Point and figure charting is a simple method of plotting price alone.  It helps the chartist understand support, resistance and specific congestion areas.  Congestion areas are areas of price where there was a previous battle of supply and demand.  Often times when the price reaches this area it is difficult to break through. However, when the breakout does occur a major move begins.   These charts are excellent at identifying specific price and relative strength breakouts.

Silver has just made a triple top breakout which signifies a possible major trend higher.  Triple top buy signals are very powerful and hint at a move higher.  Unlike bar charts projections are based on a horizontal count rather than vertical.  This silver triple top breakout which may occur shortly could initiate a rise to $27.  This target is also confirmed by the bar chart analysis which I showed on Sunday’s update. On the point and figure relative strength chart a breakout has already occurred.

Usually relative strength breakouts precede price breakouts and confirm the move higher.

Never in history has the gold to silver ratio been so high and a reversion to the mean could mean a significant move in silver.

Disclosure: Own silver and silver mining shares.

Silver is attacking the all important $19.51 to $20.18 resistance zone. This zone reflects the March 2008 and October 1980 swing high and is an important line in the sand that will be vigorously defended in the paper markets. The January 1980 high magnet of 38.25 will be pulling harder once this zone is breached.

Silver, London P.M. Fixed:

As long as trend energy continues to step higher relative to price (that is, produce higher highs than previous readings at a similar price level), it’s only a matter of time before 19.51-20.18 resistance zone is breached to the upside.

Paper Silver ETF (SLV):

Disclaimer: This is for informational and educational purposes only. Nothing contained herein is investment advice.

Casey Research Senior Editor Louis James is very familiar with the gold market and with junior gold companies that have projects all over the world. In fact, he’s visited many of the most promising ones. In this exclusive interview with The Gold Report, Louis offers tips on how to own physical gold and “paper” gold, and even picks some junior gold and silver plays with significant potential.

The Gold Report: Louis, earlier this month the U.S. government sold its new 10-Year Notes at about 2.7%. That’s the lowest yield ever for a refunding, yet the sale was over three times subscribed. What’s that telling us?

Louis James: Any particular event may or may not be a watershed; I try not to ascribe too much significance to one thing. Sometimes it’s a straw in the wind and sometimes it’s the straw that breaks the camel’s back; you can’t really tell until afterward. But this one is interesting. It seems to me what this is telling us is that people are more worried elsewhere than they are in the United States. I was reading about declining numbers from China for about nine months running, and, of course, there’s been all the excitement in the eurozone this year that’s caused a lot of turmoil. 

TGR: What numbers are those from China?

LJ: It was industrial output. This situation is not necessarily evidence of how great and trustworthy U.S. debt is. It’s evidence of how much worse everybody else’s debt is. In the race to the bottom, the U.S. is firmly in the rear—this month. That doesn’t mean the U.S. is not headed down; it just means it’s not leading the pack charging downwards.

TGR: The Fed sale came while the Dow was falling and gold was rising. Do you think this is the beginning of a trend or just more volatility?

LJ: Just more volatility. Even veteran Doug Casey won’t look at the daily price of gold. He will look at the weekly and monthly movements. And if there’s a big price jog in a day, we might discuss it— but again, we try not to ascribe too much meaning to the daily fluctuations. Gold is a volatile commodity, and the gold stocks, of course, are the most volatile stocks on earth. One single buyer can move these markets. You have to, just for your own sanity, pull back and have a bigger picture view. 

TGR: If you had $100,000 to invest right now in 10-year T-bills or the equivalent in gold, where would you put your money and why?

LJ: Absolutely, no question: if those were my only two choices, I would put 100% of that in gold. I have very little confidence in the loser in the race to the bottom. Just because the United States is seen as the “least bad” place to invest and people have to put their money somewhere, that doesn’t actually make U.S. Treasuries a safe investment. When there is as much doubt about the solvency of the backer of any security as there is about the U.S. and the other world powers, it just makes no sense. But that’s actually only half the equation; the other half of the equation is that I am very bullish on gold. 

TGR: All right, but banks and foreign investors are buying these T-bills. If it’s plain to you that buying gold is a much better investment, why aren’t these banks and these other institutions doing the same?

LJ: In spite of the news that gold has made, it’s not seen as an important instrument of investment by most people. If you’re a gold bug or you’re somebody who is already interested in the sector, you see advertisements on the Super Bowl and say, “Oh, wow, this is really catching on! This is going to be like the ’70s and the wave is coming.” Perhaps the wave is coming; I believe there will be a wave. But I am not sure we’re even in the beginning stages of that crest yet. There has been some effort to get the word out, but if you go to a family dinner and you ask your family and friends how many of them actually own gold, unless yours is a family of gold bugs, you’re not going to get a lot of people holding up their hands.

The average person is still not involved in this market, and the average central banker and the average Wall Street type still doesn’t think about gold anywhere near as much as he or she will when the mania phase kicks in. I have a friend who is a financial manager for some very wealthy families in Europe. He’s based in Switzerland, and he, alone among his peers that I know of, placed a lot of his clients in gold before the crash of 2008. He’s now very popular with his clients.

But that’s uncommon. Most people wouldn’t even talk about it. My sister is a mainstream U.S. banker. She called me a couple of weeks ago and asked me how to go about buying physical gold. I was shocked. There is awareness percolating out there, but it’s just barely getting started. 

TGR: Maybe your sister read your piece on Goldseek.com, where you talked about picking up American Buffalo gold coins. Tell us about your penchant for hoarding gold coins.

LJ: Well, I like gold coins.

TGR: But why Buffaloes?

LJ: I like the Buffaloes because they’re unalloyed. It’s as much gold as you’re going to get in a bullion coin. You look at it and it’s just gold, whereas as the Eagles are alloyed with a little bit of copper that makes them harder and more durable. The Eagles are the most recognized coin in the world and most easily exchangeable anywhere you go—but the Buffalos are prettier, and well recognized among those in the business. 

I like having physical gold—the fact that it’s portable and, in many cases, untraceable. The government has passed new regulations whereby U.S. gold coin dealers will have to fill out 1099s on anybody who buys or sells $600 worth of gold. Which means, of course, that the tax man is going to be looking at these things all the way down to a single-ounce coin transaction (unless gold really crashes from here).

