After gold and silver bullion make new highs a year ago we have seen precious metals consolidate for roughly the last twelve months.  This type of price action is very bullish and points to much higher prices in the coming months. However over the last year we have witnessed a series of lower highs and increasingly tested supports levels around $150 on GLD gold bullion (If you are looking for a site which lets you buy the safest pure physical gold and silver then check out: Bullionvault.com) ETF which raises caution.

Gold Bullion Prices

T Federal Reserve is avoiding any extensions on further quantitative easing in the form of QE3 or other programs; the bullish case has lately been criticized for precious metals to move higher.  However, gold in most respects is a currency, and the only one that can maintain its value over the long run.  There are very serious issues unfolding in Europe and across the world that are far from resolution.  With only a few tools left in the cards to stimulate world economies, further easing can never be ruled out.

After Silvers breakout in September 2011 it went almost parabolic prior to giving up most of its gains in the last year.  There seems to be significant support around $26 on SLV silver bullion ETF, however this level has been tested quite frequently over recent months and this again raises a caution flag.  While silver owes some of its moves to its industrial application, the high correlation between the two metals is not to be ignored.

Silver Bullion Prices

Long-term outlook will be to own both metals, but I’m waiting to see a significant breakout out to the upside on heavy volume to confirm a direction.  I would like to see both precious metals break out of their respective consolidations and ultimately have further confirmation in the USD.  Any major headlines over the next couple months involving Europe or quantitative easing may provide us with the trigger for the next big move.

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Chris Vermeulen