In our view, the price action of Gold and Silver is still highly constructive with both metals in fledgling medium term up trends. Gold remains stronger than silver, and has good price support at the $825 level basis the February contract and at $81.50 on the GLD ETF. Like the gold stocks, the 9 day RSI for gold has pulled back from a reading of +77.52 on December 17th to a reading at the close today of +42.84. From here, we believe prices will base out, and then begin a renewed advance that should see GLD heading toward $90.00 and Feb Gold toward $900 in the next two to three weeks.
In the case of the Silver ETF, SLV, the $10.50 to $10.60 area looks like good support and any move back above $11.40 would be bullish. For SLV, the $12.50 to $13.00 area would be the next target on the upside. Supporting the case for a near-term bottom is the surge in the Euro, which took place today after several days of heavy selling in that market.
As we see it, gold is likely to surge in the weeks ahead over $900, and possibly as high as $950 before settling in to a first half consolidation phase between the mid $900s and the mid $800s. In our view, gold is likely to then get a lot stronger from May on and will surge well above $1,000 in 2009.
We believe that the Gold Mining Sector will peak this month, likely later this month, above 140 on the XAU. As we get closer to the Presidential inauguration on January 20th, it will likely be time to get a whole lot more defensive, raising cash, buying puts, etc.