Red’s Overall Outlook for Gold and Silver in Y 2011

Red’s Overall Outlook for Gold and Silver in Y 2011 ; Gold gained about 27% this year, its 3rd Double Digit gainer in the past 4 yrs. Charting Gold’s price movements from Y 2000 shows a strong and clear up-trend off of its lows, In 1-H of Y 2010 the EuroZone;s sovereign debt concerns boosted Gold’s price. In 2-H, USD weakness was the contributor,as the precious Yellow metal reached and breached record highs on over 13 occasions.

In August after US Federal Reserve Chairman Ben Bernanke announced his proposal to expand the Fed’s T-Bond program with round 2 of Quantitative Easing, aka QE-2, overall I have seen only good backing and filling action topped by further extensions of the rally.

The fundamentals that have boosted the prices of the whole precious metals complex North during Y 2010 are; the US Fed’s turning on the “liquidity faucet” at about Zero interest, USD weakness, fear of inflation, Gold as the “Perfect Currency”, the regular buying by Indian consumers, New buying by wealthy Chinese folks, sovereign debt problems in the EuroZone, big purchases by central bank, and high unemployment in the US, and all of these remain valid, and most savvy observers (including me) do not see any of the aforementioned fundamental factors abating in Y 2011; some of them will get worse IMO .

That being the case, I am Bullish on Gold in Y 2011. And I write Reports on Gold and Silver twice weekly and publish them on E-H Live Trading News (www.livetradingnews.com) to our readers World wide.

Several “Goldbugs” are forecasting rises in Gold’s price from 100 to 400 oz in the coming year.
Analysts at Goldman Sachs (NYSE:GM) are saying that the Gold price is likely to continue it run North in 2011, but could Top out in Y 2012 on rising interest rates and target the price at 1,750 oz in Y 2012. I do not disagree, but I do not go out that far, my work is more to the near term and viewed on a weekly basis not annually or bi-annually.

Chaps like Peter Schiff and Jim Rogers are on the record as predicting that Gold will go up to 2,000 + oz in the next 10 yrs. Both of them are likely predicting using the presumed inflation as the benchmark, there are other factors and they are clearly Demand/Supply. See the chart below:

You are likely aware that Silver, the price percentage leader in the sector this year. I believe that Silver is headed to 40/45 oz and I am on the record as being Bullish on Silver into Y 2011 due to new acceptance in jewelry, new applications, and increasing industrial demand. See the Chart below.

Having said that, it would not be surprising to see Gold tap at 1800 and Silver tap at 45 in Y 2011, and higher in the longer term.

A Big Q: what is the downside for Gold and Sliver?

1. a speed up in the US economy (I do not see US unemployment getting better until Y 2015) might slow the momentum in Gold but not Silver, because of its industrial many traditional and new applications.

2. if the US Fed turns off the “liquidity faucet”, not likely for some time to come IMO, there are lots of problems at all levels in the USA and the Fed Window will continue to be open at 1/4 pt to Zero rates to borrowers.

3. stabilization of the Euro, and

4. the Indian and Chinese consumers stop buying Gold, also not likely.

The main fuel for the price of Gold, Silver, Platinum and Palladium then is inflation. Should the EU raise interest rates the Gold Bugs, including the central banks will still be net buyers not net sellers as they have been over the last decade. Higher long-term interest rates in government securities means rising inflation expectations, and lessened confidence in the USD, and that is Bullish for Gold IMO.

When I look at a long-term USD Index chart that spans about 20 yrs, Y 2010’s action come into perspective.

And when looking at a short-term chart, the USD Index appears to have rallied more than that seen when compared to past years.

This is what it looks like to me: the long-term declining resistance line has not been breached in the past 12-months, and sits at a Strong Key resistance mark, meaning is that any rally in the USD Index will not break 83, the Key resistance and the upper channel limit for now. When the USD falls I believe the target is 72 and that is Bullish for gold

It is interesting to note that Gold, Silver and mining stocks are priced in “Greenbacks”, and move in the opposite direction of the USD Index, unless a strong demand from the non-USD players develop.

Sure the USD can rally all by it’s lonesome if non-USD demand remains strong, but precious metals prices can stand still in that scenario or rise. Stay tuned…Paul A. Ebeling, Jnr. www.livetradingnews.com For the latest updates PRESS CTR + D or visit Stock Market news Today

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