A Time for Caution
Nothing goes straight up and nothing goes straight down. As edifying as it is to see silver and gold go up almost every day, now and again all markets take a breather.
I run a gold site and it's considered heresy to suggest commodities correct but they do. Even the lowly dollar goes in the opposite direction on occasions.
Gold has been on a tear since mid-August when the very real damage to the world's financial system started to rear its ugly head. The damage is hardly complete, indeed we will see the banking system fail worldwide before we are through but now would be a good time to pull in our horns.
Gold was $650 in mid-August and almost made its way to $1,000 a couple of days ago. Silver managed a climb from $11.75 to over $20 in the same time frame. Those are insurance policies, 50% moves are pretty unusual. There will be more upcoming but a nice violent correction would set the stage for higher prices after a typical May-June bottom.
When you think of the utter non-entities running for President of the United States, it's hard to envision much of a future for the dollar; face it, the country is bankrupt in every way and fashion. But when everyone climbs on one side of a trade, the market almost always does the opposite.
The junior golds haven't even recovered from their mauling in August. I remained convinced that they will provide the only safe harbor when the banking system shuts down. But if you have some nice gains, now would be a good time to sweep some profit off the table.
Gold, silver and the dollar are all at almost record levels of sentiment. Bullish for silver and gold, bearish for the dollar. That's when markets turn. You have been warned.
Mar 7, 2008