Gold Finally Confirms

Both gold and silver closed in New York yesterday at multi-decade highs. Gold closed at $573.00, slightly bettering the high reached in early February. Silver closed $11.073, continuing a string of new highs for it. As expected, silver is leading, as can be seen from the following chart of the gold/silver ratio:

What do these new highs in gold and silver mean?

Basically, the flight from the dollar into the safety of the precious metals is continuing. These new highs in the gold and silver confirm that their bull market is alive and well.

While anything can of course happen when it comes to markets, it looks like there is just too much momentum underpinning the metals for them to stop now. After all, what would you rather own? Gold/silver or paper? Sound money or a rapidly inflating dollar? Not much of a choice is it, so we shouldn't be surprised that both gold and silver have just made new multi-decade highs.

What will happen next? Well, let me emphasize again that anything is possible, so one always needs to be prepared for a correction. Watch gold closely the next few days. I would like to see some upside follow-through. If we get it by gold climbing higher to say, above $582, the odds improve that both metals will continue their uptrends for the next few weeks.

Because I remain bullish, let me end with some history. Remember what happened from March 20, 1987 to April 24, 1987? In those 35 days, the price of silver nearly doubled. Will history repeat? If it does, the silver price would be $17.83 at the close of trading on April 24th. Is that possible? Of course it is - it would just be replicating the gain of that magnitude that already happened in 1987. Will it happen? Well, there's the rub - no one knows. But it never hurts to focus on what 'could be' to help keep us on the right side of the major trend, which is clearly pointing higher for both gold and silver.

Published by GoldMoney
Copyright © 2006. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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