Tuesday, December 27, 2005

The Gold and Silver Review, Friday January 20th, 2006

THE GOLD AND SILVER REVIEW

4th Edition

January 20th, 2006.

GOLD AND SILVER PAUSE

SilverInvestor.blogspotJanuary 20, 2006

by Chris Waltzek

MARKET SUMMARY

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 gold's new highs, the bull will be napping.




In the chart below, its clear that Tuesday's 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.

© 2006 Chris WaltzekEditorial Archive

CONTACT INFORMATION Chris WaltzekLilburn, GeorgiaTrend Traders websiteEmail Author
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