Precious Metals Correction
Precious metals have corrected. Silver has gotten most of the press, but gold has corrected too. What does this correction mean?
Gold
One thing it doesn't mean is that the bull market in gold is over. That's why we call the recent drop in the price of gold a "correction." So what does it correct? The price: the price of gold went up too far too fast. Anytime a price does that, it's subject to correction. Gold's price was far above it's 50-day moving average - which is already far above its 200-day moving average. So you get a drop in price - or sometimes a long, long period of sideways action - until the price drops down closer to the moving average. The 50-day moving average for gold is around 1460 - that's $1,460 per ounce.
Silver
The story with silver is a bit different. Silver rocketed up this past year. It may have even gone "parabolic" - a term that means that the price goes pretty much straight up on strong volume. Silver's price rise can certainly be seen as parabolic, gold less so. But silver's price tends to be quite volatile as a rule. For silver to correct as much as 50% here would not be out of character. If gold corrected 50% - and it's certainly possible - that would be considered pretty extreme. (On the other hand, it's happened before, so you can't count it out.) But the thing about speculating on silver is that you have to expect volatility and have to be able to live with it.
U.S. Dollar
This correction may signal some sort of rally for the dollar. The U.S. dollar has been in such a funk that a correction "should have" happened already. But each time the dollar started heading up, it just collapsed right back down again. But now, with gold and silver both correcting, I would not be surprised if the dollar did gain some real strength and head up for a bit. I wouldn't be short the dollar here.
Whenever the correction ends for gold and silver, I would expect them both - especially gold - to head for new record highs by the end of the year. As for silver, I'm not so sure it will turn around as quickly as gold, but I don't know.
If you can stomach this kind of correction - and so far it's really not that bad - then you just sit tight. If you can't and you wind up selling your positions, you'll be facing the dilemma of when to get back in - unless you somehow believe that gold and silver are no longer in a bull market.
But if you do believe that gold and silver are in a bull market that will continue for a while, it's always a problem to try to figure out when to get back in if you sell out your position to avoid or minimize a loss during a correction. I don't know how to do that, and I don't know anyone who knows how to do it.
Gold
One thing it doesn't mean is that the bull market in gold is over. That's why we call the recent drop in the price of gold a "correction." So what does it correct? The price: the price of gold went up too far too fast. Anytime a price does that, it's subject to correction. Gold's price was far above it's 50-day moving average - which is already far above its 200-day moving average. So you get a drop in price - or sometimes a long, long period of sideways action - until the price drops down closer to the moving average. The 50-day moving average for gold is around 1460 - that's $1,460 per ounce.
Silver
The story with silver is a bit different. Silver rocketed up this past year. It may have even gone "parabolic" - a term that means that the price goes pretty much straight up on strong volume. Silver's price rise can certainly be seen as parabolic, gold less so. But silver's price tends to be quite volatile as a rule. For silver to correct as much as 50% here would not be out of character. If gold corrected 50% - and it's certainly possible - that would be considered pretty extreme. (On the other hand, it's happened before, so you can't count it out.) But the thing about speculating on silver is that you have to expect volatility and have to be able to live with it.
U.S. Dollar
This correction may signal some sort of rally for the dollar. The U.S. dollar has been in such a funk that a correction "should have" happened already. But each time the dollar started heading up, it just collapsed right back down again. But now, with gold and silver both correcting, I would not be surprised if the dollar did gain some real strength and head up for a bit. I wouldn't be short the dollar here.
Whenever the correction ends for gold and silver, I would expect them both - especially gold - to head for new record highs by the end of the year. As for silver, I'm not so sure it will turn around as quickly as gold, but I don't know.
If you can stomach this kind of correction - and so far it's really not that bad - then you just sit tight. If you can't and you wind up selling your positions, you'll be facing the dilemma of when to get back in - unless you somehow believe that gold and silver are no longer in a bull market.
But if you do believe that gold and silver are in a bull market that will continue for a while, it's always a problem to try to figure out when to get back in if you sell out your position to avoid or minimize a loss during a correction. I don't know how to do that, and I don't know anyone who knows how to do it.
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