Gold and Silver Analyst Nov 9, 2010
Gold and especially silver have had a great run since August as the US Dollar gets talked down more – especially by its own regulators in the form of the Federal Reserve. Obviously nothing goes straight up and the precious metals will take a breather in this final leg of the multiyear bull market.
Various reasons can be given for that but one graph in particular should give metal bulls pause for thought. It is the weekly graph of the US Dollar Index and as you can see, the dollar has reached a major level of support on the lower trend line. Now it may keep going down and it will in due time to the next level of support at the all time low of 70.
(Click on image to enlarge)
That trend line is currently at 76 and the dollar briefly spent three days below this line but has now crept back above it and technicians will take this as a sign to sell some of their gold/silver positions but hold the core for the next major leg which breaks the dollar into the unknown territory of the 60s level.
As I write silver has not surprisingly sold off on this event and I anticipate a period of volatility for gold and silver in the weeks ahead. The precious metals bull market nevertheless remains in place.
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