That’s a significant change. Right now the anonymity is a strong pull for U.S. consumers. But I think everybody should have some physical gold, because gold is the only financial instrument that is not simultaneously somebody else’s obligation. Silver too, of course. If you’ve got paper gold, even good quality paper gold like Perth Mint Certificates, it’s still a piece of paper. You should have some physical gold in hand. Obviously you can’t carry around millions of dollars with you, but a couple of months’ living expenses is a good rule of thumb.

TGR: But let’s say gold goes up significantly from where it is now. Unless you’re buying something substantial, I don’t see how it’s going to work as a currency because if you want to buy a loaf of bread, how are you going to do that with a gold coin? That gold coin could be worth $4,000.

LJ: That’s true, but there are half-ounces, one-tenth ounces; there’s silver, too. I saw a YouTube video featuring a convenience store in Los Angeles that has a guy in the back with an assay test and scales for gold and silver. At that place you can buy a loaf of bread with your ex-wife’s wedding ring if you want.

But will gold become a currency again? I think there’s a good chance that it might if the financial catastrophe unfolds the way we think it will, and paper currencies, as a whole, come to be regarded with the suspicion that they so justly deserve. But whether or not that happens, it is good to have some form of concentrated portable wealth in times of financial chaos.

I was in the Republic of Georgia, just a couple of weeks before the bombs started falling two years ago, and I was interested to see that there are gold dealers on street corners there. It is part of their culture, and it’s part of Middle Eastern culture. In Mexico, many towns have basically pawnshops where they will buy scrap gold and silver. I’ve used such places to liquidate bullion and buy groceries. On a larger scale, a couple tubes of gold coins that would fit in any briefcase or purse could easily be turned into, say, a house in Argentina. You will find a facilitator in Argentina who would make the exchange happen.

TGR: But how do you protect yourself when you’re carrying around a briefcase full of gold bullion? I mean if you’re buying Buffalo coins fairly consistently, you probably have a reasonable store of wealth at this point, and to me that seems dangerous.

LJ: Well, first and foremost, you don’t tell anyone. [Laughs] So here I am telling people in this interview!

TGR: You stated it on your website long before this.

LJ: Yes, but, seriously, this is the first rule: security through obscurity. You don’t tell your neighbors; you don’t bring out that bar of gold at Thanksgiving and show everybody how proud you are of it. 

For small amounts, if nobody knows about it, you’re not likely to have any trouble. If you’re a serious player, a segregated account in a facility that’s set up specifically for gold storage is a good idea. Some of the near-gold substitutes are also a good idea. I mentioned Perth Mint Certificates before; we like those. The Australian government runs a mint that’s an audited facility; they will store gold and silver for individuals. These certificates are transferable and they’re deliverable. If you get nervous about your gold, you can have them send you your gold via FedEx Corp. (NYSE:FDX). Or you can sign your Perth Mint Certificate over to someone else for paper currency, or whatever you want in exchange.

TGR: In the same Goldseek.com article where you mentioned your coins, you said: “The strategy called for is a more cash-focused version of our ‘buy only the best of the best’ (BOTBOTB) program. Buy nothing new unless you’re offered a great bargain in a solid company that can deliver significant new or expanding production.” Give us a quick overview of your more cash-focused BOTBOTB program.

LJ: What we’re saying is that we’re not in any hurry to have our portfolio fully invested at this point. We see a significant risk of correction in the very near term; yet we are very bullish on gold going forward. We see the second dip in the W-shaped economic slump coming, perhaps by the end of this year. We have already had some of the typical summer weakness. With these possibilities in mind, we don’t want to tell people, “Buy, buy, buy!”—not when there’s a very good chance they will be able to buy at better prices soon.

You want to buy right now only if you can look at something and say, “These guys have all their ducks in a row. Even if there is a correction, they have enough cash, they have the right property and they have the right people that they will proceed anyway.” If you see that in a company you want to own but don’t, then buying some of those shares may not be a bad idea. We could be wrong about the correction, so you don’t want to be completely out of the market.

There are good companies out there that I think will go higher from where they are now. But I already have shares in most of those, so I don’t want to buy more now. What we say to new subscribers in the newsletter is “Here are the ones to focus on.”

TGR: All right, what are some of the companies in your newsletter?

LJ: We like emerging producers or companies with discoveries in hand. An emerging producer that I like a lot is Medusa Mining Ltd. (ASX:MML; AIM:MML; TSX.V:MLL). It’s an Australian company that has quite a large portfolio of properties in the Philippines along a very prospective belt where there have been a number of discoveries. They keep finding new gold veins with great potential in the same property as their very high-grade producing Co-O Mine. Co-O is cranking out about 100,000 ounces a year, a significant producer, but they’re finding more gold at about the same rate as they’re mining it, so the asset is not depleting—a strong plus in an extractive business. They’re able to make money, and they have great discovery potential. I like that a lot. There’s underpinning value there. And I should say it would be safe for anybody reading this to assume that I own shares in these companies, because I do eat my own cooking.

TGR: Hopefully, our readers will consider you a gourmet. What are some other companies you are following?

LJ: One of the companies that I think we have spoken about before is AuEx Ventures, Inc. (TSX:XAU). This company is a project generator. It has multiple projects, most of them in Nevada, but also in a very prospective area of Argentina that’s pro-mining, and in Spain of all places, which is a better mining jurisdiction than most people appreciate. AuEx’s main asset is the Long Canyon Project in Nevada, a joint venture with a company called Fronteer Gold Inc. (TSX:FRG; NYSE.A:FRG). AuEx has 49%; Fronteer has 51%. We’re talking about AuEx rather than Fronteer because AuEx is much cheaper. Fronteer is a great company with other assets I do like a lot, but that’s a different play (partly a uranium speculation).

Long Canyon is just a peach of an asset; it’s a potential open pit, which is your cheapest method of mining, and for an open-pit resource, it’s very high-grade, more than 3 grams per ton gold. And it’s oxide material, which means you can heap leach the ore instead of the more expensive milling. It has all the characteristics of a highly profitable mine. They did a preliminary economic assessment, and the internal rate of return was something like 66%.

TGR: That’s well above average. 

LJ: Fantastic numbers. The resource has doubled since that preliminary assessment, which will improve the project economics, and they continue to step out and discover more. They recently hit 10 grams per ton over 44.2 meters of mineralization; it’s just a peach of a project. AuEx is not particularly cheap today; if there is a market correction, these shares could easily go on sale at a great discount. But at the end of the day, they have a project that looks very much like Nevada’s next gold mine. 

TGR: Any others?

