silverseek.com / By Gary Tanashian / January 1, 2013
Yesterday I made a post with the provocative title Silver is in a Bear Flag in response to some bullish headlines and well… silver’s Bear Flag, which remains intact and viable by daily chart.
A favorable bigger picture risk vs. reward situation was also highlighted for gold and silver in that post. Among the reasons for this:
- Technical upside potential appears greater than downside.
- The inflation-dampening Operation Twist is now put in the rear view mirror in favor of good old fashioned T bond and MBS Monetization.
- The Commitments of Traders structures are improving.
- Sentiment – especially among gold newsletter writers tracked by Mark Hulbert – is in the dumps and contrarian bullish.
Importantly, there is also the value proposition of gold, which has not changed throughout the long and bullish consolidation these last 1.5 years. By the graph below, courtesy of the St. Louis Fed, it has not changed since the beginning of the secular bull market either.
Here we have the gold price adjusted by the Monetary Base, which is the key money supply measure to be watching (as opposed to M2, MZM or their velocity measures) for signs of inflation.
