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Can Gold Break Out To Upside?

Commentaries & Views

Last week gold and silver held the bottoms, and both had big rallies. Gold rallied from $1,306, gaining almost $40, and silver rallied from $16.10, gaining 55 cents. The real question: can these rallies hold and go higher or are they just testing the upper end of the ranges they have been in for the last couple of months.

The answer is complicated. They certainly can break out to the upside, but based on commercial positioning, silver has a better chance to sustain the rally while gold should stay within the range if not trade lower. At the current levels, gold is overbought and will struggle to go much higher, while silver has more room to the upside.

The gold/silver relationship is still considerably out of whack with gold 80 times over silver. We would be long silver, short gold in the current set-up and expect gold to stay in this range while working its way back to the lower end of the range. The dollar holds the key for now, but we expect the dollar to rally big.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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