Gold and Silver Update

This post is from Chaz...a commodities trader that writes a monthly newsletter on the precious metals market. He has given me permission to post it on my blog. As a disclaimer...I (and Option Magic) are not responsible for the content or recommendations in this newsletter. Thanks Chaz.

Good evening traders. Sadly, Jim Sinclairs prediction of gold over 1600 by Jan 14, 2011 failed to materialize. While he definatly missed the date, I'm not so sure he missed the month. We shall see over the next few weeks. Last weeks raid was nothing short of amazing. I'm not surprised the raid occurred but I am surprised at some things connected to it. What I found most facinating was that while gold and silver were getting hammered, copper ROSE OVER 300 points and the dollar index was pretty much asleep. I've NEVER seen ANYTHING like this before. I've talked to several other commodity futures traders and brokers and asked if any of them had ever seen a market act like this naturally. They ALL said NO. I do not believe this was a natural market. This screams manipulation. The fact that the dollar index was pretty much dormant tells me that the supposedly mythical "plunge protection team" , whose fingerprints are all over every financial instrument on Wall Street, WASNT involved in this. That leaves the other two primary players. J P Morgan and the Central Banks. Many analysts include JPM in with the central banks but I do not. I think it is important to recognize that the holder of the worlds largest short position in silver is an entity all to itself. This one bank has the power to move the silver market any way it wants without any help from the centrals. By the way, they also have a massive short position in gold too. The next thing that caught my attention was what happened when gold broke below 1369 and silver broke below 28.80. A massive army of buyers stepped in and started buying EVERYTHING being dumped into the market and they literally stopped the shorts in their tracks. The battle raged for several hours and was amazing too watch. Friday was one of the most volitile days of repeatedly constant up and down action I've ever seen. I managed to jump in there and snag two more positions in silver at 28.20 before the market closed at 28.42. I love a happy ending at the close of the day. Anyway, I believe the worst is over. It is certainly possible this correction will continue but I doubt it. The volitility we saw in the last few days tells me that its going to get worse in the next few weeks.I think it is highly likely that gold will be over 1400 and silver over 30 within a few trading days. The shorts got a powerful message delivered to them by the longs on Friday. I think that message was basicly this... "Bring it on. We'll buy EVERYTHING you've got to sell... And we'll take delivery". I was expecting this market to move a little higher before correcting but as I look back on the charts at the evidence available at the time, I think I would still call it exactly as I did. I'm sure that my detractors will delight in telling others how wrong I was and how much smarter they are with their 20/20 hindsight but please try to remember the I make these calls BEFORE they happen. It takes courage to do that. That is a rare commodity in itself these days. I cant help but notice that my detractors are always dead silent about my forcasts until AFTER they have passed. When Im wrong, Im the first to admit it. But Im not wrong very often. My short term calls over the last 3 weeks have been off but not due to technical analysis. This is one of the pitfalls of a manipulated market. However, my long term calls are dead on.... I'm getting a little more organized about this newsletter. It started off as just a few occasional comments about what was going on. That was seven years ago. It just went to a few friends at first. Then it started growing. I'm amazed at how big it is now. Im at a point now where Im going to try to send this out every two weeks. Around the first and the middle of the month. I give this to you freely and ask nothing in return. It is simply my own opinion and my hope that you will prosper from this. If you dont like my opinion , then stop reading mine and write your own commentary and spare me your 20/20 hindsight wisdom. THIS WEEKS CALL... Expect a VERY volitile next few weeks. I suspect some of the swings will be big. We should see gold over 1400 and silver over 30 within days. I will not be surprised to see golds 1444 barrier broken and 1521 challenged by the end of January. If that happens, it is likely silver will hit our target of 37.25 well before the March contract settles in late Febuary. If this happens, take half your positions off the table and wait for the correction to buy back in. Remember to buy options only "at the money". DO NOT TRADE CONTRACTS!!! If you were trading contracts last week , you probably lost your entire position. If you were trading options "at the money" you didnt lose anything. If you only have physical, you didnt lose anything. Thats it. Tomorrow morning promises to be very interesting. And profitable. Happy trades....Chaz