seen a strong shift
of money out of risk off assets (Bonds) and into risk off (Stocks). This
shift is happening before the dollar has broken down indicating the dollar
may be topping and could be an early warning of higher stocks prices going
into year end. Also note that light volume market conditions also favour higher prices.
 
Gold Price Daily Chart
Gold could still head lower but at
this point it is holding a key support level. If we see the dollar breakdown
below its green support trendline then I expect
gold to have a firm bounce to the $1675 - $1700.
Silver Price Daily Chart
Silver continues to hold a key
support level. If the dollar breaks down the silver should bounce to the
$31.50 - $32 area. But if the dollar continues to rally then silver and gold
may drop sharply.
Mid-Week Trend Conclusion:
In short, I think the best thing to
do is enjoy the holiday season with family and friends. Trading right now is
not that great and with the market giving mixed signals. I am keeping my eyes
on the market in case it flashes a low risk setup and I will keep you
informed if we get one.
Be aware that Monday is a holiday and
once January arrives the market could go crazy again. If you want all my
swing trades that I personally do be sure to join my alert service www.TheGoldAndOilGuy.com
Happy Holidays to
you and your loved ones!
Chris Vermeulen
Editor, the Gold and Oil Guy
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