It has been a year since the price of gold bullion topped out and even longer for silver. Many traders and investors have been patiently waiting for this long term consolidation pattern to breakout and trigger the rally for precious metals and miner stocks. Most of gold bullion is used for investment purposes. As a result, it rises when there is economic weakness and investors lose confidence in the fiat currency of a country.
With continuing economic weakness in the United States it will almost certainly lead the Federal Reserve to act in way that is more powerful than Operation Twist which is the selling of short term securities to buy those with a longer term. Based on the most recent data, economic growth in the United States is falling as the unemployment rate rises. A recent statement by the Federal Reserve was unusually clear in calling for greater action in the future.
Gold, Silver and Dollar Weekly Price Chart:
Take a look at the weekly charts below which compare gold and silver to the US Dollar index. You will notice how major resistance for metals lines up with major support for the dollar. As this time metals are still in consolidation mode (down trend) and the dollar is in an uptrend.