LJ: One that I like, with a shorter fuse, is International Tower Hill Mines Ltd. (TSX:ITH; NYSE.A:THM), which is an Alaska-focused discoverer-explorer developer. Their primary asset is the Livengood Project, on land owned by the state of Alaska, intended to generate royalties to pay for the state’s mental health care system—so they have an ally in the government that really wants to see the project developed. That’s always a good thing for permitting and other purposes. The royalty is a cost, but it’s bearable. The project is huge. Depending on the cutoff grade, it’s almost 20 million ounces, but within that you’ve got 9 million ounces at a good open-pit grade.

There are lots of good things I could say about Livengood. But I mentioned a short fuse; the company has a portfolio of other assets that they’re spinning out into a new company. Shareholders of record at a certain point will get shares in the new company that will get the other assets and some cash to advance them. That should happen over the next month or two. In other cases where we have seen this kind of spinout, it has worked out very well for shareholders.

TGR: International Tower Hill is part of the Cordero Group. When we interviewed you last time, you talked about Fortuna Silver Mines Inc. (TSX:FVI; Lima Exchange:FVI), part of the Gold Group, which specializes in mining plays.

LJ: The group you refer to here is basically centered around Simon Ridgway. The Gold Group has a number of companies—Radius Gold Inc. (TSX.V:RDU), Focus Ventures Ltd. (TSX.V:FCV), Western Pacific Resources Corp. (TSX.V:WRP) and others. There’s a bunch of them, but the projects are all quite different.

In some ways, Fortuna Silver is similar to Medusa. It has a producing mine with a really big, high-grade vein that they could mine for many years, and they’re continuing to discover more resources in that project area. This is the silver-zinc-lead Caylloma Mine in Peru, and it’s another peach of a project—one that has 400 years of mining history and was once a cornerstone of the wealth and power of the king of Spain. It’s a cash cow that is going to continue cranking out cash for years. Different zones have different mixtures or minerals, but a significant portion of the value at Caylloma comes from the base metals. 

We’re wary of base metals these days, but Caylloma has a very clean concentrate that’s actually in great demand. Smelters want Fortuna’s concentrate, because it’s pure enough to use as flux to mix with the concentrate that they get from other mines that isn’t so pure. They have negotiated very good terms with their smelter.

TGR: And then there is Fortuna’s gold-silver San Jose Project in Mexico.

LJ: Right. There’s where the big upside is. You have this cash cow with Caylloma that’s funding the work, and on the other hand, you have this new gold-silver mine that’s primarily silver. We like a gold lining to a silver story much better than a lead lining. It’s bigger too; San Jose is basically going to quadruple Fortuna’s production. And it’s already being built. We expect that to come into production next year and start adding to the company’s bottom line immediately.

There’s always a question you have about exploration companies that become miners, because these are very different skill sets. To discover something is one thing, but bring a mine into production is something very different. Fortuna is one of those rare companies that has shown it can do it. These guys are very good. 

I believe that the technical risk of developing the San Jose Project is very low. The resource is there and there’s room to make it bigger, so you have cash flow, visible growth and a team that has shown it knows how to do things. I like it.

TGR: Where do you see gold finishing 2010?

LJ: Well, our company has been predicting $1,450 to $1,500 by the end of 2010. That was our call at the beginning of the year, so I want to stand by it. Right now, it may seem, “Well, gee, maybe it won’t; gold’s retreating.” But it is common for gold and the gold stocks to retreat in the summer, and it is common for gold to have a very good fourth quarter in the average year.

There are some people who like to try to calculate the correct price of gold, given supply and demand fundamentals. I believe this is all a little bit silly because the supply of gold is essentially infinite, as gold is not really consumed—most of the gold ever mined is sitting around in refined form in one vault or another. At the right price, it comes into the market. It’s just not a commodity that is bought and sold and consumed the way other commodities are, even silver.

The price of gold is really a barometer of fear. Given what we’ve said about the other dip in the “W,” our basic view is we’re still in the eye of the storm and we’re looking to head out into second half of the storm later this year and into 2011. As this becomes evident and fear rebounds, the consequences for gold should be very substantial. People think the economy is recovering and everything’s going to be fine, and that hope is going to get smashed. The level of fear produced is going to be even larger than in 2008. That will move gold significantly.

TGR: Do you have a forecast out on 2011?

LJ: No, we’ll probably do that at the end of the year.

TGR: Do you have some parting thoughts you would like to leave with us with?

LJ: I just want to specify again that I am bullish in the near term on gold, if you think of the end of the year as near term. But in the very immediate future, I am saying there is plenty of room for volatility. If you read this article and go out and buy gold Buffaloes today because they’re Louis James’ favorite, and gold falls off $30 tomorrow, don’t get mad. If gold drops in the short term, look at that as a buying opportunity.

TGR: Thanks, Louie. Interesting to talk with you, as always.

Always on the lookout for the next double-your-money winner, Louis James is the master of metals at Casey Research, where he’s the widely read and well-respected senior editor of the International Speculator, Casey Investment Alert and Conversations with Casey. Fluent in English, Spanish and French—and conversant in German and Russian to boot—Louis (aka Lobo Tiggre) regularly takes his skills on the road, evaluating highly prospective geological targets, visiting explorers and producers in the far corners of the globe, and getting to know their management teams. In addition to subject matter expertise, he’s built a following on the basis of a dynamic combination of investment savvy, practical advice, experience in physics and economics and a gift for comprehensible technical writing.

Want to read more exclusive Gold Report interviews like this? Sign up for our free e-newsletter, and you’ll learn when new articles have been published. To see a list of recent interviews with industry analysts and commentators, visit our Expert Insights page.

DISCLOSURE:
1) Brian Sylvester of The Gold Report conducted this interview. He personally and/or his family own shares of the following companies mentioned in this interview: None.
2) The following companies mentioned in the interview are sponsors of The Energy Report or The Gold Report: Western Pacific Resources, Fortuna and AuEx Ventures.
3) Louis James: I personally and/or my family own shares of the following companies mentioned in this interview: International Tower Hill Ltd. I personally and/or my family am paid by the following companies mentioned in this interview: None.

Silver had very powerful break out today as investors are seeking assets that are safe and will retain value during a debt crisis.  Silver is  seeing demand at these price levels as it is historically cheap relative to gold.  If the ratio came down to the levels it was in 2006 it would be close to $27 an ounce.  Silver is soaring because investors are realizing this is a hard asset, it is money and it is historically cheap compared to gold.

