Wednesday, August 24, 2011

Gold and Silver Morning Update

Live 24 hours silver chart [ Kitco Inc. ]Gold and silver corrected hard yesterday, and have continued to correct this morning.

Silver was attacked as soon as it reached $44.50 yesterday, as the cartel found it critical to prevent silver from clearing $45 for obvious implications.

Silver was attacked in 3 waves, traditional for cartel take-downs. 
After wave 1 yesterday, we wrote that we looked for strong support to emerge at $41.50, which had previously provided resistance for silver on 3 occasions. 
Silver bounced precisely at this level yesterday, running nearly a dollar higher to $42.50.
The strength of the support at $41.50 is clear just from yesterday's chart as it supported silver for much of the afternoon while silver regained enough strength to crawl back above $42.
From there, silver's slide continued however, and this morning we have broken support at $41.50, dropping all the way to $40.79.

It now appears clear that silver will retest $40, particularly as tomorrow is options expiration for silver, and the Fed meets at Jackson Hole on Friday.
Expect the beat-down to continue, as options expiration days as well as days in which The Bernank makes public statements are almost mandatory for silver suppression as far as the cartel is concerned.
As such, it now appears likely that the cartel will attempt to stuff silver back below the critical $40 level. 
If successful, look for major support to emerge at $38-$38.50.  We don't expect the cartel to be successful in breaching this support absent several consecutive margin hikes.  Should silver reach this area near $38, we will be buying silver with BOTH HANDS, and recommend you do the same.
Following The Bernank's statements Friday afternoon, look for both gold and silver to scream higher in the afternoon trading session and into the access market hours, particularly if The Bernank increases the strength of his easing rhetoric (much less if QE3 is actually announced).

Live 24 hours silver chart [ Kitco Inc. ]

Gold has corrected nearly $100 already from $1917 to $1820.
Much of what has been said about silver also applies to gold, although gold was definitely more over-extended than silver, and was due a correction.
For those concerned with gold's correction over the past two days, please recall Jim Sinclair's words from several weeks ago as gold neared $1764:

1. Those holding gold to hedge the systemic risks of the Western financial world simply stay in your position.
2. Traders lighten up your positions as gold approaches the next two Angels.
3. No market fails to have reactions at some point.
4. Reactions in this market will be deep, but brief when they occur.

Sinclair's next two angels after $1764 are $1848, and $1936.

Thus, the gold master Jim Sinclair has advised those holding gold to HOLD YOUR POSITIONS, but advised that significant deep, yet brief corrections in gold are likely as gold approached $1848 and $1936.
Gold has responded almost precisely as Sinclair predicted, with corrections starting at $1815 and $1917.

We re-emphasize Sinclair's call to HOLD YOUR POSITIONS, (outside of exchanging gold for silver of course) as gold is headed much higher from here long term.

So relax, sit back, pop a bag of popcorn with Sterling and don't let the cartel's shenanigans over the next 2 days get the best of you- QE MUST CONTINUE as NOTHING HAS CHANGED!

Live 24 hours gold chart [Kitco Inc.]