Monday, July 18, 2011

New High For Gold...But Don't Ignore Silver

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Gold is basically in uncharted territory (unless we use an inflation adjusted chart to mark resistance levels) Looking at possible price projections levels to try to get an idea of where the technical chart resistance might appear. On a weekly chart $1720-$1750 should $1650 resistance give. Downside technical chart support remains near the previous all time high made earlier this year close to $1580 followed by stronger support near $1550. Itz doesn't expect technical resistance until  $1625 level but that would be more psychological rather than technical in nature, $1650 is a more likely PT.

Itz has been more bias toward silver, although everyone is on the gold bandwagon, as ITZ has been citing for months. Silver has a dual purpose- as a precious metal and as an industrial metal as well. Silver had a parabolic move earlier this year and appears to have found a floor, putting in a double bottom recently. In the chart below you'll see a gold/silver ratio, having bottomed in May and what looked like recently, setting up an ascending triangle formation. Which if held would of sent silver lower. But the chart has broken down and we may see the ratio test it's recent lows of 32, while gold rallies towards $1650. That would put silver at $51.50, which ITZ  sees occurring by 2012.

Now there are those citing how gold has outperformed silver and is the metal to be in. Well..that depends now...what time frame are we looking at? Sure since May 2nd when the Gold-Silver ratio bottomed gold has risen by 3% while silver has declined 17%. But from May 16th silver has risen 18% & gold +7%. Lets go out YTD gold +13%; silver +30%. One year gold +35%; silver...+127% and finally two year performance gold up 71% while silver up a whopping 201%!!!

ITZ is not saying one shouldn't own gold, in the ITZ PIX portfolio we have suggested Yamana Gold (AUY). Itz has also suggested owning copper - Southern Copper (SCCO), Freeport McMoran (FCX) and platinum miner Stillwater Mining (SWC). But Itz favorite play has been Silver Wheaton (SLW), best performer by far.

Investors who flocked to gold have seen is value rise by almost 35% this year, with Mad Money host Jim Cramer. Is it too late to buy gold?

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