Precious Metals Struggle in 2018
The birth of the bull market was our theme in the spring and summer of 2015. It really was the perfect set-up, and sure enough, within 6 months, a gold bull market had awakened.
It was one that sparked a MEGA rally in gold mining shares.
The mining sector as a whole is in a very good position right now, cashed up from 2016’s move and with lower costs due to the efficiencies the bear market forced on surviving management teams.
For the physical metals, in the short-term here, we are definitely in oversold conditions, with both the RSI and MACD indicators signaling an end to this recent decline.
That is unless a true trend change has been made and there is a reason for the metals to be priced even lower.
One cause for concern is the recent trend change in what has been happening to gold from rate hike to rate hike. Prior to the one two weeks ago, since December 2015, we always had a higher gold price from rate hike to rate hike… not true for the one in June.
Prior rate hikes also delivered some of our best rallies in the weeks that followed… not true with this recent one, as we’ve seen a big price drop.
The fundamental reasons for owning gold are better than ever, but I think we need to be watchful of a few key price points for both the metals that could reveal a complete reversal of what we’ve been seeing since mid-2015.
If gold falls below $1,212.20, I think we are definitely looking at a new bear market for the metals.
I honestly find it hard to believe: the commodities overall are rallying, inflation is making headlines, and the economy is picking up.
Despite the assumption that gold needs doom to rally, consider the 2002 to 2007 move where gold about tripled during a housing and stock market boom.
For silver, a drop below $15.57 would be a pretty bearish signal, but again, why would silver enter a bear market with oil and other essential natural resources making new 52-week highs.
I’m a regular buyer of precious metals, so for me personally, their price at these levels doesn’t really matter to me.
I don’t think anyone can argue that they are overvalued, so even if the price drops, in my opinion, the downside is extremely limited.
For me, precious metals offer up an opportunity to have some cash outside of the banking sector – two currencies that can’t go to zero.
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