THE GOLD AND SILVER REVIEW
Market Summary - Gold and Silver Pause
Chris G. Waltzek
January 23, 2006
This week, gold finished the
week on Friday at $554, near the break-even point. Silver closed
at $8.88, down about $.25. lower than the previous weeks level.
Last week in the Weekly Market Update, I suggested that silver
did not confirm golds new 25 year high: "Although gold hit a fresh new high,
silver did not confirm the move. We will be watching the silver
market consolidation this week for hints toward market direction." As expected, silver
did not break-out. In fact it remained within the trading range.
This is not necessarily a bearish development. However, until
silver confirms golds new highs, the bull will be napping.
In the chart below, its clear
that Tuesdays high marked the peak for gold this week. The market
is now consolidating after a new 25 year high:
The XAU gold stocks index climbed
to new highs on Tuesday, but suffered on Friday. The market is
within a narrow trading range. One worrisome technical aspect
are the three unfilled gaps left in the chart below. In the event
that the market begins a retracement, the gaps will provide targets
during the decline.
The major stock market indexes
were hit hard this week. The Dow closed down almost 300 points,
The Nasdaq lost almost 70 and the S&P gave up 26. Last week
we noted in the Weekly Update: "The markets all lost momentum this week
and appear capable of a retracement this week." As of Friday evening, the major indexes
appear very oversold. A short term rally should develop early
next week.
The Gold and Silver Review Broadcast
This week, I had the pleasure
of chatting with, James Turk of GoldMoney.com, Roland Watson
from Newerainvestor.com and Jim Rogers, the Adventure Capitalist,
on the Gold and
Silver Review broadcast. James Turk's interview is posted
at the website and the other two will post later this week.
James Turk shared his thoughts
about the bull market in gold and silver. He is expecting much
higher prices ahead for gold and substantially higher prices
for silver. To listen to the broadcast in RealAudio or Mp3 formats, click here.
All the way from Edinburgh,
Scotland, Roland Watson shared his forecasts for gold stocks,
gold and silver. Roland discussed his Elliott wave methods for
deciphering market clues. Roland expects four digit gold and
much higher silver prices ahead. Roland has a newsletter that
can be found at his
blog.
Jim Rogers told our listeners
that he is long gold at this time and went into the details of
the new commodities bull market. Jim believes that the commodities
bull has many years to run. He talked about his latest book,
Hot
Commodities, a must read or visit his website
here. Jim Rogers interview will air next week.
Guru Predictions
Chris Noon from, Faces In
The News, reported on Warren Buffett's latest warnings about
the US economy. "... The Oracle of Omaha occasionally becomes
the Prophet of Impending Doom, ...Don't count on a soft landing
for the country's deficit-addicted economy, Buffett reiterated
Tuesday. The U.S. trade deficit is a bigger threat to the domestic
economy than either the federal budget deficit or consumer debt
and could lead to "political turmoil", the decorated
investor warned. Buffett's bearishness is understandable: Fixing
the trade deficit--which soared to a record $665.9 billion in
2004, and is expected to top $700 billion this year--is becoming
rather like turning around an ocean liner by dipping a teaspoon
in the water."
Jim Sinclair is "sticking"
to his $1650 estimate for the price of gold. He
writes, "Buffett is no dummy nor am I. We have pushed all
this ...economics to the predicted point of no return. That point
is here and now. That is why the naked shorts on two hammer plays
have failed. The size of their short of gold position as a public
number is a tool of their own demise..."
Lindsay Williams reported this
week: "I spoke to TheBullionDesk.com about a week ago, and
they say $618 is an average for the whole of 2006,
with a spike up to $760."
Shirley Won recorded ex GoldCorp
chief executive, Rob McEwen, predictions:
"... junior gold stocks
will be the place to be invested: "Junior companies are
one of the best places to put your money, but it's got high risk,"
...You need a high tolerance for risk, but I think you'll have
very big returns." McEwen shared his prediction for gold
of the next three years: "He believes gold will reach $850
and then leap, "significantly higher" in a manic
phase, similar to the dot.com bubble mania of 2000.
Investment bankers are beginning
to wake up to the reality that analysts like Jim Puplava and
his guests have been noting for years: "Merrill Lynch of
New York and Australia's Macquarie both raised their projections
19% last week to $525 and $565 respectively;
bullion bank JPMorgan is looking for an average of $558
for the year; and Swiss bank UBS recently upgraded its projection
to $520."
Next, Alf Field revised his
short and long term gold targets to: $655 and $2,750,
respectively.
Lastly, Richard
Daughty quotes a gold analysts predictions this week: "From
the mid-1970s until the mid-1990s gold rarely went below $500
in today's dollars, so $500 gold really is historically cheap.
Today gold would have to challenge $1000 before
it started getting expensive and it would have to rocket up near
$2200 to hit all-time real highs."The Mogambo
himself, Daughty wrote: "Now there is 4x as much fiat paper
floating around relative to gold as there was in 1980! The $850
spike high in January 1980 multiplied by this ratio yields an
all-time gold high of $3570 in today's dollars."
Earning him our Big Shot of The Week Award.
Bottom Line
The upward trend in the gold
and silver markets will remain intact as long as higher highs
are followed by higher lows. Gold reached another 25 year high
point this week. Silver remained within a narrow trading range
for the second week, still unable to confirm new highs in the
gold market.
In order for the current break-out
in gold to remain valid, silver should close above the current
consolidation pattern as seen in the chart at the beginning of
this article.
Our Big Shot of The Week
Award, goes to Richard Daughty, the Mogambo for his intrepid
gold price outlook of: $3570. When we take the
average of all of our pundit estimates this week we find a single
price target of:
$520 + $525 + $565 + $558 + $618 + $655
+ $760 + $850 + $1650 + $2,750 + $3570
= $1,183.
We're continuing to watch for
a move out of the current silver market trading range. A close
above the range should lead to higher gold prices, a close below
the consolidation may lead to weakness in the short term for
precious metals.
Thanks for reading.
Jan 20, 2006
Chris G. Waltzek
email: cwaltzek@comcast.net
website: http://silverinvestor.blogspot.com
Please visit
my blog and web site for free daily market articles, audio broadcasts
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