The surprise rally in Gold and Silver

At the end of 2011, Merkel and Sarkozy got together for an unusual emergency meeting. They pledged to come up with economic salvation. Immediately the equity markets mounted a year end “Halleluyah” rally.

Bernanke followed Europe’s footsteps in 2012 and expanded the horizon of record low interest rates from Mid-2013 until Late 2014.

We respond judiciously to this euphoria. Politician’s promises are usually a thin blanket for an upcoming cold night. We have concluded since October that a surprisingly potent rise may occur which would be in reaction to the application of the stimulative paddles.

The European resolution was a response to the Franco-Belgium travails of the widely held Dexia Bank, which has tentacles into France and Germany’s economic foundations. If this were not enough, the chronic Greek malaise indicated that Zorba was in need of another oxygen mask to rouse him from his hedonistically induced torpor.

A potent upward move in gold and silver in addition to the oversold miners (GDX) is just beginning to occur. Our scenario was to maintain our long term core precious metal positions even though such a posture was temporarily painful as many analysts concluded wrongly that deflation, bonds and the U.S. dollar were the only safe harbors.

What about the U.S. dollar now? Note all the media hoopla that regaled us with strength of the dollar recently. News from Europe and Washington appears to be melting the U.S. Dollar under the cover of all of this stimulative warming. We have called for this surprise rally we are observing in the face of all this dollar and treasury hoopla. How uneasy must be the shorts who have been caught by this recent rise. Short sellers went into October’s market with the largest short position since 2008. Such a one-sided posture is often punished as the shorts run to cover and thereby add to the upward move.

1 2

Tags: Gold analysis, gold forecast, Gold future prices, Gold futures, Gold investment, Gold news, Gold price, gold price 2012, gold price forecast, Gold prices, price of gold, Spot gold, Spot gold price

Posted by admin on Jan 27 2012. Filed under Gold predictions. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry