Platinum, Copper Now a Better Trade Than Gold, Silver?
Platinum and copper are about to make the golden cross, which is the 50-day crossing the 200-day moving average to the upside.
We've all heard the saying "buy low, sell high" as the mantra of making money in the market. To apply this cliche is much easier said than done. Adhering to this rule isn't an easy task and without the use of technical tools to determine buy points and targets, an investor can get caught up with the hysteria of a parabolic move. Now gold and silver are making huge advances as they continue the trend into new record territory. In July I wrote about the original buy on gold as it came to long-term support (see Are Gold, Silver Offering More Buy Signals?) and also covered the coming breakout in gold and silver from the cup-and-handle pattern. Since then, gold and silver have made historic and powerful moves.
As price rises in precious metals so does confidence. All over the news I'm hearing about world banks printing money and that gold and silver could move exponentially higher. Positive news for hard assets, including yesterday's massive quantitative easing by Japan and the United States commitment to keep flooding the markets with cheap dollars, is making gold and silver investors very comfortable. Whenever confidence increases like this it's time to prepare for profit-taking. Risk is being increased and "Johnny Come Lately" analysts are advising to jump on the bandwagon. I refuse to follow the mad crowd at this time. A successful speculator knows when to enter a trade, even if the investment is unpopular. Don't follow the crowd and be prepared for exit signals as we're reaching technical targets.
Unfortunately the majority of investors tend to follow the crowd and don't have technical targets that will take profits after a reasonable move. Just like in popular culture there are fads that come and go, so too in asset classes. Be careful of the hype that's accompanying the trade now.
As gold and silver reach overbought territory, I've been focused on some miners that have pulled back and are ready to outperform even if gold and silver have a pullback. These miners will be extremely profitable at significantly lower gold and silver prices. Miners are just beginning their breakouts and many haven't caught up with the bullion price yet.
The movement in gold and silver bullion is getting extremely emotional. Yesterday's gap up after a significant move signals we may be close to the coming pullback in gold and silver bullion. Don't get comfortable now if you have considerable profits and be alert for any reversals.
Even though gold and silver have broken into new 52-week highs, platinum, copper, and other base metals haven't broken into new territory. If one is looking into dollar diversification I'd look into other hard assets that haven't moved as parabolically as silver and gold. Platinum and copper are showing strength, signaling that the massive printing will encourage the global economy to gather steam. Although gold and silver are en vogue now, from a technical standpoint other commodities that should also benefit from quantitative easing should be considered, as they should catch up with gold and silver. Platinum and copper are about to make the golden cross, which is the 50-day crossing the 200-day moving average to the upside. These two metals may break out and catch up to the other hard assets in performance. As gold and silver reach parabolic levels, other hard assets that aren't overextended may provide a better risk-to-reward investment.
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