Gold & Silver

Lately, the two PMs have been caught up in the risk on vs. risk off trade, with sellers moving in
during the risk off mode to buy Treasuries and the USD. But, both gold and silver have a long
history as cyclical plays as well, with price weakness developing in anticipation of or during
economic downturns. And, trend-wise, we are in a clear economic downturn both in the US
and globally, based on the momentum of a number weekly and monthly indicators. The romance
with gold over the past 10 years has broadened out considerably in terms of rationale, so there
may even be some sellers who think the US economy is doing well enough that quantitative easing
may be off the table. Could be, but the simpler and more time tested explanation is that global
economic momentum is tilted downward and has not hit a bottom yet. Long Term Comex Gold MRCI
No doubt some are also selling gold and silver for gains to offset losses elsewhere.

Gold is in a well established shorter run downtrend and is oversold on a short term basis. By my way
of treating all volatile commodities, gold would become moderately oversold at a discount of 10%
to its 200 day m/a and more deeply oversold at a 20% discount. Both metals are at modest discounts
and both have broken cyclical uptrend lines. First step now is to see what kind of bounce comes in
gold right ahead. Next step is to see if it can maintain support at $1500 over the next several weeks.
$Gold and $Silver