Dip Could Signal Buy for Gold, Silver

By Marco Hague (Click here for original article)

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (TheLFB-Forex) -- There are very few news wire headlines to impact gold (1520) and silver (34.60) bullion trade. The precious metal markets continue to trade in tight ranges, with the majority of any 24-hour price movement being contained in one or two 30-minute periods of trade.

Today is not the day to be looking for gold and silver bullion trades.

Outlook:
Gold and silver trade is oversold in the near-term, with a neutral mid-term momentum read. The four-hour trends are flattening out, which sets up a sell-the-test-of-resistance play from the next upside move toward 1550 on gold and 37.50 on silver. The buy-the-dip play at support around 1505 and 34.00 is now going to be closely monitored. The last 12 months of gold and silver trade have shown a strong tendency to find buyers at support.

The potential for trade signals to form today is weak, as volatile periods of trade continue to hit the bullion markets. Moves higher through resistance are struggling to hold for more than one trading session at a time. With equity momentum looking like it will transpose itself into USD mid-term buying, moves higher in gold and silver trade will continue to be choppy and overlapping.

Any existing gold or silver positions should be closely monitored while recent price action is absorbed. There have been very few clear-cut signals in the bullion market recently. Potential short signals are against the overall trend and have not yet confirmed they can easily follow through.

Bullion Price Action:
Strong buying activity was seen at 1490 on gold, and at 33.00 on silver in April and May. These swing point areas will be closely monitored, as it does seem that they are allowing a strong base to form.

Main gold support: 1470. Main gold resistance: 1550.

Main silver support: 34.00. Main silver resistance: 39.50.

Daily trading range is $24 on gold and $2.50 on silver, which are above the historical norm and indicate that speculative interest is still high, and dips will likely continue to be bought.

*I totally agree with what this article is saying. Buy now while metal prices are at a low point, reverse your strategy and do not buy when prices start to soar.

Kiyosaki's comments on Gold price

Why Gold is Falling
Many people are selling gold. Does this mean the boom in gold is over?

Personally, I’m not selling. I’m waiting to buy more gold and silver if the price continues to drop.

While prices of anything goes up and down, gold and silver are over due for a correction. The price should drop. Both metals have been in a ten-year bull market cycle. Another reason why precious metals aren’t rising is because Asian markets are raising interest rates on bonds (debt).

Many people don’t like gold and silver because there’s no interest. When interest rates were near or at zero, gold and silver prices were rising and people got out of bonds and into the precious metals bull market. Now that Asian interest rates are rising, some investors are leaving precious metals, and possibly stocks, and getting back into bonds.

Many people believe China’s bubble will bust in mid-to-late 2011. There’s simply too much money flowing into China and the Chinese markets are overheated, just as the US and European markets were overheated in 2007. If China goes bust, the world will also go bust. This is why they’re raising interest rates, trying to slow speculation and financial insanity.

Those of you who read Conspiracy of the Rich: The 8 New Rules of Money know that too much money at low interest rates was the cause of the 2007 US market collapse. Unfortunately, there’s still too much money running around looking for a place to call home, which causes inflation and speculation worldwide.

I believe we’ll be in a boom and bust world economy for at least ten more years. This is why I encourage people to stay vigilant, pay attention to the price of gold, silver, oil, food prices, and interest rates. I believe those prices more than I believe the words from our leaders.

For now, I trust gold and silver more than I trust political promises.

Thank you for supporting COR.

Robert Kiyosaki


*This is a worthwhile article to ponder when there is a price drop in the metals.

You've Just Been Gifted A Huge Second Chance To Get Into Silver

(This guest post comes courtesy of The Mad Hedge Fund Trader)

If you missed the great run up in silver last year that saw prices run up 95%, you are being offered a second bite at the apple. The latest round of risk reduction by global hedge fund has bashed the white metal, knocking $5 off of the $19.50 high seen in the heady days of November.

Geologically, silver is 17 times more common than the yellow metal. All of the gold ever mined is still around, from King Solomon's mine, to Nazi gold bars in Swiss bank vaults, and would fill two Olympic sized swimming pools. But most of the silver mined has been consumed in various industrial processes, and is sitting at the bottom of toxic waste dumps. Silver did take a multiyear hit when the world shifted from silver based films to digital photography during the nineties.

Now rising standards of living in emerging countries are increasing the demand for silver, especially in areas where there is a strong cultural preference for the jewelry, as in Latin America. That means we are setting up for a classic supply demand squeeze. I think we could run to the old high of $50/ounce in the next economic cycle, if another monetary crisis doesn't get us there first. Since silver can trade with double the volatility of gold, this forecast could prove conservative. You can buy the futures, where a 5,000 ounce contract worth $80,700 on the COMEX carries a margin requirement of only $6,750. You can also buy one ounce American silver eagle .9993% pure coins, but make sure you have a big safe to accumulate a serious position.