Gold has reached overbought conditions from my July 28th buy signal.  Right now gold is a bit overbought while silver is at an interesting buy point, having found support for the fourth time at its long term 200 day moving average.  Today’s breakout of the symmetrical triangle, a very bullish chart pattern, is a sign that silver has built up a lot of internal strength and could break out into new three year highs. Remember, silver is significantly below all time highs while gold has already broken into new highs.

While I am bullish on gold, I believe investors could see a higher percentage move in silver.  I have also alerted my readers to a specific  mining company which has recently found a major discovery in Mexico.  Pure silver discoveries are very rare.  Silver supply is mostly produced as a byproduct which makes supply very inelastic.  A new pure silver discovery in a silver bull market could receive a nice premium.

I believe silver will make a major move on this break out. Investors are looking for a safe haven, protection and value in silver.  Gold has already made a significant move and is quite overbought, while silver has not participated to the same extent.  The gold silver ratio should move to historical norms which could mean a major move for silver.

If you do a study of the point and figure chart of the relative strength of silver versus the S&P500 since 2001, its strong uptrend is apparent. Each time silver falls back into support, it breaks out and makes significant rallies.

The break above the red bearish resistance line and a double top breakout coupled with the daily chart symmetrical wedge pattern demonstrates that silver has reached a critical juncture and could make a nice move.

Source: http://goldstocktrades.com/blog/2010/08/25/silver-ascending-triangle-breakout-major-move-expected/

A move past the 2008 highs would be an important breakout. However, it is important to note that in both Silver and various large-cap gold stock indices, resistance actually dates back to 1980. For the gold stocks we are looking at a potential breakout from a 30-year base, while for Silver, we are looking at a potential breakout from a 29-year base.

Ladies and gentlemen we are looking at the inception of a historic move in precious metals and precious metals companies. Don’t believe me? Consider that at the end of 2009, 0.8% of global assets were in the precious metals complex. Folks, this was above 20% in 1981 and over 30% in the 1930s. Despite what you may read or hear, virtually no one owns precious metals, and those that do don’t own enough.

As you can see from the picture below, folks are rushing for safety in Treasury bonds.

Sad to say but most folks don’t get it. Those that continue to stick with crappy stocks and bonds that aren’t going anywhere deserve their own fate. Those that get involved in the precious metals will be wealthy when its all over.

Debt default is unavoidable. Inflation or deflation doesn’t matter. What matters is that the US, Europe and Japan CANNOT grow their way out of the debt mess. A new currency regime is unavoidable. The worse the economy gets, the faster we move towards sovereign default, bankruptcy, hyperinflation and a new currency. It has happened before numerous times and will happen again. Don’t be left behind. The train is getting ready to depart the station.

Consider a free 14-day trial, which entitles you to future updates as well as updates from our recent past.

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Jim Willie CB, editor of the “HAT TRICK LETTER”

Use the above link to subscribe to the paid research reports, which include coverage of critically important factors at work during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.

History is being made. The American public has never been no nervous, perhaps fearful of something dreadful and imminent. The global monetary system is crumbling. The typical stimulus has failed to jumpstart the USEconomy. The 20 months of near 0% short-term official interest rate has failed to revive the moribund US housing market. The phony FASB accounting rules has failed to accomplish anything except a stay of execution for the big US banks, which do not lend much. In fact, the US banks are largely dead entities showing enough life for to receive USGovt largesse aid. Witness the failure of the US financial sector. Witness the climax chapter of failure for the Fascist Business Model. The US banker brain trust, which possesses only a modicum of economic wisdom, analytic prowess, or foresight, finds itself in a desperate corner. Their talk of an Exit Strategy in the last several months was summarily dismissed as nonsense, propaganda, and wishful thinking by the Jackass here on a consistent irrefutable basis. The US Federal Reserve is ready to embark on the second round of Quantitative Easing. The monetization of US$-based bonds of many types will be done on a second initiative, on cue. Here is the irony, the stupidity, the insanity, the recklessness, the tragedy. What failed, they will do again, maybe even bigger! At risk is global confidence and trust, hardly a zero cost item.

The urgency of the QE2 Launch will be made quite clear by the Hologram Leaders occupying positions of power, after they digest the latest housing data. The July existing housing sales fell by 27.2% in a single month. The July new home sales fell by 12.4% in concert. Few analysts operating with USGovt service badges anticipated that the empty-headed home buyer credit of $8000 would rob forward sales and leave an autumn vacuum in home demand. It did. Check out the silver price, which touched $19 today on Wednesday. And at $1240, the gold price is poised to make new highs any day. My near-term targets are $23.5 for silver and $1300 for gold. Energy prices are soft but precious metals prices are strong. Think heterogeneity!

The QE2 is pure cancer within the monetary body. Foreign creditors are walking away, making distance from the USTreasurys, and especially the USAgency Mortgage Bonds. The USFed and USDept Treasury are therefore being isolated. Their USTreasury auctions are often disguised failures, but with the benefit of a falling US stock market, the bond demand has risen. The cancer of QE2 cannot be emphasized enough. My forecast a few months ago was for NO Exit Strategy implemented. The USFed balance sheet will NOT be reduced. Interest rates will NOT be permitted higher. My forecast was for an embarrassing About-Face in policy, and a hasty desperate announcement and implementation of a powerful new round of Quantitative Easing. We are seeing it unfold, exactly as forecasted. In fact, my call is for ZIRP and QE, the cancerous twins of Zero Interest Rate Policy and its Printing Pre$$ twin, to become permanent residents of the White House and USFed, an incredible pox, blemish, and badge of shame to the nation. The twins scream rot and ruin.

These shills and carnival barker policy makers need a fresh new education. The two most important indicators in my book are continued home foreclosures and renewed rising jobless claims. The rest of the forecasting challenge is remarkably easy. The nitwit barkers prefer to focus on inflation expectorations, encouraged by the wondrous USTBond rally. What nitwits, unable to read simple signals! What charlatans, pretenders to the thrones! What heretics, ignorant of economic principles! See the August special report that criticizes, exposes, and castrates the clueless cast of American economists. The latest revelation was the $120k payment to Frederic Mishkin for writing about the “Financial Stability In Iceland” in March 2006 whose title was changed to “Financial Instability In Iceland after Iceland collapsed. Mishkin did no research, almost admitted as much in an ugly exposure to these clowns operating in economist suits. See the Zero Hedge video (CLICK HERE). My contention is that Mishkin has no economic skills, and does not understand what money is, just like many on the Federal Reserve Board, whose misguided brain stems extend to most regional governors. Mishkin appears in this instance to be a bonafide whore. One exception might be Hoenig, who has warned of the perils of new monetary expansion. He recently said, “I wish free money was really free, and that there was a painless way to move from severe recession and high leverage to robust and sustainable economic growth, but there is no shortcut.” Hoenig of the Kansas City Fed has emerged as an ideological rival to Bernanke. Hoenig might soon need to be ousted for lack of patriotism and obedience to the fascist throng.

Let me make a paradoxical point: THE UNITED STATES WILL BEGIN A RECOVERY WHEN THE TOO BIG TO FAIL BANKS ARE PLOWED UNDER. They are blocking remedy and restructure. They are resisting liquidation of badly impaired assets. They do not lend money, as their credit engines are broken, since they are dead entities that occupy space in the US financial sector. They cast large long shadows. Their removal from the scene of the crime would surely light a fuse of credit derivative accidents, the likes of which the world has never seen. Let’s try THAT experiment!! Why the leading economists cannot see that credit is down since the big banks are dead is beyond me. One might regard the conclusion is too ugly to contemplate. The entire US financial chapter since 1996, when Greenspan proclaimed irrational exuberance had taken hold of the land, has been ugly, perverse, and ruinous. The nation had its chance to right the US Ship of Financial State in 1987, and instead chose to produce, nurture, encourage, justify, and bless as good a sequence of asset bubbles, while the industrial base was dispatched to Asia. The USEconomy thus replaced legitimate income with grandiose debt sources, followed by national insolvency.

GOLD & SILVER DIVERGE FROM COMMODITIES

The impact from the cancer and desperation of QE2, the next undermine of the USDollar (and other major currencies), can be seen in the price of Gold. Better yet, watch the price of silver, whose price movement has actually been leading gold upward. This week, for the first time in perhaps a decade, silver defied the industrial metals and economically dependent energy sector. Silver is money. Both copper and crude oil fell in price, but silver rose strongly. By the day’s end, gold was pulled up by silver. And this happened on a week that features options expiration, which usually sees a strong naked short pounce by JPMorgan, of course to make America strong and liberty exportable. Witness the beginning of outright visible lost control by the syndicate.

Watch the Gold/Oil ratio, which is poised to rise noticeably. Gold is the commodity king, since money. The galloping recession will take down the crude oil price, as demand falls. The natural gas price fell 3% just today on Wednesday. Hedging against the USDollar risk aside, the energy prices have been weak. By contrast, the gold price has risen from direct demand in response to monetary system risk and lost confidence in that monetary system. The global revolt against the USDollar continues quietly. The government bonds are gradually being considered trash backed by yet more bad paper dispensed by government approved printing houses. My analysis has long pointed to the advantages of silver over gold. Gold fights the political wars, but silver rides in on a shiny white glowing horse to win most gains. The supply factors favor silver. The demand factors favor silver. The shortage is acute for silver.

Again, basic economic thought process not within the mental caverns of US economists. The desperate action to launch QE2 will be quite evident in the coming weeks. It will even become a national priority. The bankers and politicians will rush to destroy whatever credibility remains in the USDollar, or any fiat paper currency. The challenge to banking leaders will be to conceal their desperation and panic. They have had no options or alternatives for almost two years, now painfully evident. The impact of the launch will be extremely damaging to the prestige of the USFed in general and Chairman Bernanke in particular. He has not understood much of any events, surely has proffered a string of errant views and obtuse forecasts. Witness the discredit of the central bank franchise system. Fiat paper money is dissolving before our eyes. Notice the assaults on sovereign debt in Europe, a trend which will hit the US shores, all in time. Economists do not expect it, since the American bankers possess the Printing Pre$$. They will be blindsided by Gold, which pulls the carpet from under the US$-based foundation inside its very structure. The Gold bull market will outlast the USTreasury Bond bubble run. The key word to be heard in the next few months will be CONFIDENCE, as in the absence of it when viewing the US financial helm.

The Powerz in charge will choose inflation over any combination of reform, restructure, and replacement of the helm. A recovery could have possibly been in our grasp, maybe in the future after much pain from adjustment. Unfortunately for the bankers in unchallenged power, the respect, prestige, and faith in the US Federal Reserve will fade like a sea mist after the QE launch. Its christening will be done in deep shame with a bottle of acid. The level of respect is approaching rock bottom, the lowest in decades. Even Alan Greenspan expects slippage and sputters as the housing market resumes its powerful decline. The next recession for the USEconomy could very easily result in a USTreasury default. Scenarios for precisely such a default are mapped out in the August Hat Trick Letter.

IMMINENT GOLD & SILVER  PRICE MOVES

Gold & Silver are entering the most favorable season of the year, autumn. Big gains should be expected. Signals are omnipresent for substantial price gains. Shortages exist and are profound. Demand is on the strong rise on a global basis. Lost confidence and faith in the fiat paper system is slowly vanishing. It would be nice to see the investment community add to positions and put on new positions before the breakout, not afterwards, and be more successful. The return of the USEconomic recession and the simultaneous QE2 Launch will mark a major turning point for gold & silver. Fear is on the rise. The precious metals offer an alternative to conventional nutball strategies, a successful one. Check out the track record for gold, the best asset in the 1990 decade. That fact is not mentioned or cited much by the financial press networks. Their sponsors object.

MANY SIDES OF MONETARY CANCER

Cancer is a strong word. It conjures up images of internal broken functions, nasty growths, blockage of organs, twisted lives, pain, and death. Yes, that sounds right for describing the USDollar and its flagship the USTreasury Bond, with the accompanying destroyer in Fannie Mae. The word cancer fits perfectly. It has brought a removal of US industry. It has brought a wave of bond fraud centered upon mortgages. It has brought endless war, paid by foreigners. It has brought insolvency to US households. It has brought insolvency to the US banks. It has brought a tumor of REO homes seized by foreclosures and put the US bank balance sheets. It has brought a bloated wrecked USFed balance sheet. It has brought chronic $1.5 trillion USGovt deficits. It has brought a mass of Food Stamp recipients. It has brought Wall Street control of the USGovt finance ministries. It has brought a Black of Hole of tainted money. It has brought diverse toxic bonds. It has brought blockage of any independent audit of the USFed assets or activity. Yes, that qualifies as the many sides of cancer.

