HardAssetsInvestor

June 26, 2012

Buy Range-bound Gold Now For Run To $1641 Or Higher, Silver Also Ripe

Details

We offer our latest analysis on the precious metals market.

Gold price action continues to confound many, as the yellow metal seesaws within a $100 range. Every time the prices are on the brink of an upside breakout, they fall back, and every time a breakdown looks imminent, they reverse course to trade higher.

GOLD

Until a breach of the key support and resistance points—$1533 and $1641, respectively—gold is considered range-bound from a technical perspective.

Current price action is conducive to very short-term trading, with dips near $1550 seen as good opportunities to accumulate long positions, and rallies near $1620 seen as selling opportunities.

In contrast, silver hasn’t offered traders a well-defined trading range, as price action in the gray metal has been much choppier. But silver is also close to a very crucial support level at $26.

SILVER

Fundamental developments over the past week have been lacking, and may help explain the trendless trading action of precious metals.

Financial markets are still grappling with global economic slowdown concerns and the eurozone sovereign debt crisis. But in our view, downside risks have been appropriately priced into markets and thus prices may begin to rally, barring a sharp deterioration in economic data.

We expect that gold, silver and the rest of the precious metals will move in tandem with stocks and other risk assets to rebound, but with monetary stimulus such as QE3 from the Fed off the table for now, the sector may underperform.

Bottom Line: Buy gold/silver at current prices, but cut losses in the event of a breach of $1533/$26 support levels. Short-term traders should consider selling at recent $1641/$29 highs, while long-term investors can hold for eventual push higher.