George Maniere:  Gold spiked an amazing $ 32.30 or 2.12% to close at $147.63, silver rose $1.79 or 5.32% to close at 34.63 and the all important Market Vectors Gold Miners Trust (NYSE:GDX) rose $1.68 or 3.13% to close at $55.42. What made the rise in GDX so important was that it finally broke through the all important $55.00 resistance level.

On Tuesday, Moody’s estimated that China’s local government debt may be $540 billion, higher than originally expected and possibly threatening the country’s credit ratings. Also, political bickering continued over the U.S. deficit ceiling policy.

Questions about China’s credit, ongoing U.S. wrangling over the Federal debt ceiling and more issues with European sovereign debt combined to send gold futures to their highest levels in nearly five weeks. Let’s not forget that one of the main reasons gold came off $1,550 was because Greece didn’t default, but make no mistake, Greece is still simmering as I write. Adding further support for gold (NYSE:IAU) were worries about China’s debt, which served to blunt investors’ appetite for risky assets and boost the appeal of traditional safe havens. Moody’s Investors Service on Tuesday said 8% to 12% of loans extended by Chinese banks could eventually be classed as nonperforming. The report revised Moody’s earlier outlook of 5% to 8% of loans. Add to this that Moody’s rated Portugal’s debt as “junk” and the Euro continued to weaken against the dollar (NYSE:UUP). That is just a few of the reasons we saw precious metals make a strong move upward.

Let’s not forget that the iShares Silver ETF (NYSE:SLV) is one of the most volatile holdings around. It is not uncommon to see wild $3.00 and $4.00 swings in the course of one day, which is a huge move for a stock that has traded between $20.00 and $50.00 over the last year or so. We are not talking about Google that trades for $500.00+ a share. However, as I wrote to one reader “One day does not a rally make.”

I had many readers email me and ask if they had missed the move in gold and silver. I want to affirm my thesis that I believe we will see silver (NYSE:AGQ) at $30.00 to $32.00 (and maybe $28.00) before we see it at $60.00, and we will see gold follow the same pattern it followed last year, and we will see it retrace to the 150 Day Moving Average before it continues its strong move upward. If you are leery about missing the move, you can never go wrong dollar cost averaging in, but I find that when things don’t go as I scripted and according to the dollar cost average, the wait can be very painful. If I’m wrong and miss the low, it really doesn’t matter to me if I buy on the way up. As Dennis Gartman likes to write, “It’s a difficult concept to accept, but the trick is to buy high and sell higher.”

I want to remind my readers that while the silver ETF closed at $34.63 Tuesday, it was only 9 short days ago that SLV was trading over $35.50. I believe there are a sufficient number of “balls in the air” to conclude that commodities traders might want to remain cautious as a busy week of economic data could curtail momentum. In particular, Friday’s non-farm payrolls report and unemployment numbers are likely to be closely watched by precious metals traders. However, the key focus will remain on the Greek default issue and the possible ECB rate hike, both will have the capacity to create even more uncertainty in the markets.

If you are thinking of investing in gold and silver before my targets are realized, please consider the plight of Wile E. Coyote in the “Road Runner” cartoons. He had plenty of momentum until he ran off a cliff. Hanging in midair, he realized his predicament, then dropped like a rock to the valley floor far below.

See chart below.

If SLV breaks the $36.00 resistance level and holds, it I will be buying there. This will signal to me that investors will have been sufficiently punished, and an uptrend will be underway. I still expect the SPDR Gold ETF (NYSE:GLD) to go back and bounce off of the $140.00 150 day moving average, and I will be a buyer at this level.

Written By George Maniere From Investing Advice

In 2004, after retiring from a very successful building career, I became determined to learn all I could about the stock market. In 2009, I knew the market was seriously oversold and committed a serious amount of capital to the market. Needless to say things went quite nicely but I always remebered 2 important things. Hubris equals failure and the market can remain illogical longer than you can remain solvent.  Please feel free to email me at maniereg@gmail.com.

NYSE:AGQ, NYSE:GDX, NYSE:GLD, SLV, ZSL