Gold is the ultimate asset and investors who took my $1778 buy recommendation are looking good.

The big question now is: Will the traditional Chinese New Year rally occur, or will there be a test of the recent lows?

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daily gold chart

If gold moves above the neckline of this inverse head and shoulders bottom pattern, Chinese New Year and western hedge fund buying should push the price to $2025, and maybe to the all-time highs near $2100.

A rally over the neckline would also take out the main downtrend line, and that would bring in additional buying by technical players.

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“scenario number two” chart

If the neckline and trendline resistance overwhelms the buyers, a double bottom pattern is likely.

The good news is that both the H&S pattern and the double-bottom have the same target price of about $2025.

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Weekly charts should form the “meat and potatoes” of any technical investment program, and this gold chart is particularly impressive. 

Note the nice upturn in the five-week moving average (5WMA).

As good as gold looks, silver looks even better!

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daily silver chart

Silver has already pushed above the main downtrend line and seems poised to push above resistance at about $26.50.

QE and government borrowing have created significant inflation in bond, stock market, real estate, and OTC derivative markets.

Institutional money managers have purchased only in limited amounts of gold and silver (and related miners) because they do not see inflation in traditional indexes like the CPI.

The CPI (consumer price index) needs to be revamped to reflect goods and services used by the average citizen…

But even if it stays as it is now, I’m projecting enough of an up tick in the CPI index to produce significant institutional interest in the miners.

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SIL ETF chart

Silver stocks appear ready for a major upside breakout…and it almost happened yesterday! 

The bottom line is that the“Main Streets of the world” seem to be experiencing a transition from deflation to inflation.

Silver and silver mining stocks are key assets to own in this environment.

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fabulous SIL versus GDX line chart

There is now an upside breakout in play from a significant inverse head and shoulders bottom pattern.

I’ve urged investors to ring silver investment bells for Christmas. Now, I’m suggesting everyone ring in the new year in exactly the same way. Get ready to enjoy higher silver prices that are likely here to stay!