[Following are excerpts from the current issue of the Weekend Update at Iacono Research.]

Aided by a surging trade-weighted dollar on Thursday and Friday when the European sovereign debt crisis took yet another turn for the worse, both gold and silver saw steep declines last week, the former experiencing its sharpest drop since the broad sell off during the first week in May, but both metals still cling to impressive gains in 2011 as other asset classes falter.

For the week, gold on the spot market dropped 2.4 percent, from $1,540.00 an ounce to $1,502.30, and silver fell 4.4 percent, from $35.90 an ounce to $34.32. For the year, gold is now up 5.7 percent and silver has gained 11.0 percent.

With last week’s decline, both metals are now at the lower end of the trading range that they’ve settled into since plunging from the late-April highs and technical analysts are increasingly talking about a developing “triangle” pattern that usually resolves itself with a big move up or down, the direction uncertain.

At times like this, when the next $100 move for gold and the next $5 move for silver could go either way, given the already lofty price and growing uncertainties in the world, it makes good sense to me to remain comfortably sitting on the sidelines with core long-term positions that are not intended to be sold until prices go much, much higher and with ample cash to take advantage of any buying opportunities that might arise.

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Following are excerpts from the current issue of the Weekend Update at  Iacono Research.]

It was another week of record highs for precious metals, but developments late in the week set the tone for a very uncertain period ahead, metal prices seeing some of their sharpest daily declines in months after new margin trading requirements were imposed for silver and rising inflation in China spurred new fears of tighter monetary policy.

More talk about the relationship between gold and paper money came from World Bank chief Robert Zoellick and more coverage of precious metals came from the mainstream media in the form of a front page New York Times story just after the gold price surged to over $1,400 an ounce, all of this followed later in the week by a plunge of almost $50.

For the week, the gold price fell 1.7 percent, from $1.392.90 an ounce to $1,368.80, while the silver price dropped 2.6 percent, from $26.75 an ounce to $26.04. For the year, both metals continue to carry impressive gains, the gold price now up 24.8 percent while silver has risen 54.3 percent, trailing only the gains made by cotton and palladium.

The most recent run-up in the gold price is again shown in the updated graphic below alongside both the 2005-2006 and 2007-2008 moves. It is important to note that this now-lengthy 2009-2010 jaunt just last week surpassed the one seen just two years ago with a rise of 38 percent versus 36 percent.

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[Following are excerpts from the current issue of the Weekend Update at  Iacono Research.]

Strong demand for an alternative to paper money after the European debt crisis again took a turn for the worse and leaders from both the European Union and central bank announced a $1 trillion bailout package saw the gold price surge in euro terms and go on the make new all-time highs when measured in U.S. dollars at $1,249 an ounce.

Heavy inflows to gold ETFs – more than 50 tonnes in the last seven days for the SPDR Gold Shares ETF (NYSE:GLD) – confirmed that investor interest has again ratcheted up though the silver price saw an even bigger rise. For the week, the spot gold price rose two percent, from $1,206 an ounce to $1,231, and silver gained five percent, from $18.35 an ounce to $19.34.

What has astonished many investors lately is that, while the gold price is understandably rising sharply against the euro, it is also moving higher against the U.S. dollar, something that many pundits thought to be unlikely given the historical relationship between the trade-weighted dollar and gold (an idea that I’ve railed against for some time now because there is no fundamental reason for the inverse relationship to exist). It would seem that either investors are losing confidence in all paper money or they figure that Europe’s troubles will eventually cross the Atlantic and are bidding prices higher in advance of that.

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