Consider the next new cancerous faces of the Quantitative Easing. They new policies and features will be so ugly as to reshape the entire American landscape. They will do to the US financial and economic pastures what the Gulf of Mexico oil volcano did to the Southern Shores. These concepts are covered in the August issue of the Hat Trick Letter in greater detail. They are bizarre complicated concepts. They strike dead the heart of US capitalism, and offer a unique brand of fascism and collectivism as a result, with an overtone of desperation. They paint a path toward systemic failure. At the end of that bitter road and death march is the USTreasury Default event, forecasted by the Jackass in September 2008. It earned ridicule, but soon will earn respect, like several other important past forecasts. The path was clear almost two years ago that the US banking system died that month. The obituary cited Lehman Brothers, Fannie Mae, and American Intl Group as pall bearers. The banking system death is undeniable to the enlightened. It will soon be clear enough to the masses after the next leg down in housing.

1) Stiglitz urges another USGovt stimulus program. The last one was hollow. The next should be lackluster and meager, but maybe more on the mark. True reform and broad liquidations are pre-requisites, as they will not be done for preparing the economic topsoil. Bankers will block it. Expect USGovt “beans & rice” handouts rather than conditions for job creation. They should really try capital expenditure immediate writeoffs and job creation tax credits instead, with a slew of obtrusive federal regulations swept aside. Too much capitalist wisdom with such ideas. More ineffective wasteful federal programs and misdirected altering of parameters on the control panel will only aggravate the effect of the QE2 Launch, a typical preface.

2) Former Treasury Secy Rubin argues against a large scale stimulus plan, and instead for deficit reduction. This economic Rasputin presided over the removal, lease, and sales of the national gold treasury. He led the deregulation movement that opened the door to profound bond fraud. He sat on the Citigroup board when it expanded recklessly into many domains, resulting in the wreckage of the corporation. That qualified him to serve as mentor and chief puppeteer to Geithner and Summers, who run the USDept Treasury and White House Council of Economic Advisors. Clearly, Rubin has a different agenda. A constant state of sluggishness might work best for Rubin. He advocates deficit reduction as his main priority, and proclaims a goal of restoring confidence. The nation is way past deficit reduction concepts, but should focus rather on collapse avoidance. Confidence can be restored, and better economic performance enabled, only if the current Elite banks are plowed under, much of their impaired assets are liquidated, Goldman Sachs is removed from control of the USDollar altogether, and stern prosecution of colossal criminal bond fraud occurs. That would produce confidence.

3) QE2 will be more cancerous than QE1, as full dependence upon monetary inflation will come. The official interest rate cannot be reduced. QE2 will produce three major effects, all ruinous. All debt is subject to coverage by new money, all to be eligible. Next comes hyper-inflation, as confidence in all things paper evaporates and a great tipping point is breached. The arrival of QE2 will produce three major effects. A) The reliance upon new money growth to monetize rapidly growing debt in the US financial system will undermine all things US$-related. The continued artificial support of the USTreasury Bonds will transfer risk to the USDollar. B) Whatever respect and prestige in the USFed will vanish quickly. The bravado of helicopter drops will seen hollow, amateurish, and invite mockery in the open among respected brain trust. C) The smartest people in the room will begin to declare that the current global monetary system is irreparably broken, and that past and future response, even if amplified, will be doomed to fail. We are on the doorstep of hyper-inflation.

4) The FDIC will soon launch what could grow into a vast securitization initiative. It is better described as the QE2 from the rear guard, not well noticed. Since broke, the FDIC has resorted to selling packaged credit assets from failed banks in order to raise cash, new securities with USGovt guarantees. Apparently, viable banks are harder to find for buying much of any assets. The FDIC two years ago served as an investment banker harlot for Wall Street acquisitions. Then it became a matchmaker, finally a liquidator, now a bond issuer. All the while the Deposit Insurance Fund runs more negative each month. Be sure that the Printing Pre$$ of monetization is behind the scheme, no longer well disguised, since the FDIC is so closely aligned with the other engineers of bond management within the USGovt (see Fannie Mae). The FDIC bond securities are more monetization.

5) Mortgage relief might be the destination for the next mammoth monetary expansion. The StLouis Fed was permitted to leak the story. James Bullard of the St Louis Fed wrote a breif white paper entitled “Seven Faces of The Peril” in he urged the USFed should immediately restart the purchase of USTreasurys if the deflation scenario takes deeper root, as in QE2. He correctly concludes the high risk of a Japanese-style deflationary outcome in the United States. Next came the speculation by both Morgan Stanley and Merrill Lynch in their concurrent release of analyst reports. They surmised that Fannie Mae and the Federal Housing Admin might be preparing an imminent launch of broad sweeping initiative. The proposed plan would feature an instant automatic refinance program for troubled mortgage loans. It would take millions of borrowers to current market rates overnight. It would stop short of reducing the loan balances of under-water mortgages, those suffering negative equity. In the process, $46 billion of consumer savings per year would be created, from basic reduction of monthly payments.

6) The loan modification pathways will possibly be expanded, maybe meaningfully. Operations have expanded whereby fraudulent home loans have been warehoused in Fannie Mae, under the USGovt roof and aegis for two years. Even the bankers might give pressure to revamp home loans in a skein of modification plans, in reaction to widespread non-payment from strategic default. A major challenge must be dealt with. They must avoid the close examination of massive mortgage bond fraud for at least $2 trillion on home loans. Such scrutiny might uncover a multi-$trillion Fannie Mae clearinghouse of fraud that links several major fraud schemes. Recall that on Christmas Eve 2009, the Treasury Department waived a $400 billion limit on financial assistance to the failed fat duo Fannie & Freddie, pledging an unlimited credit line. The sewage treatment plant will surely devise more clever projects to handle the toxic waste, since very large liquidity plumbing is promised.

7) QE2 will feature Fannie Mae rental homes, a new vibrant toxic business. Except a major blemish will build further, as defiant non-payment of mortgages will flourish, from strategic voluntary defaults. Look for Fannie Mae to gather in hundreds of thousands, even millions of broken mortgages. They will attempt to build a business subsidiary of the most queer type. An ulterior motive is to bail out big banks but not reveal doing so. A desperation is sinking in with USGovt proposals, perhaps in direct response to open fear of civil disobedience. Consider that 250 thousand Bank of America mortgage holders are paying nothing on self-driven strike actions. My forecast made in 2004 and 2005 was for the advent of a bizarre perverse Fannie Home Rental program. Now we see people forfeit title to their homes, lose their equity, but remain in the same home as renters making small monthly payments. The housing market would prevent the dumping of properties on an already bloated housing market. The Fannie Mae investors could have earned a dividend from rent payments, except that FNM stock issues were de-listed. Homeowners are increasingly not making monthly payments, daring the bank to foreclose on the property, challenging them to produce the property title. In many cases, the banks cannot produce the title, because the MERS database is a nightmare of spun spaghetti. The courts have ruled MERS has no legal standing in any foreclosure displacement of occupants. Rumors swirl with gathering strength and persistence. The USGovt might soon take over all failing home mortgages, and have their titles signed over to the USGovt. Then people would lease the properties to the people who occupy them according to pay scales, in collectivist fashion consistent with the presidential ideology.

