Gold and Silver May Correct
On March 10th, amid massive bearishness on gold and silver, I called for a tradable bottom. It turned out to be a timely call. Resource shares didn’t do much but we had a $100 move higher in gold and $1.50 move in silver.
The opposite is true today. The DSI on gold hit 90 on Thursday April 13th. That’s not a major top but it’s an indication that bullishness is persuasive. Too persuasive for my blood. In addition, we are back at near record open interest in silver futures contracts. The last time silver’s open interest was this high, silver was threatening $21 an ounce.
A lot of precious metals investors hate hearing about corrections. There are big websites run by guys that consider themselves experts on gold yet you will never see the word correction on their site. Markets move up, markets move down. It is true of all commodities and like it or not, gold and silver are still trading as commodities. I explain it all in Nobody Knows Anything.
And what people really hate is someone actually predicting short-term moves with any degree of accuracy because it makes a lie out of constant manipulation, which my readers already know. All markets are manipulated; it’s no big deal.
For the last several years the metals markets have tended to make two low points a year; in June/July and six months later in December/January. It is perfectly normal for prices to decline from April to June/July. I believe it will happen again this year.
In addition, the platinum/gold spread is back to nose bleed territory with gold carrying a $315 premium to platinum. At any price above $325 premium gold over platinum it is an easy moneymaker. You short gold and buy platinum. You don’t care which way prices of the underlying metals move, only that the spread declines. I believe platinum will return to a premium over gold so this is a high potential, low risk trade. I cover it in my book.
Prudent investors might want to consider taking some money off the table. No one ever lost money taking a profit.