Silver was parabolic in late 2010 by going from $18 per ounce to over $31 ounce by the end of the year. In a bull market, nothing goes up forever without a correction to digest all of the profit. If you look at the yearly chart, it shows the base that lasted almost three years before going up and so the parabolic move was warranted.

After hitting a new high before the new year, silver is pulling back to shake out the “weak hands” in this market. The weak hands are the traders who look to make a quick buck or the investors who are too emotional and decides to close their positions. The commodity market is volatile with big swings and many people can’t handle a big pullback. They sell their position and hope to buy back at a lower price.

If you look long term,  silver has not broke below any of the moving averages. In the short term, the next support is at 27.50. If it break that support, the next support is at 27.  However, I still believer 2011 will be a great year for silver. The correction could last another month or so before continuing to go higher. My target price by the end of 2011 is $45 to $50 if the fed continues to print money and currency war continues around the world.

I was disappointed by gold price action at the end of the year. Gold lagged behind silver in the month of December. I thought gold would finish between $1,500 to $1,600. Instead, it finish around $1,420.

After studying the chart, gold could continue their uptrend sooner before silver if history is any indication. The 20 day exponential moving average (EMA) has shown to be a good support for gold. If you look at the chart above, the last time it touched the 20 day EMA, it bounced off around $1,180 and lift off! Right now, gold is near the 20 day EMA again and that could be another lift off for gold if history can repeat itself.

Also, gold had a three month base in the summer of 2010 from May to August. In September 2010, it broke the resistance at $1,250 and it went up to $1,400 before the pullback. Right now, gold has been consolidating for over 2 month and it could make another 3 month base. Again, if history is any indication, gold should continue their uptrend and break the $1,420 resistance at the conclusion of this 3 month base, which is around February.

I could be wrong about my analysis since timing the commodity market is difficult  so don’t take my word for it. Either way, I’m still “all in” on gold and silver.

Good night and good luck.

Here is more technical analysis by other experts below. ( This is not an endorsement,  I just want to present other expert analysis to you.)

Gold Trends

FX Street

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