Gold’s Little Brother Is Talking

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Early this morning, gold may have achieved an upside breakout from a key symmetrical triangle formation. Please click here now.

This chart provides an overview of the situation; there is a symmetrical triangle (highlighted in black) sitting within a giant drifting rectangle (highlighted in green).

To view the possible breakout, please click here now. FOMC minutes are scheduled to be released on Wednesday. While that report could create some significant price volatility, there’s no question that this morning’s technical breakout is a very bullish event.

The price of oil is rising in a near-perfect uptrend. Please click here now. Short-term traders can add to positions around the green horizontal lines on the chart.

The next upside resistance band sits at about $103. I’ll reduce my position by 5-10% in that price zone.

Higher prices for food and energy put a lot of upside pressure on the gold price. In the biggest picture, natural gas has stopped falling and may be forming a significant bottom. Oil is almost $100 a barrel, and last night soybeans surged to over $17 a bushel.

All of this price action is being factored into the gold chart, and an upside “price geyser” is now a realistic possibility.

Please click here now. Silver is in a trading range between about $30 and $34. This morning marks the 2nd day in a row that it is above important highs near $28.50.

Silver seems set to perform well against the dollar, but it also appears to be ready to make gold look like a bit of a slug. Unlike most silver investors, I have no interest in selling silver for “dollars of profit”.

I view silver primarily as a currency. Gold is the ultimate currency, and I think silver is best viewed as “gold’s little brother”. I sold silver for gold in the first quarter of 2011, and now it’s time for me to buy silver with gold. Here’s why:

Please click here now. This is the daily ratio chart of silver versus gold. I’ve talked in the past about the importance of silver investors taking pride in their mighty metal.

Most investors use “gold:silver” ratio charts when analysing silver. I like to always put the item I’m accumulating in an offensive posture on a chart, rather than a defensive one.

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