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Despite both gold and silver being oversold on their daily charts, with gaps well below their respective lower Bollinger Bands last Friday, the updated weekly timeframes for each ETF below indicates room to drop much further before prior major support levels are tested. Thus, even though precious metals have garnered interest from contrarians with this recent swoon, I do not yet see a play here. A few more days of laughing at the gold bugs, however, changes that story for at least a tradable bounce.
The other main issue to address is whether the metals are not, in fact, close to a good low. In other words, the spring 2011 parabolic move higher in silver may very well have been the climactic moment of the secular bull run for both precious metals. For now, that argument is still a work in progress. But a downside breach of the $148 level on GLD and the $26 level on SLV would certainly force us to consider the thesis much more seriously.