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Precious Points: Bull Markets in Metals

Those looking for $1k gold continue to be thwarted as the monetary metals have to prove themselves in the short term by taking out key upside levels and invalidating corrective counts. Silver... can extend to 17.40-17.50 before facing significant resistance. At the same time, platinum continued its tear higher on the back of fundamental supply concerns in South Africa and is yet to show signs of letting up. ~ Precious Points: Ready, Set, Retrace, February 09, 2008

The charts and counts in gold and silver continued to hold up well last week, though for the most part these metals remain in a holding pattern ahead of what's expected to be another 50 bps cut from the Fed next month. It's important to understand that even if the corrections play out as charted here currently, it would only be a natural correction within a bull market which, painful as it might seem, is all a return to $800 gold and $14 silver would be.

So, despite seasonality beginning to work against gold and silver, there is no bearishness or call to short here. With rates dropping here and in Europe, and with the money supply swelling, it's difficult to expect a calamitous selloff in precious metals. Gold will have to take out the previous low, as well as support in the RSI to demonstrate an impulsive move downward or the current count will be eliminated. TTC members are already aware of the first alternate, one that could still see new highs before a slightly deeper correction.

As mentioned over the last two weeks, while gold and silver are pushed and pulled by economic and monetary concerns, there are other quiet bull markets in metals that have provided excellent opportunities. The platinum group metals in particular, based on supply disruptions, have performed best. Palladium, shown above, is a cheaper alternative to platinum and has risen 30% since December. We're probably closer to the end of this rally than the beginning, so starting new positions now, except for the shortest of time frames may not be the best risk/reward proposition. Copper, on the other hand, which has been rangebound in an environment of uncertainty about the global economy, has also started to rally recently and could be set to break out of a multi-year consolidation, especially if predictions for a second-half of the year economic recovery gain traction.

 

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