Gold and Silver Fever Keep Spreading

10/05/2010 1:00 pm EST

Focus: COMMODITIES

Eric Roseman

Editor, The Commodity Trend Alert

Eric Roseman, editor of Commodity Trend Alert, says gold and silver already are near his price targets for the end of the year, and he expects their recent strong momentum to continue.

Man, there’s no fever like gold fever—and silver fever, too!

Either way, we’ve got a full-blown bull market that’s gaining momentum, and it looks like there’s no stopping this freight train for now.

Earlier this year, I forecast that gold would close 2010 at approximately $1,300 to $1,350 an ounce and [silver would close the year at] $21 to $21.50 an ounce. Well, we’re basically at my year-end price targets now.

The metals are on a tear, and the gold [mining] stocks have started to outpace bullion this year for the first time in several years—also bullish price action.

The spot gold price broke out above its June 2010 high of $1,265 an ounce and is possibly heading to my intermediate target of $1,350 by Christmas at the latest or by October, and $1,500 thereafter in 2011. (It closed above $1,315 an ounce Monday—Editor.)

Near-term support now lies close to $1,220 an ounce (the ten-week moving average) while intermediate-term support remains at $1,170 to $1,155. For all intents and purposes, you can kiss $1,000 an ounce goodbye for a long time.

The silver spot price just broke out to a 2.5-year high, and the primary trend is bullish. Silver [recently broke] above the March 2008 intraday high of $21.36 an ounce, [and closed above $22 Monday—Editor.]

Again, we’re in bullish territory. Silver is once again outperforming gold in 2010, and I expect this to continue provided the global economic cycle supports industrial demand for silver.

The latest surge in gold and silver—with the latter at a 30-year high—has nothing to do with booming [exchange-traded fund] demand, a new round of quantitative easing, or fears of a double-dip recession.

Instead, the catalyst was [recent] currency action—triggered by the Bank of Japan announcing its yen-selling initiative and the Swiss central bank cutting its inflation forecasts. These moves led investors to dump the Japanese currency and the franc.

When two of the world’s strongest paper currencies decline in value—coupled with super-low interest rates—investors turn to gold and silver bullion as a haven to preserve wealth.

Meanwhile, the US Dollar Index is now in a down trend, and I expect this to accelerate on the heels of another effort by the Federal Reserve to buy US assets vis-à-vis quantitative easing. The dollar is now comfortably below its 50- and 200-day moving averages, and the trend is bearish.

Many investors believe [currencies] like the euro, Norwegian krone, Swiss franc, Singapore dollar, and Japanese yen might be better alternatives. But none of those currencies has risen against gold since 2005. Not one.

So, when someone tells me they’re truly worried about holding dollars, I don’t beat around the bush; I tell them to buy gold and silver. End of story.

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