THE HAT TRICK LETTER PROFITS IN THE CURRENT CRISIS.

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Richard (Rick) Mills
Ahead of the Herd

As a general rule, the most successful man in life is the man who has the best information

In the time of the ancient Babylonians – long before the periodic table – there were seven sacred metals: gold, silver, copper, iron, tin, lead and mercury.

In Roman and Greek Mythology, the First Age was called Golden, the Second Age Silver. Apollo, the god of truth and light, and teacher of medicine, carried a silver bow.

The hieroglyph of Isis (Egyptian moon goddess) is a crescent and images of her are usually reproduced with her standing on the Crescent. This has also become the symbol for silver – on old maps a crescent shows the location of a silver mine.

Islamic alchemy gave silver an important place, alchemical procedures were defined in terms of silver – the silvering of other metals, the act of giving other metals silver like qualities.

We’ve long practiced the science (metallurgy) of separating silver from lead – the earliest known workings of any significant size were those of the pre-Hittites of Cappadocia in eastern Anatolia, the first sophisticated processing of lead-silver ore was attributed to the Chaldeans around 2500 B.C.

Silver metal was recognized as more precious than gold when bartering in ancient Egypt – this recorded as early as 930 BC. Silver’s use as money in coin form began around 2600 years ago. The Lydian (present day Turkey) Trite is considered by many experts to be one of the first coins used as money. It was made of “Electrum”, a silver and gold mixture. Egyptian silver in coin form began appearing around 300BC. 
Silver and gold have stood the test of time, as a medium of exchange, a storehouse of value and a safe haven in times of turmoil.

The history of fiat money has always been one of failure (most paper money economies downfall can be linked directly to the costs of financing out of control military growth and its wars). Every fiat currency since the Romans started diluting the silver content of their denarius has ended in devaluation and eventual collapse of both the currency and of that particular economy.

For the very first time in our history, all money, all currencies, are now fiat – the US dollar use to be gold backed and it was the rock all the worlds currencies were anchored to – when the US dollar became fiat, all the worlds currencies became fiat.

The Federal Reserve first issued its debt based paper money in 1913. Since then the US dollar has lost 95% of its value.

“The major monetary metal in history is silver, not gold.” Milton Friedman, Nobel Laureate

In this author’s opinion silver has a few unique twists: 

Firstly as a much cheaper precious metal silver is winning market share from gold buyers. The higher gold prices go the more consumers will step down to silver, more so if they think silver’s price will rise substantially.

Today the gold:silver ratio stands at 65.94:1

Gold $1224 oz/silver 18.56 oz = 65.94

Historically the ratio has been 15:1

Since silver made it’s nominal high in 1984 the gold:silver ratio has held fairly steady at 45:1 – with the current ratio at 65.94:1 either gold will have to fall or silver will have to rise to $27.20 in order to get the numbers back in sync with 45:1.

To get back to the historical average ratio of 15:1 silver would have to rise to $81.60 an oz.

Silver, like gold, also performs it’s function as a precious metal – acting as a storehouse of value and a safe haven in times of turmoil – although, and herein might lie the opportunity, silver seems to have been asleep on the job what with the historical gold:silver ratio being so out of whack.

Gold does seem to be performing admirably and in this authors opinion does not seem set to significantly drop in price any time soon, the Dow on gold’s terms:

• In 2000 gold made its $260 per ounce low

• January 2000 the Dow was 10,900

• 10,900 / $260 per ounce = 41.9 ounces to buy the Dow

• Today at 10,443 DJII and $1,224 gold it’s 8.53 oz to buy the Dow

Secondly silver is an industrial metal/commodity which, unlike gold, is consumed, therefore giving you a call on an economic recovery.

“Silver is a unique metal that wins whether the economy is going well or is in bad shape. In the latter, the investor buys it as a hedge against the downturn in the economy and the markets. And if the economy improves, then the industrial demand increases.” Chintan Parikh, CPM Group commodity analyst

The bottom line? Silver gives you a nice double play with prices expected to perform well no matter what the prevailing economic or geopolitical conditions.

Third silver does not have the threat of much publicized Central Bank and IMF sales constantly overhanging it – although silver does seem to trade in lockstep with gold when this old bogey man is trotted out to the herd.

Conclusion

In this authors opinion, it’s not if, but rather when, the gold:silver ratio will revert to a more traditional number and share price upswings will trickle down to the very few junior silver producers, the soon to be producers, developers and explorers. It’s for these reasons that silver and silver junior precious metal company’s should be on every investor’s radar screen.

Are they on yours?

Richard (Rick) Mills
rick@aheadoftheherd.com
www.aheadoftheherd.com

If you’re interested in learning more about specific junior silver/gold stocks and the junior resource market in general please come and visit us at www.aheadoftheherd.com

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Richard is host of aheadoftheherd.com and invests in the junior resource sector. His articles have been published on over 200 websites, including: Wall Street Journal, SafeHaven, Market Oracle, USAToday, National Post, Stockhouse, Casey Research, 24hgold, Vancouver Sun, SilverBearCafe, Infomine, Huffington Post, 321Gold, Kitco, Gold-Eagle, The Gold/Energy Reports, Calgary Herald, Resource Investor and Financial Sense.

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Gold has moved well past its 2008 high and the same has happened with our junior gold index. Silver, at its recovery peak was within 7% off its 2008 high while our junior silver index was 25% off its 2008 high. While the junior silvers have recovered, they have lagged both the junior golds and Silver.

This chart shows our junior silver index (black) and our index versus Silver (blue).

The ratio fell from about 13.5 to 3.0 and now sits below 6.0. Much of the recovery in the junior silver stocks has come from the huge recovery in Silver rather than from a leveraged move in the shares. Is the market right about this? Are the silver stocks fairly valued here? Let’s take a look at some ratios, which can help explain the profitability of the silver stocks and answer those questions.