IS THERE A SIGNIFICANCE TO THE GOLD/OIL RATIO?

Is there a hidden connection behind the Gold to Oil ratio? Some would say yes. We have often called Gold the King of Money, while Crude Oil (sometimes called Black Gold) is clearly the King of Commodities. Many hold the view that both Gold and Oil are a direct reflection of US dollar value ; as the value of the dollar falls, so gold and oil rise. From 1999 to 2009 gold has risen from $255 to as high as $1,000 while oil has risen from $12 to its peak of $147.

In 1999 when the commodity bull market began, the ratio between the gold and oil price was 21:1 (where it would take 21 barrels of oil to buy 1 oz of gold). Does this ratio offer us an indication of something deeper, or is it simply some arbitrary variation between the King of Money and the King of Commodities?

The last several years the ratio has been reasonably stable, ranging between 8:1 to 10:1. For example, in early 2006 the bull market in commodities was now seven years old; Gold was trading at $560, Oil at $62 and the ratio 9:1.Two years later in early 2008 Gold was $835, Oil $100 and the ratio 8.5:1. At this point it could be argued that the two had risen together, each equaling reflecting a loss of value in the dollar.

However the end of 2008 shows a very different picture. Now Gold was trading at $844 but Oil was at $39.50 and the ratio all the way up to 21:1. What had changed for oil? Global demand hadn't fallen significantly, nor had the fact changed that we are only discovering 1 barrel for every 8 we consume.

Did the ratio change signify a simple slowdown in world trade? Or could it be indicating a greater importance being placed on money, a representation of 'value' than on commodities, a representation of 'things'?

Where is the ratio now? Today the ratio was 17.7:1 and trending back to its average.

*Now do you understand why there is an Oil price watcher at the bottom of this blog and also a Precious Metals price watcher? These commodities are all 'in this together' and if you have spotted the similarities and trends then blessed are ye...

The Gold Price is Headed for Another Shot at $1,000, and May Pierce this Time

Gold Price Close Today : $958.30
Change: 69.60 or 7.83%

Silver Price Close Today : $13.50
Change: $1.55 or 12.40%

Gold Silver Ratio: 70.9851

Dow Industrial: 7,400.8
Change: -85.78 or -1.15%

US Dollar Index Today: 83.17
Change: -255

Silver and gold prices have a best friend, and it's Big Ben Bernanke. Yesterday the gold price had broken down, and was headed lower, but Ben engineered one of the last decade's most dramatic turnarounds. The gold price leapt nearly 60 bucks, silver 100 cents. Today's figures take yesterday's low closes into account, with the gold price up $69.60 to $958.30 and the silver price up to $13.60, up $1.55.

The upshot was the first half of a key reversal (break to a new low for the move with a higher close), confirmed today by higher closes. The gold price is headed for another shot at $1,000, and may pierce this time. The silver price needs to climb over this $13.50 mark, done today. Next barrier is $14.50..

The next big move to expect in silver and gold prices is a dramatic rise by silver against gold (the ratio will drop drastically).

Yesterday the US Dollar Index dropped 255 basis points. I looked and stuttered. I have never seen a move like that. Bernanke and the other meddlers have laid hands on the Primal Forces of the Universe. Imagine giving college frat boys the keys to the car, a case of gin, & thermonuclear warheads. You'll get a flavour of what has happened.

Never stand in the way of gigantic, fierce market moves. If you've been waiting to buy silver and gold, stop waiting. Buy now. Get out of dollars as quickly as you can.

I hope y'all are seriously considering your future. I try to avoid dwelling on negatives, but dollar depreciation leads directly to unemployment, poverty, and violence. If you live in a city, better locate a back door.

Yesterday the Federal Open Market Committee announced the US Dollar's coming demise. Oh, the dollar is still ambulatory, but the Fed doubling its balance sheet again, after already doubling it in the past 12 months, tells you the dollar is dead. You can keep hoping, you can keep sticking your fingers in your ears and your head in the sand, but the Fed announced yesterday that the Dollar most surely will be sacrificed to meet the dirigist and socialist agenda. Let the banks be saved, though the heavens fall!

One of my great amusements in life is hearing Comrade Obama and other Washington cadre call government spending "investment." How cutely Orwellian! Now every time I want to buy a pack of cigarettes, I can say, "Hey! I want to go invest $4.50 in the economy by buying a 50 cent pack of smokes and giving the government $4.50 to invest."

Argentum et aurum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger

The-MoneyChanger.com

To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold; US$ or US$-denominated assets, primary trend down; real estate in a bubble, primary trend way down

*There is troubling news about the Federal Reserve buying all those toxic assets right now. This may spun a relatively bull market for the price of gold and silver.