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.