Gold and Silver: Is the Correction Over?

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Technically speaking, any drop back below $935 and then below $900 could see the gold price freefall as low as $800. There is simply no support below $900. But as long as precious metals can hold the current support levels, it is safe to assume the correction is over.

I was about a week too early in predicting the sell-off in precious metals,but it certainly materialized as we witnessed gold lose $100 (10%), and silver lose $3.50 (17%) in just 48 hours. It looked like a manufactured event by commercial traders (mostly big banks) to take advantage of technical investors, liquidate their short positions and go long again by buying the cheap gold that weak hands and technical traders were dumping into the market.

At the beginning of the year, I wrote an article with my 10 Predictions for 2008. So far, 8 of those 10 predictions have come true. One of the predictions was that corrections in the gold market would become increasingly violent,but also of increasingly short in duration. After falling below their 50-day moving averages and looking like a huge drop was approaching, gold and silver both rebounded in the last two days, and recaptured about 30% of their devastating 2-day loss. The metals rebounded in the first day to rest on their respective support lines ($935 for gold and $18 for silver), and then continued decisively upward on Wednesday.

Technically speaking, any drop back below $935 and then below $900 could see the gold price freefall as low as $800. There is simply no support below $900. But as long as precious metals can hold the current support levels, it is safe to assume the correction is over. Fundamentals still point to much higher prices, and I believe we will see gold hit $1,000 again before it hits $900. Jason Hamlin, www.GoldStockBull.com

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