Gold will probably top at 1680 and get smashed down again

Options expiration is on 26 January, and gold usually gets smashed down before then. Chinese New Year begins on 23 January, and so they won't be around to buy. Finally, the FOMC is on 25 January, and they will likely disappoint the market again.

Gold and silver should continue to rally until the end of this week or Tuesday next week. Gold should hit 1680 and silver should get to about 31.50. Then they will correct, most likely. The critical question is how low they will go. Will gold stay above 1522 or go below?

It's the same game every time. The banks control the gold price by painting the charts. Without a technical breakout, gold and silver aren't going up. I intend to go long DSLV (when silver is near 31.50) and/or DUST (when the HUI is near 550). I would stop them if gold and silver broke out above the downtrend line. There is a chance that the FOMC announces QE3 on 25 Jan, but I doubt it. Maybe later in the year.

If the gold price bottoms above the previous low of 1522, it will be a bullish sign. It would signal that gold's correction is complete and it is in another upward move. Below 1522, gold would first test the three-year channel around 1510. After that it could fall to 1460. If it can't hold 1460, it probably falls to 1325 or so. I don't think it will fall that far. We might have seen the bottom already. Gold seems to have many willing buyers in the 1500s. Too many people will feel like they missed the lows and want to get in. 1560 and 1580 are good support. I think gold will break above that downtrend line in the next few months and start rallying.

Disclosure: Long physical gold/silver.

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