Gold & Silver Pullback: Textbook Bullish

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US Dollar Breakdown Alert Chart

Dollar Commentary

Technically, the dollar is not acting well. The situation is very serious. When a market should be going up and it can’t, that action is a warning of imminent danger. The United States government is flat broke, and its debt beyond honest repayment. That is the fundamental story told technically, on the above price chart.

The dollar often has a respectable move higher in the summer months, but not this time. The US economy and the US dollar are approaching a breaking point. My time target is unchanged as Sept -Oct for the $USD price to fall to 65. At the same time, I believe gold is setting up for a sharper trajectory.

UUP (US Dollar Proxy) Chart

The above chart of this US dollar proxy clearly indicates that with each new financial crisis, the dollar becomes less and less of a safe haven for global investors.

Notice the breakdown on the bottom right on the chart. The triangle delivered a bear break, on volume. That action indicated more selling was coming and that is what we’ve got so far. My internal indicators show this move has more to go to the downside in the short term. That downside move should be followed by a slight bounce, then look out below as we get into my Sept-Oct 2011 timeline.

I think the dollar is now entering the eye of the crisis hurricane storm. I have encouraged you to hold gold and silver outside of the banking system and I think it is now critical that you get it done to at least some minimum level.

Gold Super Highway Chart

Gold Analysis

The gold market caught the vast majority of sceptics flat footed, and continues to astound naysayers. The action this summer is an early indication of what I see coming into the fall of 2011 and beyond. I see gold moving higher to $1700, followed by a vicious smack-down from that price area.

The gold market appears technically to be preparing to shatter the “upper window” and move on to what I term the parabolic superhighway.

This “gold superhighway” is not going to be the pot at the end of the rainbow/free ride that many think it is. What I see is a great likelihood that this superhighway trend action will be accompanied by the type of volatility that we have never seen before, not even in the silver market recently, where silver lost over 30% in five trading days.

This type of unprecedented volatility can be used to your advantage, or it can destroy you. I’ll be doing my very best to calibrate the timing and possible size of the declines, to keep you in the game. I’m personally positioned with 65% core positions, and 35% trading positions. The core positions form the bedrock of my strategy for dealing with extreme volatility.

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