The cooling process for gold and silver has moved slowly and deliberately. The first step featured a fight through parabolic upswings, especially for silver. The next step finally seems underway with the first break of primary (short-term) uptrends. Gold closed below its 50-day moving average (DMA) for the first time since August. Silver closed below its 20DMA for the first time since August. (The same moves apply for the respective ETFs, GLD and SLV).
For over four months, these trend lines have formed strong support for a robust rally. It is far from clear whether these first breaks will immediately lead to more substantial corrections. However, with fresh money moving into stocks (especially from bonds), interest rates going up, and the dollar holding firm for a month and looking poised for a fresh break upward (see chart below), the case for further upside in silver and gold is weakening for the short-term. Just in case this is the only dip I get to start rebuilding my gold and silver positions, I have nibbled on miners Goldcorp (GG) and Pan American Silver (PAAS). As a reminder, I target the miners for shorter-term trades. I build core positions in the actual commodities (through the ETFs GLD and SLV).
If a correction unfolds, I will be looking at the 200DMA line as a spot for aggressive accumulation. By that time, the gold (and silver) skeptics and bears will be in full bloom…
(Note I did a quick update of my sentiment analysis using Google trends and little seems to have changed since my last formal review in October).
Source for all charts: stockcharts.com
Be careful out there!
Full disclosure: long GG, PAAS, and TBT