Gold and Silver Market Update

December 6, 2009

Timothy Silvers

          On 11/24 I sent the email alert:

          "Gold and Silver broke out above previous resistance levels last week but I am getting concerned that this rally is overdone and we may see a pullback any day now. Both metals rallied strong Monday then sold off towards the close. That may have been the top. Key prices to watch: Gold needs to close above 1175 and silver over 18.90 for this rally to continue. Gold has pretty strong support and hasn't closed below $1140 since Nov 13th, so that is a key level to watch that may indicate short term weakness to come. Silver has traded in a volatile range between 18.10 and 18.90 and has not been nearly as strong as gold lately. It hasn't closed below 18.40 recently, so that's an important level to watch. There is a lot of speculative focus on gold right now and the high level of bullishness is a big factor in my thinking that we are near a top. I recommend stop loss orders to protect profits on open long trading positions."

          For the past few months, I've been concerned that the major reason gold, silver, equities and other assets have been rising in value is mainly because everyone is selling the dollar. While long term I am no fan of the dollar due to the government's fiscal irresponsibility, in the short term a dollar rally is becoming more likely. The main reason is that the dollar short trade has become too crowded. It seems that everyone is sure the dollar is going down the toilet. Usually, when the greatest number of people are convinced that a trend will go on forever, that's when the trend reverses.

          On Friday the dollar rallied strongly and gold dropped about $50, a huge move. One day does not reverse the bull market trend for the metals that started in July, but the next few trading days will be important to watch. Gold needs to hold above $1140. As I write this update, gold has bounced off Friday's lows and traded mostly between $1150 and $1160 in early morning hours and just dropped below $1150 testing critical support. If gold closes below $1140 then I think it will next find support around $1100. Likewise, I would be a cautious buyer if gold were to convincingly close above $1175. That would probably indicate that we'll see gold make new highs. There is still a lot of speculative interest in gold and silver. This rally will continue as long as the metals don't drop below their 6 month trend support, currently around $1100 for gold and $17.50 for silver. Gold is the metal to watch, as silver has been more or less following gold's moves, but with uncharacteristicly less volatility. I'm still bullish long term but I'm watching out for a surprise dollar rally that could put the precious metals bull run on hold for a few months.

           If you took my advice recently your trading positions may have been stopped out during the 11/27 selloff or the one on 12/4. We've seen some extreme price volatility in gold recently, so you have to consider these large price swings and your trading objectives when deciding at what price to put your stop levels.

Best wishes on your investing and future and God Bless,

Timothy Silvers

www.silverbrothers.com

www.numisnetwork.com/silverbrothers

 

Disclaimer: This article represents the opinions and personal views of Timothy Silvers and is not intended to be investment advice. If you choose to use this analysis for your personal trading, Timothy Silvers assumes no liability for the direct or indirect losses you may incur due to using this article to make your investment decisions. You are totally and completely responsible for your own investments. At any given time, Timothy Silvers or his friends and relatives may have positions in silver related investments that may or may not follow the recommendations contained in this article. The information in this article may not be completely correct and accurate. Even though Timothy Silvers has done his best to review the content and accuracy of this article, he is in no way liable or responsible for any mistakes or omissions.