Opportunities in the Precious Metals Sector


". . .this bull market still has a long way to go and to completely bail out now, would be a very foolish mistake."

Gold managed to surge past $960 and actually traded all the way to $1,004 before rapidly pulling back. Even though the Dow has gone on to put in a series of new 52-week lows and has now traded well below 7,000, gold has not surged to new highs, this suggests that the gold sector could be in for a sharp and short correction, which could last roughly three months. If gold trades below $900 for more than seven days, the correction will probably gather steam and at the very least gold should trade down to the $840$870 ranges.

Gold came within trading distance of testing its old high at $1,014, but ran out of steam as it hit $1,004. If gold breaks below the $880$900 ranges for more than three days, it will most likely lead to a longer-term correction that could last as long as six months.

Silver mounted a very strong rally from its lows and, as a result, the pattern has changed and become more bullish. We will be looking forward to open up several new positions in silver as soon as the appropriate buy signals are generated. A pull back to $9 or below should be viewed as a screaming buy.

Palladium has traded down to the $180 range several times and on the last three occasions it has flashed a series of back-to-back positive divergence signals; from a long-term perspective, this is a very positive development and virtually guarantees that palladium will one day be trading well past $1,000.

On the short to intermediate timeframes, palladium's strength will be determined by how it responds to the corrections in the gold and silver markets. If during this corrective phase palladium can hold above $180 even if gold were to trade to say in the $720$750 ranges, then it would be a very strong sign that this market is just waiting for a reason to explode. Expect this market one day to move in bursts of $30$50 a day.

Individuals should understand that while we expect gold and silver to pull back, we do not expect them to crash; this bull market still has a long way to go and to completely bail out now, would be a very foolish mistake.

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