Larry Edelson Updates Gold, Silver

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Good morning! I hope you had a wonderful weekend, like I did, resting, spending time with family, and at the same time, reflecting on the markets -- because if you think last week's action was wild, just wait until you see what this week will bring!

So let's get right to the market action now ...no delays, no dilly-dallying, no pontificating about theories or philosophies. Just the cold hard truth about last week's action in key markets -- and what to expect this week.

First, to the most important market on investors' minds: None other than that most precious asset class of all, and the world's most tried and true store of value: GOLD!

In my video update of last Monday, I showed you this chart, and I told you that "I personally would not be buying here. I would only be buying on a pullback when it comes or when I give the all clear, which would be a close into this channel here which right now stands about $1,900 ... $1,910.

Well, gold did soar to as high as $1,917, but importantly, it failed to close above that resistance level, and then -- as I have been expecting -- gold swooned, big time. Shedding more than $200 in a mere three trading days, about an 11% plunge.

More importantly, gold also gave me a very important sell signal when it closed below the $1,768 level. That action now confirms what I've been suspecting and looking for.

So how low could gold go during a correction? Why is it heading lower? And how should you handle it?

First, as published in my recent columns, I believe gold can fall back to the following support levels: $1,611 ... $1,567 ... $1,433 ... $1,386 ... and $1,359.

A closing price below each of the above support levels will indicate a move to the next lower support area.

What's driving gold lower is simply this ...

A. It was hugely overbought and way overdue for a correction.

B. The dollar is likely bottoming (short term) as the euro continues to suffer from the sovereign debt crisis and the potential that the euro will disintegrate.

C. It's just time for a correction: Gold has had an incredible 11-year run, with very few 10% to 20% pullbacks. So, a rather big, possibly drawn out correction is definitely in the cards.

Importantly for your long-term core gold holdings, you should just sit through it and wait for lower prices to add more gold to your portfolio. Ditto for select gold shares. Do not, I repeat, do not try to trade the short side, for most, it's too risky.

And don't worry, the bull market in gold is not over yet, not by a long shot!

Next, silver: The devil's metal ran up to over $44 and then collapsed to as low as $38 before rebounding a bit. That's almost a 15% slide, in just a few days time.

Thing is, silver has already penetrated the $38.86 all-important technical support level on an intraday basis, a subtle but important signal that it should soon close below it. And once it does, look out below; silver could plunge all the way down to the $30 level!

In silver, I repeat my warnings: Steer clear of it, period, until it finds rock solid support at the $30 level. At that time, depending upon a few other parameters I monitor, I might then issue my first major buy signal for silver. But not until then!

Best wishes,

Larry

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