Gold Outlook: Short and Long Term
(Our friend Chuck Cohen, a New York-based financial consultant and a raging bull on bullion, recently turned cautious on precious metals – but extremely cautious on stocks, which he says are setting up for a crash that could be worse than last May’s. The report below was prepared by him more than a week ago, but Chuck notes that sentiment extremes in gold and silver have corrected nicely since. Although he can’t bring himself to turn as bearish on bullion as he is on stocks, Chuck says gold is nonetheless likely to violate round-number support – i.e., $1300 – before the shakeout subsides. If you’d like a free copy of his latest report, click here.)

There have been troubling signs as well in precious metals. Bernstein’s Daily Sentiment Index on both gold and silver recently climbed into the mid-90s. In addition, the volume in silver and gold ETFs recently jumped significantly. Another worrisome sign is the lack of confirmation by the precious metals shares, especially over the past few weeks, and the low volume in the shares. Given the breakout of the HUI through 500 and $1350 gold, it is logical that the listed shares would have continued to move higher, but this has not been the case. On the bright side, exploration stocks have resisted the recent tide of selling.

Right now, I believe the odds strongly favor a drop in the price of gold, perhaps back as low as $1265, but likely under $1300. [December Comex Gold fell as low as $1318.20 yesterday. Rick’s Picks is forecasting more weakness, to at least 1291.60, in the days ahead. RA ] Because it has risen non-stop from $18, silver should decline even more.

‘Massively Higher’ Bullion Eventually

Finally, I want to make clear that my big-picture view has not changed at all. I believe we are headed for dire, historic inflation and eventually into hyperinflation. We are past the point of the danger of a deflationary crash that many are still adhering to [your editor, for one]. Gold and silver, and especially mining shares, will ultimately reach ridiculous heights as the world currency crisis continues to unfold. But as we have seen, corrections do come — usually when sentiment reaches levels such as we have seen recently.