THE GOLD AND SILVER REVIEW
Market Summary - Gold and Silver Consolidation
Chris G. Waltzek
February 06, 2006
The Radio.Goldseek.com Broadcast -
Interview With Dave Morgan
On this weeks online radio
broadcast, radio.goldseek.com, I had the pleasure of chatting
with Dave Morgan, from www.silver-investor.com. Dave told us
that he thinks the ultimate peak in precious metals is at least
4 years away and that prices in excess of $100 for silver is
very possible. In fact, Daves peak price for silver is around
$125. He expects the silver market to rally until at least 2010
and perhaps peak by 2014. Dave recommends dollar cost averaging
into the bull market.
Mr. Morgan, expects that any
price under $8 is a bargain and that it is a good target following
the next correction. He said to buy aggressively at prices under
$8. He does not expect silver to fall beneath $7 per ounce for
many years to come.
Dave also made it clear that
it is best to observe the market and not predict. Although he
is very bullish on precious metals in the years ahead, he agrees
that the market may have become a bit manic and a retracement
is due soon. Mr. Morgan sees short-term weakness ahead and advises
caution for silver investors at this time.
On next weeks show, we will
chat with Mr. Roland Watson, an Elliott Wave technician who focusses
on the HUI. Mr. Watson hails all the way from Scotland. We'll
also add an energy sector segment to the program. Please bookmark
our site at either of the following links: radio.goldseek.com
or silverinvestor.blogspot.com
Market Summary - Gold and Silver Consolidation
On Monday, precious metals
soared higher, as the Federal Reserve prepared for its Tuesday
FOMC meeting. Gold and Silver consolidated for the remainder
of the week and Silver held within a narrow trading range. Gold
finished on Friday at $568, up about $9 while Silver moved closed
at $9.73, up near $.14.
The XAU, Gold and Silver stocks
Index, gapped up on Tuesday but then forfeited all of its gains
for the week, closing near the break-even level. In the chart
below, the XAU registered a bearish, shooting star Japanese candlestick
pattern. Shooting star candlesticks are highly correlated with
short term weakness and often signal the top in an upswing:
Stocks didn't fair as well
this week and saw some profit taking. The Dow Jones Industrials
retreated by about 100 points, the Nasdaq was off about 40 and
the S&P declined by about 20. All three of the major indexes
have been consolidating for about 3 months. We would want to
see strength come in next week in order for the trading ranges
to remain intact. A failure of recent lows could lead to a new
downtrend.
Guru Predictions - Gold Bug Award
Dr. Richard
Appel remains very bullish on gold. This week he predicted that
we will reach the previous gold peak from 1980: "The reason
why I anticipate that the next major target for gold is $875
is simple. Among other reasons, it is due to two primary factors.
The first is that there are no major areas of resistance between
the $500 to $515 range and that point. The other is that conditions
have coalesced that I believe will drive the eternal metal to
that level if not higher, before a major bearish assault can
be mustered."
Richard Russell
from Dow Theory Letters agrees with Dr. Appel's bull market prediction:
"Gold is now well above the 550 halfway or 50% level of the entire 1980 to 2000 bear market.
This puts gold in line to test the 1980 record high of 850.
There's no time limit on the test of the high.
Gold is staying overbought,
characteristic of great bull markets. Those who want in are waiting
for the correction that a seeming army of analysts are promising
is "just around the corner." Meanwhile, the gold bull
snorts, tosses his head -- and moves higher. The twin bull of
silver does the same."
Jim Sinclair has become a silver
bull and has a startling prediction for the silver market: "The
answer to the perennial debate about real silver and paper silver
should be answered soon. The key to this answer market wise is
$10.50 as major resistance is right there.
The basis of reaching a 22
year high lies in Barclay Global Investor's plan to issue a publicly
traded exchange listed silver fund. If this fund is sizeable
and buys real silver bars the impact could be significant. However,
if this fund specializes in paper silver it will only become
another tool of COT. Is Barclaysgoing to fight COT? That seems
most unlikely but we shall see.
My feeling is that the funds
that ETFs and Hedge funds have in gold have only served to muck
up the waters. They have so far made fools out of themselves
long on the top and short at the bottom. Gold is too violent
at present prices, meaning that in time $150 to $250 ranges in
a single day can be expected. Silver will have $5 between the
bid side and the nearest offer. Now will that make life easier?
I do not cheer the formation
of the first EFT of significance in silver. The market is cheering
but real bullish joy only comes at a close above $10.50."
Ed Bugos from the Interim Market
Update wins the Gold Bug award this week with his $2,000-$3,000
gold forecast: " I am bullish enough to say that the market
will probably move to the high end of my target ranges (i.e.
XAU=200; HUI=400; Gold=US$633), but this is no
science to begin with. Anything beyond those figures is outside
the scope of any kind of measurement - technical, fundamental,
historic - in my arsenal, at least for the near term.
Now, when I suggest taking
profits on this stuff, even while arguing for gold to rally into
the $2000-3000 range ultimately, I have a specific
investor in mind: that is, anyone looking to minimize their downside
during the inevitable PRIMARY correction.
Wherever the peak will be,
whether US$600 or US$800, it will happen in the
next few months, and after that a correction of up to 30% in
gold prices and up to 50% in the HUI would make a good fit for
the historical model that has served us well up to this point."
Bottom Line
Our Gold Bug of The Week
Award, goes to Ed Bugos for his target of: $2,000-$3,000.
When we take the average of all of our intermediate term pundit
estimates this week we find a single price target of, $786
or about $200 higher than the current gold quote.
$633+ $850+ $875 = $786
In last weeks article I wrote"
Gold was unable to confirm the record closes in the previously
lagging XAU and silver markets. This indicates that precious
metals will likely begin to consolidate next week."
The gold and silver consolidation
came to pass. All eyes should be on the gold and silver consolidations.
Next week will tell if the gold stocks will lead the metals lower.
Don't be surprised to see extreme volatility, powerful swings
up and down at this stage of the bull market.
Thanks for reading.
Feb 03, 2006
Chris G. Waltzek
email: cwaltzek@comcast.net
website: http://silverinvestor.blogspot.com
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