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In our view, we wouldn’t call the economy sluggish but rather an expanding combination of several train wrecks without fire trucks or, ambulances at the scene. Has Benny been inhaling too much stale congressional air or, is he smoking something the kids prefer? The Washington cesspool of liars remains intact as new ones seemingly multiply in the dark. We see no escape plan except to prolong the agony by printing more cash. Think about the German Weimar Republic in 1921-1922 and more recent flurries of hyperinflation in South America. These are not pretty events and its looking more like what arrives in America in the near future.

At this juncture, as we’ve written before, the global system is struggling between inflation and deflation. Our partner Jay Taylor has devised a sensitive index of his own design measuring the difference between the two. Recently, the index was slipping into deflation but then regained its inflation footing. This signals the tug-of-war between the two with seemingly more power lately on the deflation side. Federal Reserve and Treasury’s efforts to throw-push billions into the system are not working. The big boys are not borrowing or, lending and consumers are headed toward bankruptcy.

The current administration will be fighting tooth and nail using every economic bullet in its arsenal of manipulation to hold political power and beat off the Democrats. This includes, selling gold, buying S&P and Dow futures, messing with interest rates and most of all spewing a continual load of fictional news strongly resembling-smelling like something found in barnyards.

America is broke and going broker. Those New York boys diddling around with struggles in pious selections of the next great stock pick or, other crazy idea to line their brokerage and fee pockets are facing hurricane headwinds as every nasty piece of trash they originated flies back into their faces. Selling new offerings or, more shares is difficult when you personally sell into strength to escape the market’s wrath.

Big Investment Banks Coming Around On Gold Story

The gold analysts at Merrill Lynch just issued an excellent 15 page report on why they have a more bullish view on gold prices. They told us; “Based upon broadening investor demand, U.S. Dollar weakness, record oil prices and on-going political tensions, we are substantially raising our 2008-2012 gold forecasts. Notwithstanding the possibility of short-term strength in the U.S. Dollar, higher gold prices should be supported by positive supply-demand fundamentals including stagnant mine production and robust jewelry demand in emerging markets. They went on to say, ‘In 2008 and 2009 we expect gold to average $925oz and $1,000oz respectively (up from $750/oz and $800/oz).”

Merrill Also Raised Silver Price Forecasts

“We are also raising our 2008-2012 silver price forecasts based on improving investment demand. In 2008 and 2009 we now expect silver to average $15.50/oz and $16.50/oz respectively (compared to our prior forecasts of $14.00 and $13.00.

Trader Tracks Precious Metals Forecasts Are Higher

“Some in the gold and silver community say Merrill’s forecasts are way too modest but understand the institutional reports are traditionally conservative and they are suggesting AVERAGES not necessarily highs and lows within futures markets on given dates. Be fair with these reports and ideas.” - Traderrog

Our spring gold forecast is $960 minimum to a potential $1,050. For the fall of 2008, we expect gold to see a high futures trading price of $1,050 minimum to a potential $1,150-$1,250.

We predict silver futures to trade this spring at a minimum of $17.70 with a potential to $18.50 and $19.85. Our forecast for December, 2008 silver is $18.50 minimum with potentials to $19.85, $21.50, $22.85 and $25.50. A distinguished fund manager and trader in Canada forecasts silver at $30 on the December, 2008 futures contract. We are not quite that ambitious but would not be at all surprised.

Presently, we have recommended gold and silver trades for the second time in 2008 and expect more to come. We closed out very profitable precious metals trades just last month. This was just one set of several in the pasts few months. Our subscriber traders eagerly await the next one and it’s very close.

Gold, Silver, and Metals’ Stock Index are Bullish

While we expect normal profit-taking and a selling cycle in the spring for precious metals and most other markets, for now the trends remain bullish and using the technicals we can report timely exit strategies.

Gold was not only reported higher on several analysts’s forecasts including ours, but supply is getting tighter with electric power problems and labor disputes in Africa. Further, the senior miners are running short on reserves and we expect more buyouts and mergers as a result.

Silver should be weaker say some analysts expecting commercial and industrial applications to weaken. That may be true but the silver and gold ETF’s are sopping-up large amounts of precious metals and this could accelerate not abate as they suggest. Silver shortages and delivery problems are being reported regularly. This is not a signal of weakening prices but shortages of physical silver.

Gold Rally Continues

Weekly gold on 2-13-08 rallies higher above new, steeper growth support line. Momentum signals in the lower box (PMO) show further buying pressures.

Gold & Silver Shares Paused But Hold Rally Channel Support

Gold & Silver Index (XAU) holding support despite forming new continuation triangle. The XAU shows congestive trading preparing for a breakout. Index is still tied to the Dow’s Trading.

Silver Enjoys Hard Rally From Below $14 to Over $17.

Daily Silver at $17.21 on 2-13-08 is far above all moving averages.

Momentum is peaking (lower box) but there is room on cycles and time for silver to rally.

We have wanted to recommend silver futures during this current rally, but price kept acting weird giving us pause we might be stepping right in front a big cycle selling event. Selling could be imminent but for now, it appears on other charts, silver is consolidating under $17.70 in a continuation triangle. We have seen numerous charts lately by others and our own with patterns suggesting a larger blow-out silver rally. Silver tends to follow gold so we expect stronger buyers. We have several silver futures traders chomping at the bit to buy but we must be very careful to select the right spot or, we give away expensive stops on multiple contracts. Not taking a trade is a trading decision. Sometimes this idea is the better idea as it too easy to step on a trading land mine. Please have patience and we will work to guide traders through the cycles. For non-subscribers, use the information below to get aboard. In our view, the next moves for gold and silver will surprise on the upside. - Traderrog

Roger Wiegand
Editor Trader Tracks Newsletter
& The Rog Blog at webeatthestreet.com