The government may say there is little or no inflation but that is hard to believe. Just look around the world, ie, Egypt, and there are many reports of surging food prices. The rise in inflation also impacts precious metals prices.
While everyone has been buying metals in anticipation of inflation, I find it amusing how inflation for the first time is clearly presented on TV (Egypt issues) and we see gold and silver trading lower than they were a month ago.
Personally, I do not think they will drop much further but I do think it’s going to take six to eight months before we see new highs in both gold and silver. They have had a nice run but now it looks as though they may cool off for a while. We could see some strength in the dollar for a little while and that should keep some pressure on metals even though inflation is clearly starting to show up around the world.
Below are my updated charts on gold, silver and the gold miners index. Not much has really changed from last week’s analysis other than both gold and gold miners are getting deeper into a resistance level forming a bear flag pattern.
Gold Daily Chart
Gold is working its way up into a key resistance level and forming a possible bear flag.
Gold Chart
Silver Daily Chart
Silver has been testing its key resistance level for a few days. It is normal to see silver push the limits and make larger moves simply because it is thinly traded and much more volatile. It looks ripe for a pullback at this area.
Silver Chart
Gold Miners Daily Chart Index
Gold stocks have put in a nice bounce from the strong selling in January. As it pushes up into a resistance level it’s starting to look more attractive as a short play also. I still think the market has a couple more days to upward/chop before metals see possibly another thrust down, but that also depends on what the dollar does this week. The dollar does look ready to rally this coming week and that will put pressure on metals.
Gold Miners
Sunday Night Super Gold Conclusion:
In short, I’m an still neutral to bearish on gold, silver and gold stocks. Last week’s report showed these same patterns and it takes time for patterns to mature. The market always tends to take longer than we think to start a move. At the moment I am waiting for metals to form a low risk entry point.
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