New Records for Gold

This past week was another good one for gold. Based on weekly closing prices, gold closed this past week at new all-time record highs against the euro, British pound, Indian rupee, Australian dollar and South African rand. It also scored a multi-decade high against the US dollar, Canadian dollar, Japanese yen and Swiss franc.

The above charts indicate that gold is breaking out of the consolidation pattern that has confined it since early November. Its new record highs and bullish chart patterns indicate that there is enough evidence to conclude that gold is resuming its uptrend.

Silver also rose this past week, but has not yet made a new multi-decade high. In fact, it is still below its May 2006 high, so the metals have diverged, which is unusual.

It is also unusual that gold is leading. In other words, silver usually breaks out to the upside before gold. Then as the uptrend in both precious metals continues, silver usually outperforms so that the ratio of the gold and silver price falls. This time though, their ratio has been climbing since touching 43.6 in April 2006. It presently takes 56.8 ounces of silver to buy one ounce of gold.

Divergences are worrying because they can be a sign of weakness. But sometimes it just takes awhile for both metals to get into gear, which I think explains the current situation. In other words, I expect silver will join gold at a new multi-decade high by eventually breaking above resistance in the $14.85 to $15.00 area, but more patience is needed.

Published by GoldMoney
Copyright © 2007. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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