M I S Q S

On April 29th I said "Again I would be watching and waiting for the BIG STORY of BAD or GOOD news to drive Silver up or down.  Unfortunately I think we will hear more BAD news before really GOOD news which means that yes I am biased to the upside still."  However, the beginning of this week brought GOOD news for America at least, the final confrontation and elimination of one of America's Top Terrorist threats OBL.  This big news has strengthened the Dollar which in turn is bringing down Gold and Silver prices.  And not a moment too soon.  While Gold has had a good run up Silver has been a squirrel on amphetamines.  Jumping from branch to branch of the tallest tree it could find in rapid succession.  Silver really needed to take a breather and have a bit of corrections.

(The other news that has severely affect Silver pricing is the increase in margin requirements for Silver Futures positions.  This has the effect of taking out those traders that are highly speculative in nature using bare minimum margin to place their bets.  Because of this lots of the more speculative long-term players may have been knocked out of the market causing other long-term players to sell due to declining prices and the need to take some profits.  Finally, because of the rapid decrease in prices short-sellers will be doing two things, taking profits on some of their positions [which causes prices to firm up a bit as they have to buy to cover] while initiating new positions to take advantage of further declines.)

So this may be the correction I have been waiting to happen.  Gold hit a high of $1577.40 while Silver hit an intra-day trading high of  $49.82.  Currently Gold is trading at $1536.80 a fall of $40.60 representing a 2.6% decline.  While Silver is trading at $41.04 a fall of $8.78 which is a 17.6% decline.

If Silver can not bounce back quickly above $42.50 then I think we will see continued weakness with Support currently at $40.00 a range between $40 and $42.50 could form the new base.  However, weakness at $40.00 should lead to silver declining to around $36.00 which would be a 27.8% decline from the intra-day high.   Silver remaining above $22.50 would mean that the primary bull market pattern is still intact.

For Gold the primary bull market stays intact with prices above around $1350.00-1360.00.  Gold support should be around $1490-1492 with upside resistance at the $1550 and the high of $1577.  I would expect both metals to take an extended breather hear as the Dollar shows strength in the face of recent international events (the elimination of OBL being the primary news this week).  Oil is down from recent highs but still trading in the $110 area.  This indicates that even with a strengthening Dollar, price pressures (inflation) are still a concern.

While Gold and Silver both need to take a moment (a few weeks/month) to build a good base, I think that any negative news and weakness in the Dollar will send both metals soaring back to all-time highs in relatively quick fashion.

A healthy pullback during a primary bull market trend is 30-40% of any run-up  for Silver a 27.8% decline (should we see Silver back around $36) would probably be satisfactory to meet this requirement.  The big question is "Will it hold?"  Holding at the $36 and higher pricing would allow this Bull market to re-start and see Silver hit $50 again and potentially move on to the $60-75 range.  Gold on the other hand will probably build it's base in the low $1500 area and potentially move back up to $1575 and test $1600.  If we see $1600 Gold, I believe $1750 would occur in a quick hop, skip and jump fashion.  That is to say, I would expect to see Gold move up towards the intra-day high where a little hop will take Gold up above $1577.40 very easily, then it will skip through the $1600 level rapidily followed by a really quick rally that ends with a nice jump towards $1750.  At which point I would expect another pullback and cool down period.

Again, as always, these are my personal impressions and Standard Disclaimer applies.