Greetings! 

Gold last month was able to book the highest monthly gains in over 30 years. To be exact the precious yellow metal gained 11% in value. To put that in perspective when we look at our total gain for 2011, gold gained less than 11%. Now of course this year is far from over, but if January is any indication of the precious metals markets pricing this year we should remain  optimistic.

The main factor influencing this bullish rally in the precious metals markets is the U.S. dollar. The dollar has been under significant pressure for the better part of the year and, after trading higher for the previous two days, has returned to its bearish stature.

It is my current belief that we are in a critical area in regards to gold and silver. I would not be surprised to see this market either rally significantly or correct significantly. If gold is able to take out resistance at 1750 we could see a significant pop to the upside. A move from 1750 to the mid-1800s would be in line. On the other hand if gold is unable to break through resistance and if a correction ensues, we could see a sell-off just as significant. Silver should follow gold in this next price move.

I believe that we will see an accelerated rally as gold takes out the resistance level of 1750. However, the jury is not yet in and in the wild world of precious metals trading and investing anything is possible.

As always wishing you good trading,

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Proper Action

GOLD: Maintain Long @1580. On a technical basis, our next real level of resistance is 1750 per ounce.  Our short term interim upside target still remains around 1800,  assuming we take out resistance at 1750. This matches up with the last rally that took gold prices to a high of 1802. 

SILVER: Maintain Long @28.10. Last night we also raised our stops in silver, placing them below 32.80. Our upside target remains $35. However, I believe that there is much more upside available in silver once our initial $35 target is reached. It is quite possible that if we see gold trade to new record highs this year, silver will follow suit.

MARKET FORECAST

Gary S. Wagner

Gold & Silver:

On a technical basis there can be no doubt that gold is leading the way, as silver follows its big brother. As I mentioned in my opening letter today, 1750 is a critical area. Last night we tested 1748. Depending on how gold trades as it attempts to break through this resistance will determine the next short term price moves in the metals markets. 

As this market has been consolidating in trading sideways it is also gaining energy, so a break above resistance would begin an extended price rally taking gold above $1800. If gold is unable to overcome current resistance I believe a strong corrective wave (wave 2) would follow. In either case February could prove to be a most interesting month for precious metals traders and investors.

Gold 360 Minute Chart

 SILVER: Daily Chart

Copyright (c) 2011 Wagner Financial Group