We have seen quite a dramatic run in gold and silver over the past week, as well as, quite a drop in the U.S. Dollar over the past month.

Don’t let these moves fool you into thinking the major trends are over. I spoke about a potential pullback in the U.S. Dollar in my article Has The Dollar Ended It’s Run And Is The Euro Headed Back Up? back on March 24th.

At that time, I spoke about the pullback in the dollar and stated that it was possible to see it drop as low as 94. We saw it dip below 94 last week, but it appears to have found some support at that level.

Looking at the chart below, you’ll see that there is some significant support in the low 93 range and I believe we will see some strength this week.

Any drop below 93 that does not quickly move back above that level will be an indication of further weakness, but I don’t believe that is likely at this time.

A move back above the 96 level will be a sign that the pullback is over and we should see a move back towards the highs at 100.

Switching gears now, last week was a big week for precious metals. Gold jumped from $1183 an ounce to over $1225 an ounce, while silver went from a low of $16.31 an ounce to $17.56 an ounce.

I have heard a number of analysts say that last week’s action marked a bottom in both metals and that we are now entering a new bull market… nothing could be further from the truth.

We have seen a number of rallies in both gold and silver over the past year, but every one has been met with considerable resistance and eventually headed lower.

Gold has some major resistance around $1240 and ounce and the current move up appears to be running out of steam as it approaches that level.

Similarly, silver hits major resistance as it nears $18 an ounce and also looks like it is loosing steam as it nears that level.

I still believe that we will see gold drop below $1000 this year, most likely sometime this summer. Once we drop below $1000, look for gold to have one final push to the downside with a fairly quick reversal. This is when I believe we will have truly seen a bottom and it will be safe to enter a long position or add to any existing bullish holdings.

Like gold, I believe silver is destined to head lower this year and my bottom target for silver is below $13 an ounce. It is likely that silver will bottom out somewhere in the mid $12 range and this should occur at around the same time gold drops below $1000. Also, as with gold, I would expect there to be a sharp dip, followed by a quick reversal at those levels.

I want to point out that I believe gold and silver are a great long term investment and you shouldn’t concern yourself with the weekly or even monthly moves of these two metals.

They are both excellent ways to protect yourself from the problems of the eventual weakening of the U.S. dollar.

Be ready to take advantage of lower prices and don’t try to chase them higher at this time.

Note: With the Memorial Day holiday coming up, I’ll be taking some time off. Ternion Investments Insights will return on Tuesday, June 9nd.

Have a great Memorial Day holiday.