Wait for a Sale on Gold and Oil

12/30/2010 9:05 am EST

Focus: COMMODITIES

Curtis Hesler

Editor, Professional Timing Service

The precious metal and the primary fuel are due for a pullback that will provide great opportunities, writes Curtis Hesler of Professional Timing Service.

There has been some interesting news regarding gold this month. According to the Shanghai Gold Exchange, China imported 209.7 metric tons versus 45.0 metric tons of gold last year. They have a lot of crummy currency to hedge, and they will buy more gold.

There are also rumors that wealthy folks trying to retrieve gold that they have previously squirreled away in Swiss Banks are having difficulty getting delivery. I suspect the banks may have “leased” the gold out or perhaps simply sold it. The banks likely didn’t expect to actually be called on to come up with the gold, and they are now forced to buy bullion in the market to fulfill their customers’ demands.

The One Joy of Self-Storage
If you are buying bullion gold, you must store it yourself. That is a problem, but so is having your gold disappear from the guy you trusted to keep it safe for you.

The number of interested gold buyers is growing worldwide. Regardless, markets all cycle and spates of profit-taking set in from time to time. I caution against chasing strength. Gold is going to have a difficult time getting through $1,420 by April without some further consolidation. There should be some support at $1,330, but there is still a good possibility that we might see gold correct to $1,250. That would be an excellent time to climb on and add to positions in physical gold.

Even though market corrections occur from time to time, it is interesting that everyone is so bullish at the tops and then so quick to turn equally as bearish once the selling begins. If gold breaks below $1,330, you are going to hear all sorts of claptrap about the gold bubble being popped, the dollar rising to infinity, world peace, a return to fiscal responsibility in the US, and on and on. The fact is, nothing has or will have changed. The forces that put gold at $1,400 will still be in force, and the next leg should take gold to our long-held target of $1,600.

The Double Top Is In
I believe we are seeing the start of the correction I have been warning about. The $1,400 high this month looks like a double top, and our downside projections look valid. The best strategy with precious metals is to hold what you have and heed our posted downside buy prices.

Crude oil is due for some weakness also. There is significant overhead technical resistance at $90 to $95 per barrel going into March, and I am looking for a retracement back to $82. This will offer an opportunity to pick up some dividend payers at advantageous prices.

[Hesler recently recommended several securities to buy once gold corrects. Jim Jubak has some suggestions, too—Editor.]  

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