Will PM's get the steep correction?

My favorite guru uses the cycle theory to predict movement in PM prices (gold and silver prices). According to him, the PM market is due for a steep correction. How steep? He pegs gold to go back to 1,350 (maybe even a hundred lower) and silver correcting back to maybe as low as $22/oz. Then he made a strange statement. Unless silver corrects back, it won't move beyond $30.

I am not privy to his formulas. He was correct in his long range forecast, but he keeps repeating the forecast for the steep drop. So far, it has not happened. But it could happen. Still, forecasters should do like weathermen and look out the window.

I have collected silver and gold prices that go back to August this year. Both graphs show an almost straight line change till mid October then volatility increases. Furthermore, the rate of change of gold prices slowed, while silver prices continued. Is this meaningful?

Let's look at the fundamentals then. 1. The European debt crisis continues and if the papering over shows cracks, Europeans will again buy dollars which might drop gold prices for a while. 2. The FED is continuing the printing of money. Of course, the printing has been reduced to punching computer keys, but the result is the same, adding money to the money supply. Potentially, this could be as much as $6T or even more. 3. The fundamentals of the US economy are being still devastated by Obama and the Democrats. The latest example is the political maneuvering over the expiration of tax rates in place since 2003. Obama refers to efforts to maintain this level of taxation as "tax cuts for the rich." In what has been dubbed as an abrupt about face, Obama agreed to an extension of these rates for two years in exchange for extending unemployment and reducing Social Security witholdings. Some people believe that Obama was setting up a hoax in order to discredit supply-side economics. The idea that maintaining the same tax rates is a "tax cut" is a hoax, since there is no change from the current level of taxation, except that inheritance taxes will go from zero to thirty five percent. In any case, members of the Socialist Party (Democrats) reacted violently and the Dem caucus in the House has voted to defy Obama. So, here we are facing the Dec 15 witching hour. Will people dump stocks (including PM miners) anticipating a rise in taxes on cap gains?

So, while technicals do not forecast a drop in gold prices, fundamentals are uncertain. The feeble attempt by Obama to try to emulate Bill Clinton's move to the mythical "Center" is a sham. He remains a Marxist and a foe of Capitalism.

All this uncertainty is having a good effect: the Dem's Dream Act of registering millions of Hispanic Democrats has been shelved by the Senate along with the repeal of "don't ask don't tell." At least for the while. Dingy Harry Reid is a treacherous bas...d and can renag on promises at a drop of a hat.

So, here we are. Will we see a drop in gold?

Nesze semmi, fogd meg jol.

The Great Tax Compromise of 2010 between Republicans and the Obama regime is already ballyhooed by the financial Press as leading to growth. Of course, Liberals believe that giving people unemployment creates economic growth, so we can not expect better from them than to expect cutting Social Security taxes to do the same.

Markets responded with a yawn.

Why would this not work? The title tells the story in Hungarian. Roughly translated it means: 'here is nothing, hold it tight!' In essence, there is very little here that would cause growth. Keeping current tax rates simply maintains things as they are. Reducing Social Security taxes is not that different from giving people $500 that failed to grow the economy. And contrary to the firmly held belief of Pelosi and her minions, giving people money for doing nothing does not grow the economy either. Still, this compromise will do one thing: INCREASE THE DEFICIT.

Nothing in this package is a supply-side tax cut. Nothing in this package will grow the economy.

Economic idiocy.

The Media is doing everything it can to extend the power of the defeated Democrats in Congress. As usual, they are clueless about how the economy works. Democrats want to allow the tax cuts of the Bush area to expire and raise taxes by doing so. Especially tempting for them is to raise taxes on upper earners making more than 250,000 a year. They refer to this as "tax cuts for the rich." In reality, Republicans are fighting to preserve CURRENT TAX RATES.

Most small businesses file their tax return as sub chapter "S" returns and so the overwhelming majority of incomes above $250,000/year represent small business income. Raising taxes on that would automatically prolong the Recession. That is not all the harm that would come from raising taxes now. The Stock Market would take a big hit, because if the current tax rates are allowed to expire, capitol gains would go from 25% to 30%. Why would that be bad? Because Investors would sell their stocks now (before TAX RATES WENT UP), precipitating a Stock Market retreat.

SenateRepublicans pledged to filibuster anything the losing Dems want to bring up unless the current tax rates are preserved. The Media refers to this as "holding the Nation hostage," as if the losers of the last election are entitled to slip in one more dose of their idiocy before they get out of town.

What idiocy - you say. Read the AP story dated Nov 30. It echoes Nancy Pelosi that unemployment compensation grows the economy. They cite figures that every dollar spent on unemployment cause $1.6 growth in the economy. No wonder the recession goes on and on.

Will we, won't we?

Many financial analysts are constantly predicting two things: 1. a robust economic recovery and 2. a drop in gold prices. I would expect that analysts would set up a clamor now when gold prices are showing a head and shoulder pattern(first graph).

At first glance, the head and shoulder pattern is fairly clear, with the head forecasting a &90/oz drop in gold price. Only the second look makes you wonder. Why? Because the neck on the right did not form properly and the pattern is being drawn out into a simple correction that is nearly over. This is even clearer with silver (second graph). Silver prices simply hiccuped and continue to rise after the correction.

Yesterday's action in gold and silver miners also deny the existence of a sharp correction. Today's action is mixed. The dollar is again pushing 82, but oil finally has cracked through the 85 level and is coming up on $87/bbl. Inflation is beginning to mount a show.

What is a likely scenario is that investors are beginning to lose their fear of another (double dip) recession and have increased funds going into the Stock Market. Gold prices, meanwhile, are consolidating while silver prices continue to rocket higher. With each day of gold staying close to $1400/oz, the chance of a big correction (signalled by a head and shoulders pattern) is diminished. And another rally could push gold to new highs, above $1422.