Gold and Silver Take A Flying Leap: Now What?

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Gold and Silver Take A Flying Leap: Now What?
EWI's Metals Specialty Service uses Elliott wave analysis to reveal today what tomorrow's news will bring for gold and silver.

By Nico Isaac
Thu, 01 Mar 2012 13:30:00 ET

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February 29, 2012 was a calendar Leap Day. But for the world's biggest precious metal markets, it was Take-A-Flying-Leap-Off-the-Edge-Of-A-Cliff-Day. Gold prices ended the session $77 per ounce lower in their steepest single-day drop in six months. AND silver joined the rout with a near 7% nose-dive.

And, according to the mainstream financial experts, one main factor caused the ground to fall out from under gold and silver: Ben Bernanke's same-day speech to Congress. Here, a February 29 Barron's blog writes:

"Gold and Silver Get Bernankified. The Federal Reserve Chairman told Congress that he still expects US growth to meet or beat what took place in late 2011. [His comments] were viewed as making it less likely that the Fed will enact another round of quantitative easing. 'Inflation-haven' precious metals tend to take a dive any time that trader's easy-money hopes get dashed."

This is an example of what "fundamental" analysis does best: Search the news for a specific big-ticket event that fits a market's price action... after the fact.

What about before gold and silver's big sell-offs -- were there any clues to look for? EWI's Metals Specialty Service told subscribers that there were.

On February 27, Metals Specialty Service's "Daily" updates on gold and silver posted the following subscriber updates. While the Elliott wave picture in both precious metals was tenuous, one thing was clear: a 5-wave Elliott wave rally in both gold and silver was coming to an end, and at least a correction was due.

February 27 "Daily" silver forecast:

"The 'time-to-correct' scenario does suggest at least a 38% retracement of the rally from 26.14. I am going to favor the upside until price action tells me not to. The huge bigger picture key is that this new high likely confirms the December low at 26.14 was a key bottom as a big five-wave rally could complete."

What happened: The call for a "38% retracement" was based on a common Fibonacci price target for corrections. It would have placed silver prices at $33.18. Indeed, on February 29, silver plunged from 37.53 to 33.70, within spitting distance of that target.

And, February 27 "Daily" gold forecast:

"The huge bigger picture is that this new high above 1763 likely confirms 1522 was a key low as a big five wave rally could very likely soon complete. Let's watch the action continue to unfold and see if prices either top soon or head [higher]. Going decisively below 1761 would be an initial warning... to suggest a fifth wave may have topped... and we should correct the big rally."

What happened: Two days later, on February 29, gold fell from $1791 to $1708, a 4.6% one-day drop.

As for where gold and silver prices are headed now -- the latest Metals Specialty Service writes: "Once you take a step back from this incredible volatility the huge key is [...] Now we have an excellent forecasting roadmap in the days and weeks ahead."

Use that roadmap to find your way to opportunity today. Check out the details below for a Metals Specialty Service subscription.

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Tags: Ben Bernanke, Elliott wave, fundamental analysis, Gold, precious metals, silver, Elliott Wave trading

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