Feb 22, 2006 – Gold and silver have been in a short-term correction for the past couple of weeks. Corrections like the current one are a normal occurrence in bull markets. After all, nothing moves in a straight line. The key point is that eventually corrections end, and the current correction may be ending now.
In my January 29th alert I discused the importance of the gold/silver ratio. I present below the chart of the gold/silver ratio that I discussed in that alert, updated through the February 22nd New York close.
Please refer to the January 29th alert for a detailed discussion of this chart. The purpose of this alert is to draw to your attention the current level of the gold/silver ratio, which closed in New York today at 57.9.
In my January 29th alert I noted: “If the ratio moves below 58, it is breaking out of the pennant. If it moves below 55, it is breaking out of the rising uptrend channel. When that happens, I expect both metals will be soaring, with silver clearly leading the way.”
We are moving closer to that moment in time when silver breaks down from its current pennant formation, which is the first step needed for the precious metals to resume their uptrend in this ongoing bull market. If this first step happens, then I expect everything to fall into place. A break out from the rising trend channel will not be far behind, and by then, the precious metals will be near or at new high prices – with silver leading the way.
Corrections like the current one – even if it lasts longer than I expect – will not stop the metals from climbing higher. The precious metals are in a major bull market, and their prices still have a long way to go before they reach their final bull market tops.