How to Trade Gold, Silver, and Precious Metal Miners in This Still-Dicey Market
Precious metals may be close to a bottom, but there could be sharply lower prices still to come.
Since 2011 when gold and silver started another major bull market correction, the best position has been to move to cash, or sell/write options against your positions to protect your investment until the next trend resumes.
If you take a look at the chart below of gold you will notice that in 2008 we had a similar breakdown in price, which purged the market of investors who where long gold. And if you compare the last two breakdowns, they look very much the same. If price holds true then much higher prices are likely to unfold at the end of 2013.
The key here is for the price to move and hold above the major resistance line. If it can do that then we are looking at a possible breakout to gold at $2600 - $3500. With that being said, gold and silver may just be starting a bear market. Depending what the price of gold does when my resistance level is touched, my outlook may change from bullish to bearish.
Also with last week's economic numbers getting better in the US, I do have concerns that gold may be starting a bear market, but we will not know that for several more months.
Gold Daily Technical Chart
Major technical damage has been done to the chart of gold. This can be seen as bullish or bearish price action, but until a price and volume pattern unfolds which puts the odds on the bullish or bearish side, I remain neutral.
Silver Daily Technical Chart
Silver is in the same position as gold. The question is whether this is a shakeout or breakdown.
Gold Mining Stocks Daily Monthly Chart
Gold mining stocks broke down a couple months ago and continue to sell off. If precious metals continue to move lower, then mining stocks will continue their journey down. The chart below was made in February and it has, for the most part, played out as expected. While I do not try to pick bottoms (catch falling knives), I do like to watch for them so I am prepared for a new position when the time and chart become bullish.
In short, precious metals continue to be in a downtrend. While they look to be trying to bottom, it is important to remember that the largest moves take place in the last 10% of a trend. So we may be close to a bottom, but there could be sharply lower prices yet.
Editor's Note: Chris Vermeulen offers more content at his sites, TheGoldAndOilGuy.com and Traders Video Playbook.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter