With the wild action in gold and silver this week, top Citi analyst Tom Fitzpatrick put together a ‘Gold & Silver Chartapalooza’ where he laid out the roadmap for gold and silver to hit new all-time highs. Below is his interview and the KWN Special Friday Gold & Silver ‘Chart Mania’.
“We are still of the view that this has been a base building process for gold, and I would the same is true for silver. This has been similar to the 2006/2007 base before we went higher (See chart below). It’s really just a question of timing more than anything else because we are increasingly convinced we are going to get the up move.
In terms of gold, it has bottomed out a couple of times around this $1,500 to $1,520 area (See chart below). If gold can close Friday at $1,600, we’re going to get another bullish outside week for the second time in the last nine weeks off of this base.
So we’re beginning to feel like we are getting close to the point where we are going to get some momentum in the gold price. This is the case both technically and fundamentally, with all of the rhetoric about the possible need for further monetary stimulus. (See Gold and the US debt limit in the chart below)
If gold breaks out through the top of the triangle at $1,688, and in particular, eventually, through the $1,791. At that point gold will really get the momentum going for a significant push higher. I would then look for gold to hit new all-time highs after taking out the top of the triangle.
After clearing $1,791, the short-term target for gold would then be in the $2,050 to $2,060 range. After that short-term pulse, we would then expect a continuation on gold up to the $2,400 area by the end of the year or beginning of next year. (See long-term Gold chart below)
On a longer-term basis, we are not even convinced that $2,400 is going to be the highs. But right now we could see a move of that magnitude in a relatively short period of time.”
Fitzpatrick on silver: “It’s touch and go in terms of the gold/silver ratio. But when we look at silver, it’s starting to look constructive as well. If silver can get a close above $27.40, silver will actually have a bullish outside week.
We haven’t had a bullish outside week on silver since the week of the 23rd of August, 2010 (See chart below). You will see, if you look back, once we had that outside week in 2010 we really saw silver breakout with a vengeance and witnessed a significant move higher in silver.
If silver can get some momentum going to the upside, then we would look at the possibility of testing the top of this triangle again, around $32.70, and most importantly just below $38. If silver can clear $38, that would give us the dynamic to see a move to the September high, from 2011, near $50. We believe this is going to happen.”