Current Analysis:

Gold:

Currently: Over the last two days, gold metal and gold stocks have rallied strongly because of a pullback in the US Dollar. Also, gold metal and gold stocks were strongly oversold, therefore it's only natural to expect an oversold bounce, though the ferocity of the rally has surprised me. On the other hand, the ferocity of the sell of also surprised me as well. Anyway, it will be interesting to see what the new commercial net short number is on Friday. Unless this number has dropped, then I still think this oversold rally is doomed. However, the wild card is the US Dollar: If the Dollar continues to fall and makes new lows, then gold will continue to rally. Stay tuned....

Last week was not a good week if you are a 'gold bug', especially if you were unfortunate enough to own gold stocks. While gold metal only fell by about $2.5, gold stocks on the other hand got slaughtered. For example, the $HUI Gold Bugs Index fell a whopping $18.43 points! However the $HUI, as well as most gold stocks, broke major support levels. This is a major red flag. Gold stocks usually lead the metal, therefore I think the extreme weakness in gold stocks may be predicting a big pullback in gold metal that could begin at anytime.

Also, the commercial net short interest is still way too high, it is currently at 142K. Gold typicall bottoms when it is below 60K. See the Commercial Short Interest page for more details.

Gold stocks are weak and have broken major suppport levels. While gold stocks are getting short term oversold and will probably bounce soon, too much technical damagae has been done for gold stocks to recover fully. It will now take weeks to months for the technical damage to be undone in gold stocks, and they may ultimately go lower before it's all over.

Silver: Silver has found support near the high $6s and just broke a minor resistance level. The next major resistance area is $7.65

US Dollar: The US Dollar is right at a resistance down trend line and the daily stochastics are oversold. The Dollar is the wild card, and it needs to weaken in order for gold to rally.

Commodities: Commodities are in a major up trend. The long term charts clearly shows that commodities have entered a secular long term bull market that will last for many years. This will eventually lead to inflation as the price of raw materials continue to increase. This is also a reason to own gold and precious metals.

Current Analysis - The CRB has formed a possible falling wedge pattern.

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We called the exact bottom in gold:

My Analysis From Feb. 10th - Gold metal looks like it has finally bottomed. The Elliot 5 wave formation has ended and a new up trend has begun. Also great news, the commercial net short position has fallen to 38k, therefore this is the BOTTOM! The commercial net short position typically falls to between 30k to 50k during major bottoms.

Charts: