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Are Precious Metals Going Parabolic?

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Seems so, but anticipate a small correction in the next few days.

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It's been an exciting couple weeks in the market with gold now making new all-time highs as money floods into this shiny safe haven. It has everyone all worked up, either wanting to take part or already riding the rally up. But the big question is when should some money be taken off the table to lock in gains and lower your overall risk during these crazy times?

Below are a few charts showing you how I see things at this time.

Gold Exchange-Traded Fund (GLD)

The price of GLD and gold appear to be going parabolic (straight up). The tough part about this type of price action is that large moves can happen in a very short period of time. But on the flip side, when the price reverses we tend to see prices fall just as fast if not faster. Trading this type of price action carries a very high level of risk. Chasing it up, buying at these overbought market conditions is a double-edge knife.



Silver Exchange-Traded Fund
(SLV)

Silver is trading similar to gold but the key difference here is that silver hasn't broken to a new high as of yet. The high was set in 2008, just over $20 per ounce. But from looking at the chart I think metals are ready for a breather.



HUI Index -- Gold Stocks

Gold stocks have yet to break out along with silver as they both are nearing key resistance levels. With gold stocks and silver trading near resistance I figure we'll see pause in the coming days as traders digest the recent strong moves up, taking some money off the table in case prices get stuck under these resistance level.



S&P 500 Broad Market Exchange-Traded Fund (SPY)

The broad market appears to be forming a possible short setup on the daily chart as the price continues to drift higher with declining volume. Also, indexes are testing key resistance levels and the 10-period moving average. The next few days should be interesting…



Mid-Week Precious Metals and Index Exchange-Traded Fund Report

In short, it looks like precious metals and the broad market could take a breather in the coming days. I'm not sure how large of a correction we'll see but I don't think it will be all that big.

Gold and silver should have a quick dip with buyers stepping back in on weakness. The S&P 500/broad market is a little more tough to call as last week's market crash messed things up, washing out all the stops in one day instead of weeks… but we could easily see a 5% drop in the market still.

Check out more from Chris Vermeulen at TheGoldAndOilGuy.com.

For more on ETFs in Minyanville check out the Grail ETF & Equity Investor newsletter.
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No positions in stocks mentioned.

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