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Here is what top Citi analyst Fitzpatrick had to say, along with some powerful charts:  “We now feel like we’ve at least got the first leg in what we think is the start of a move that’s going to take gold significantly higher.  Gold has broken out of the top of this triangle (see chart below), and above the downward sloping trendline.


That should open up the way now for a test of what we believe to be the more important level at around $1,791, which was the peak earlier in the year.  If gold can break through that level, and we believe gold will eventually, we will complete a double-bottom within the triangle, which will give a target in the region of $2,060 an ounce.




We’ve also had a close above the 55 week moving average.  It’s the first time we’ve seen that since the move down to the lows in May.  We also had two consecutive up-weeks in gold.  The last time we had two consecutive up-weeks off these similar lows was back in late December, early January.  This was the platform which gave us a move up to $1,791.


So the picture to us is looking increasingly positive in terms of the potential move.  Also, this move in gold continues to look very similar to the formation we saw into early 2007, before we started to see gold move higher.  If gold repeats that pattern, while the double-bottom targets $2,060, that 2007 pattern would suggest that we could be looking at something even higher, maybe as high as $2,450 to $2,500 as we move into the first quarter of 2013.”


Fitzpatrick also added: “I think we had a lot of the breathing in gold, in terms of the moving back and forth, when we had a number of weeks of consolidation.  This went on for many weeks.  So I actually think that was the breathing mechanism.


Now it’s impressive not only that gold has pushed out here, but also that we have pushed out here with some momentum.  I think we can make a move towards that $1,791 level, in the weeks and months ahead, without it being the real acceleration in gold.  Our sense is the real acceleration is going to come gold breaks through that $1,791 level.”


When asked about silver, Fitzpatrick had this to say:  “There’s not much resistance on silver until the $37.50 level.  Silver has both clearly broken out of the downward sloping trendline of the triangle, and we have also seen a decisive push through the 55 week moving average (see chart below).  They were both converging right around that $31.50 level.


So there isn’t much resistance, at least major resistance, ahead of that $37.50 area.  If we can push through that area on silver, similar to the $1,791 on gold, that opens up the way for a potential sharper acceleration higher.




What’s interesting is that if you look at the pattern on silver, if we get that break of $37.50, it suggests silver could be going to the $49 region.  While the pattern on gold suggests that we could be going to somewhere in the region of $2,060 in terms of that same break.  This tells us that even though the gold/silver ratio, at the moment, is around 52, that would suggest a compression of that ratio to around 42. 


If these moves do transpire, and we believe they will, within these moves you could be looking at silver, at least in this up-leg, outperforming gold by up to 20%.”


Fitzpatrick also added:  “We have gone significantly through what was the all-time highs in gold that we set in 1980, and we are still below that all-time high, set in 1980, in terms of silver.  Everything is a work in progress.  More recently (in this cycle) we have seen a gold/silver ratio of 32.  On top of that we should remind ourselves that back in that period, when we hit the all-time high in gold back in 1980, the gold/silver ratio fell to about 16 to 1.


So if we ever go back and revisit the ratios we saw back in 1980, it would suggest you would be looking at a silver price that is significantly higher than the existing all-time high.  If gold moves to the $2,500 level I suggested earlier, and we go back to a 16 to 1 ratio, it targets a silver price above $150. 


I would suggest it’s unlikely we are going to see a move to that ratio as we hit the $2,500 level on gold.  But it’s not inconceivable that we could be back to the ratio that we saw very recently at around 32.  At $2,500 gold, that would suggest a silver price in the $75 to $80 region.  I would also note that would be significantly above the high for silver that was set in 1980.”


KWN has just released an incredibly powerful interview with one of the greats.  Dr. Marc Faber discusses everything from gold and silver, to investment allocations, confiscation fears, dangerous trends, protecting oneself, central planners, inflation and much more. The KWN audio with Dr. Marc Faber is available now and you can listen to it by CLICKING HERE.


© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.


The interviews with Marc Faber, James Turk, Egon von Greyerz, Art Cashin (UBS $612 billion), Agnico CEO Sean Boyd, John Hathaway and Eric Sprott are available now.  Also, be sure to listen to last week’s line-up of other KWN interviews which included Jean-Marie Eveillard, John Mauldin, and Gerald Celente by CLICKING HERE.


Eric King

KingWorldNews.com

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