In the following chart we show three things: Silver in Canadian Dollars, Base Metals prices and Silver versus Oil. The vast majority of silver stocks are Canadian companies so the Canadian price of Silver is more important to them. We know that Oil comprises a large cost of mining and that many silver companies produce base metals in addition to Silver.

Since the peak in silver stocks, Silver in Canadian Dollars is almost 20% higher, Silver vs. Oil is marginally higher and base metals prices are a good 20% off their highs. This quick analysis indicates that silver producers, as a group, should have near record profits and perhaps even better profits than in 2007. This is the case as a handful of silver companies have recently reported excellent profits.

So why haven’t silver stocks gained more? First, the credit crunch and deflationary environment is initially most bullish for the gold sector. As we know, Gold always leads Silver. Second, the financial crisis has lead to more risk aversion. In such an environment Silver has difficulty escaping its partial status as an industrial metal.

Going forward, traders and investors should keep their eyes on the Silver sector. If the price of Silver can clear and hold above $20/oz, then most of the silver stocks can rise handsomely. Furthermore, the transition from a deflationary to inflationary environment should benefit the silver sector first and foremost.

Hence, in our premium service, we cover numerous silver companies and focus on our favorite juniors. We believe these stocks have more potential than junior golds and currently offer better value. You can try our service for free for 14 days.

Jordan Roy-Byrne, CMT

http://www.thedailygold.com/newsletter

Jordan@TheDailyGold.com

This essay is based on the Premium Update posted on August 13rd, 2010

Two weeks ago, we’ve posted an essay in which we’ve analyzed i.a. the Euro Index. We’ve stressed that a slight move lower may be seen in the short-term, which will likely be coupled with a corresponding move higher in the USD Index. This is precisely what we have just witnessed, so without further introduction, we will let you know how low can it take the Euro Index and how big rally could we see in the USD Index. In the latter part of the essay we will provide you with our very-long-term silver chart.

Let’s start with the long-term Euro Index chart (charts courtesy by http://stockcharts.com.)

We must begin this week’s technical analysis section with a comment on the long-awaited correction, which alas is clearly seen in the week’s long-term Euro Index chart. After a move above a key resistance level, confirmation did not occur, and subsequent days saw a decline below this level.

In last week’s Premium Update, caution was suggested and a period of consolidation was termed likely. “For the short-term we remain skeptical towards a continuation of the rally in the Euro Index until we see confirmation for a breakout or consolidation. The latter still appears more probable.”

Once again, applying hard and fast rules as part of our technical analysis and interpretation resulted in the right call rather than unwarranted optimism. The reason for this comment is that we would like to emphasize the need to wait for a confirmation instead of chasing the market.

The short-term Euro Index chart this week provides a clearer picture of the correction we mentioned above.  Note that the RSI has moved below the 50 level and the Euro Index itself is very close to the first Fibonacci retracement level which is based upon the previous rally. The long-term declining resistance level will now likely become a support, as it intersects with the key 61.8% Fibonacci retracement.

This means that there is a strong possibility that the euro will decline again in roughly the same amount as we have already seen. This will result in a target bottom, slightly below or at the 125 level. At this time, it does not seem likely that the bottom will move to levels seen last June, but we surely can’t rule that out completely. Indications are that 125 is an accurate minimum target for the current decline. This seems to be about 50% likely with a 25% chance that the bottom will be above 125 and a 25% chance for moving below this level.

In this week’s long-term USD Index chart, we see a slight rally, which was expected in view of the Euro Index decline. This is consistent with what we stated in last week’s Premium Update. We identified a possible profit opportunity for FOREX traders with a rise in the dollar likely.  This turned out to be right on the money.

From a precious metals perspective, there is little to be said at this time. The impact of the currency markets this week has been minimal, yet positive.  However, it is still possible that gold and silver will move higher in the next few days only to move lower once again afterwards. Additionally, it is still likely that the precious metals sector would decline towards the end of August.

In the recent past, gold, silver, and mining stocks declined slightly when the USD Index showed a strong rally. This was followed by a consolidation for the USD, which coincided with a precious metals rally. All in all, the precious metals sector has shown strength in relation to the dollar.

Let’s take a look at the short-term chart for more details.

In this week’s short-term chart, we see a higher, broader and bigger target for the short-term rally in the USD Index. The strong momentum seen recently has been surprising and our prior target range has already been reached. It is possible that the USD Index could move as high as 84 and its next turning point may be seen relatively soon. A top in the USD index could correspond to one for precious metals as well.

Other than the above, the relationship between gold, silver and mining stocks and the dollar remains unclear at this time. Turning points may coincide, but it is a situation, which must be continuously monitored. As always, Sunshine Profits will be up to the task.

Before summarizing, let’s take a look at the big picture regarding the silver market – since both metals usually move together the below analysis should prove useful to gold Investors as well.

On the very-long-term chart this week, emphasis is given to the TRIX indicator, which has declined somewhat in the past weeks. This is a bullish signal for the long-term as important developments usually occur after the TRIX reaches zero. There is a possibility that this level may be reached in the relative near-term, possible once we’ve seen the end of the summer decline that we’ve described in the full version of this essay.

A sharp decline in silver’s price could cause a substantial decline in the TRIX, which would be a healthy and normal development for the market. The coming decline might appear scary at the first sight, but if it does materialize – please keep in mind that it’s something that will allow the market to move even higher in the long run.

Previous “second” rallies for the white metal have often been followed by declines after silver failed to move above previous highs. After that we’ve used to see corrections that took silver much lower – correcting 50% of the preceding rally.  Silver may or may not get this low in its next decline.

The current retracement level is based on the 2008 low and the 2010 high. Since the 2008 decline was generally an unordinary development, the $14 target (as visible on the chart above at the 50% retracement) might be too low, and perhaps the $16 level would hold.

Summing up, last week’s view for the short term was quite accurate and we now see a possibility of higher USD Index levels in the coming week. The Euro Index will likely decline again in the week ahead, continuing the trend, which took hold during this past week. Precious metals are likely to move slightly higher in the short term but we remain bearish for the next few weeks in advance of an expected late summer low in much of the precious metals sector.

Technically, lower silver prices will be healthy not only for silver but also for gold and mining stocks as well. We have seen massive rallies quickly follow severe declines in silver’s price. This may, in turn, eventually lead to higher silver prices, possibly the next rally would take silver to $25 – $35 area.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor 
www.SunshineProfits.com

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All essays, research and information found above represent analyses and opinions of Mr.Radomski and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

By reading Mr. Radomski’s essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.