Turd Ferguson: Gold and Silver Looking Vulnerable

Hoping To Be Wrong

by Turd Ferguson

Back on Monday, one of our astute Turdites pointed out that the $/Yen was approaching 80 and that, below there, all risk assets would come under pressure. Astute, indeed.

Under 80, it seems that nearly everyone expects the Bank of Japan to flush trillions of new yen into the market.
http://www.zerohedge.com/article/yen-surges-boj-intervention-watch-defcon-1
Currency traders seem to be trying to front-run this move and have thus bid up the POSX from its lows right at support of 73.51. Having now broken the 2-week downtrend, technical buying may drive Pigatha all the way back up toward 74.50 and even 75.

The dollar rally has added to what was already a rather tenuous position for gold. Take a look at the chart below. If we again use the white-out to wipeout the blowoff from early May, we get a chart that made a top about five weeks ago, corrected down, moved back up and now has made an attempt at a “new high”. Failing the new high, it instead has rolled over and is now pointing lower. I hope I’m wrong but it looks like we have found our range for the summer. It looks now like gold will trade between 1470 and 1550 for the foreseeable future. Do not despair, this pattern of four months UP and two months sideways has been going on for years in this bull market. This new range would just be a continuance of the pattern and it certainly is consistent with the “roadmap” I posted several weeks ago. I still believe that, by late summer, gold will finally break higher and rally toward a December high between 1700 and 1780.

On January 21 with gold at 1346, I wrote this:
http://tfmetalsreport.blogspot.com/2011/01/1600-gold-by-june-10-2011.html
Here is the most important paragraph:

“I firmly believe that there is absolutely no reason not to expect the pattern to continue so, follow closely, as this is some pretty complicated math…
20 weeks from this Friday…assuming the lows for this correction are made this week, is 6/10/11.
19 weeks from next Friday…assuming the lows are made next week, is 6/10/11.
A 20% gain off of a low of 1345 puts us at $1614 sometime during the week of 6/10/11.
A 20% gain off of a low of 1320 puts us at $1584 sometime during the week of 6/10/11.
Let’s split the difference: $1600 on or before 6/10/11.”

August gold actually bottomed at 1314.20 on 1/28. Adding 20% to that number gives us 1577.04. The high (so far) of the August contract came on 5/2 at 1577.70. I’d say that’s pretty close. 

Again, if we are now rangebound through the summer and, sometime during the next two months, we retest the low of the range near 1465, then we get this:
1465 + 20% = $1758 December target

And I’ll also give you this: The 12/31/10 close of the August contract was 1427.70. The average annual gain for gold since this bull market began back in 2001 has been around 25%.
1427.70 + 25% = $1784 December target

So, again, don’t despair when you look at this chart. It is what it is.

Like gold, silver looks somewhat foul. If you’re trading, you must watch that lower trendline very closely as a break of it may indicate that a move back toward 34 or even 33 is coming. I’m still hoping for 42-43 before the end of June but this, too, is beginning to look like it has found its “summer range”, bounded by 33 at the low end and 39 at the high end.

Lastly, I would be remiss if I didn’t take time to thank those who defended me overnight against the continued attacks of Spalding “maradona” Smailes. As you know, I can no longer afford the time and energy it takes to tackle the trolls one by one so I appreciate the help. That said, it’s probably best for everyone to simply take the same course and ignore them. Without the attention, they may just drift away.

Hang in there and have a great day! TF

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This entry was posted in Gold, Silver, Technical Analysis, Turd Ferguson, USD. Bookmark the permalink.

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