Welcome pullback and long-term targets

The tweezer top at $848 has prompted a welcome and expected pullback in the gold price. Several days to weeks of consolidation would allow a base to be formed for the next leg up in this bull run. RSI is falling from strongly overbought levels above 80%. If gold falls below the upper rail of its recent channel, support would be expected in the $800 area, close to the 23.6% Fibonacci retracement level.

Meanwhile, silver is looking resilient, making a long downtail on Friday for the second day in a row and again closing practically on the projected Fibonacci level. A pullback to the next Fib level down, around $14.70, would not be surprising and might serve as a buying opportunity. Below that, strong support may be expected at $14.

GDX continues its pullback, with RSI falling after the failure of its latest attempt to reach 70%, and MACD threatening to make a bearish crossover. Initial support is around $49, and stronger support is at $46.

On the weekly chart, a bearish candlestick resembling a shooting star can be seen, and RSI is in the process of being turned back from the 70% level.

The U.S. dollar index made a long-tailed candlestick resembling a bullish hammer on Friday. $USD closed just above the projected Fibonacci suppport level, and a bounce may be imminent to coincide with the pullback in gold.

In the longer term, of course, gold remains in a powerful bull market. Mark Hulbert notes the absence of irrational exuberance among the gold newsletters he follows, which to contrarians is a sign that the bull has legs.

Adam Hamilton calculates that the relative HUI, which is obtained by dividing the AMEX index of unhedged gold stocks by its 200-day moving average, stood at 1.298 last week. Hamilton says the time to start worrying about an intermediate-term top is when rHUI approaches 1.5, which is still some way off.

Even further off is the top of this bull market in gold. What will the price of gold be at that point? In a remarkable and compelling analysis, Christopher K. Potter tackles this question head-on from several different points of view and concludes that gold will surpass $2,500 (in devalued U.S. dollars) before this is all over.

As for silver, Ted Butler suggests in an interview with Jim Cook that because it is an industrial metal in chronic short supply, it will spectacularly outperform gold and ultimately reach a price in the hundreds of dollars.