Tuesday, April 26, 2011

Silver - potential fibonacci levels

With the run up in Silver prices, it was inevitable to have a pullback at some point. Silver reached $49.82 in early Sunday trading which may be a temporary top.

Depicted above is the World Silver Index and a fibonacci draw from the low on March 15, 2011 to last Sundays high of 49.82.  Potential retracement levels would be:

23.6 - $46.00
38.2 - $43.50
50.0 - $41.75
61.8 - $39.75

We are already in the last week of April and heading towards May and the summer months which are typically flat for both Gold and Silver. The high last Sunday may be a short term top before the seasonal bull markets that start in September.

With the UD Dollar Index weakness over the past several months, it is possible for the Silver and Gold market to be stronger going through the summer season. These markets are very hard to predict because there are factors that directly affect this market that no one fully knows when or if they will occur.

QE2 ends in June, what will the fed do if the financial markets start to crash?
What is the federal reserve going to do with interest rates?

In any case, if your looking to add to your position in both Gold and Silver, wait until they are 'on sale' and near the short term lows. One way is to divide the amount of capital to invest into segments and enter the market gradually on the pullback.  Or just dollar cost average into the metals each month on a specific date. 

With the debt levels rising for all countries, both Silver and Gold should be at new all time highs towards the end of this year.

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