Silver is poised for fantastic gains

My previous concerns that gold could drop as low as 1275 and silver to 17 were based on the idea that the market could irrationally panic amid 'deflation' concerns. At no point did I say that gold and silver should drop to those prices, nor did I say that the deflation concerns were justified. Bernanke finally satisfied the market yesterday. While he did not announce QE3, he basically extended ZIRP forever and indicated that QE3 may be coming later.

More importantly, gold has broken out upside from that horrible downtrend line, and another major uptrend has officially started. Downside support should now be very strong near 1680. For now, gold contends with 1720, 1735, 1768, and 1826. A gold price of 2166 or more later this year is now a reasonable target.

Silver could vastly outpace gold, as it did during the QE2 period. The gold/silver ratio has now broken out in favor of silver. Silver made a W-bottom (double bottom) at 26.15 and has surged through one of its downtrend lines. The big one is near 36. (The gold/silver ratio might break 47:1 here and head to 40:1.) Silver is still in its bull flag continuation. A break above that line should spark a quick surge to 50. And a surge above 50 would send everyone into silver. But, for now, silver needs to break above 34. It will probably take a gold move above 1735 for it to happen.

Natural gas looks like a failed backtest of the downtrend line. Below 2.56 it should plunge some more.

Disclosure: Long physical gold/silver.

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