Precious Metals Enter a Higher Risk, Higher Return Potential Zone

2011 is sure to be a critical year for gold with several analysts predicting an end of the bull market. It may sound very strange, but it appears that the USD Index has been leading the way for precious metals and suggests higher prices are likely to be seen soon. The general stock market may enter a consolidation phase in the near-term but has had little influence on gold, silver and mining stocks recently.

Recent declines in precious metals prices have been clearly seen from a short-term point of view. This may appear scary to some. Note, however, that if price declines are short lived, this means little to speculative long positions. Also, please keep in mind that in the past none of the major upswings ended in a consolidation pattern, which makes it less likely that the rally is completely over now.

The long-term USD Index chart shows that the index level is currently above the declining resistance line. The consolidation has already taken place - in the 79 - 81 range, it is likely that index levels will continue to move up from where they are today - most likely to the area marked with red ellipse on the above chart. (more)