GOLD & SILVER MAJOR ALERT...

originally published April 26th, 2012

• GOLD & SILVER MAJOR ALERT...
  April 26th, 2012
• MARKETWATCH - IMPORTANT MESSAGE for SHELL SHOCKED GOLD & SILVER LONGS...
  March 15th, 2012
• The astounding SILVER-GOLD RATIO CHART and WHAT IT REVEALS...
  January 19th, 2012

After our glorious success shorting silver and the sector generally just before the plunge last September, made even better by our closing out the positions right at the bottom, which resulted in one subscriber retiring at the age of 48 and another buying a supercar for his wife, pickings have been thin. Further opportunities on the downside have been too limited and risky for us to do much, while on the other hand the outlook has not been bullish enough for us to really pile in in a big way - until right now, that is.

We have observed for weeks now how gold has been marking out a suspected Head-and-Shoulders continuation pattern, and silver a Head-and-Shoulders bottom, but have remained wary because of the fear of another 2008 style collapse, but that now looks like it is not going to happen. At the same time further examination of the long-term charts for gold and silver reveals that they are historically at an optimum "buy spot" right now, and putting this together with the clear reversal patterns that are now completing furnishes a strong case for going all out and buying aggressively here. Let's now look at the completing reversal patterns in gold and silver on their 1-year charts and also look at their long-terms charts with key moving averages which strongly suggest that major uptrends are imminent.

Gold's 1-year chart shows a large fine Head-and-Shoulders continuation pattern now completing, with it at an optimal entry point right now as it has dropped down to mark out the Right Shoulder low of the pattern and should now turn higher, especially as it is right on its 300-day moving average (green line), where it has always turned up in the past, which the exception of the 2008 collapse, and as we can see, it reversed exactly at this average back in December. It is viewed as a strong buy here, but we recognise that it could drop a little more to about $1600 short-term, in which case it should be bought even more aggressively, as the potential upside is HUGE from here, especially given what is likely to go down in Europe, which we will come to later.

The two long-term charts for gold shown below, which cover the periods 2003 - 2005 inclusive and 2005 - 2007 inclusive, show that, with the exception of the 2008 collapse, it has always reversed to the upside from a point near to its 300-day moving average.

Silver's 1-year chart is remarkably similar to that for gold, the main difference being that because it has fallen a lot more, its reversal pattern is classed as a Head-and-Shoulders bottom rather than a Head-and-Shoulders continuation pattern, because it has much more of a drop to reverse. As we can see it too has dropped down in recent weeks to mark out the Right Shoulder low of the pattern. Throughout its bull market silver has almost always reversed to the upside from a point near to its 500-day (100-week) moving average which is shown on this chart, the exception being the 2008 collapse. As we can see it is right on this average now, which is still rising - thus the stage is set for another strong advance.

The long-term chart for silver shown below, which goes back to 2004, shows that, with the exception of the 2008 collapse, it has always reversed to the upside from a point near to its 500-day (100-week) moving average.

In the recent past we have been rather discouraged from buying this Right Shoulder dip in gold and silver for fear of the patterns aborting due to a 2008 style collapse, especially as PM stocks have been so terribly weak, but this now looks like it isn't going to happen. A big reason that it is much less likely is that The Masters of the System are well aware that if it (the system) collapses now the consequences will be far worse even than they would have been without the intervention of 2008, due to all the unbridled money creation since that time. Hence they will "move heaven and earth" to head off, or at least postpone such a major crisis for as long as they possibly can. Thus it does not come as so much of a surprize to read the following...

"The European Stabilization Mechanism Treaty due to pass in July this year will take care of whatever money is required by Spain or any other Euroland nations for effective bailout. It starts with $700 billion in capitalization and has an open call for additional capital infusion with no limit placed on these calls and no further agreements required.

New additional capitalization called on by this treaty is mandatory, not elective and therefore will go to infinity.

The member nations have 7 days to pay up when ordered to by the management of the EMS who are protected against any form of attack or litigation to legislation. It will be backed by the US Fed via swaps while the US publicly denies it is adding any capital to the IMF or this new entity, ESM. It is the mechanism for QE to infinity in Europe.

QE to infinity, properly understood, is debt monetization on steroids. Denials will be legion, but this debt monetization on steroids will not and cannot be avoided.

The advent of the ESM Treaty establishing the European Stabilization Mechanism is economically Earth shaking and recognized by almost no one out there. It cannot be otherwise, it cannot be avoided. It can de denied but it will occur."

Maund comment: if what is written above is true and comes to pass, and it is certainly plausible, then gold and silver will go through the roof, and they are definitely well positioned to commence a major uptrend imminently. PM stocks are still in a weak position, but that could change rapidly despite the overhanging supply problem, if gold and silver take off strongly higher soon. A key factor is the dollar, which is very close to breaking down from its uptrend in force from last August (dollar index), and now looking more likely to do so after the action of recent days.