As I outlined in one of my posts at the start of this year, I expect to see commodities perform extremely well in 2011, and whilst most analysts and so called ‘experts’ have been suggesting that the extended bullish rally of 2010 has come to an abrupt halt, my own view could not be more different. Indeed I believe that the rally of 2010 may be dwarfed by this year’s trend, and for evidence of this we need look no further then silver, which broke above key potential resistance on Thursday last week, adding further strong gains on Friday as we ended the week with two consecutive wide spread up candles.
This is one of the many commodities that I trade using CME futures, having bought back into the market when the price failed to breach the 200 day moving average on the recent pull back, having entered the trade at $28.14 with the March contract which I propose to hold and then roll into the next period in due course. The technical picture now looks extremely strong, with Thursday’s hold above the $30.87 level, and with both the 9 and 14 day moving averages providing excellent short term support to the move higher, this trend now looks set to continue for some time to come. Indeed with both of these averages now crossing above the 40 day moving average this is giving us a further bullish signal and my short term target for the metal is currently at the $36.78 per ounce level.
As a committed gold bug, much the same forecasts were given about the precious metal, with the suggestion that the rally was over, and that we would see a sharp decline this year. In my view nothing could be further from the truth, and I expect to see gold break into new high ground in due course, and we could even see close to $1700 per ounce by the end of the year. Last week’s price action signalled a modest return to longer term bullish sentiment with the metal breaking above all five moving averages once again on the daily chart, and ending last week with five days of gains, with the 9 day moving average crossing above both the 14 day and the 40 day, to give us a bull cross signal in the spot market. The 200 day remains firmly bullish for the longer term, but the key issues remains the potential triple top in the $1425 per ounce level, which many technical analysts have suggested may prove to be an insurmountable barrier to any longer term move higher. This may be the case – we will have to wait and see, but should this level be breached, as I expect, then we should see further strong gains for gold later in the year with this region providing a strong platform of support as a result.