Are Precious Metals Melting or Firming Up
Jan 31, 2010
The past two months have been tough on the precious metals sector. We saw precious metals lead the market higher all of last year until December 2009 when prices plummeted as the US Dollar started to bounce. The continued rise in stocks indicated an extreme overbought condition and alerted us that a sharp pullback was going to take place.
Many traders including myself were surprised that the broad market did not sell down with the metals. In December the market looked and felt ready for a sharp pullback but new money continued to flow into stocks, pushing the market higher. This slow and steady grind higher was very frustrating to watch because the market was making new highs day after day while obviously needing to take a breather at any time.
It’s this grind higher that sucks in the last retail buyers before prices collapse, unfortunately leaving many holding overpriced securities and commodities for sale another day.
Since gold lead the market up last year it should be the first to correct and also pullback quicker and deeper than its followers (stock market). This is what we are seeing now which I explain below using charts.
Are Precious Metals Melting or Firming Up
