Clive Maund reminds us to keep our eyes on the prize when it comes to the recent pullback in the gold price and the ongoing test of patience demanded by silver.
So long as our long-term investment thesis remains sound (and barring a return to the gold standard, it will), shorter-term price pullbacks are to be viewed as gifts, opportunities to bring our average cost down and ultimately make more money.
Gold’s breach of nearby support last week freaked out some longs of a nervous disposition, but it did no technical damage of any significance, as we can see on our latest 3-year shown chart below on which we can observe that it is still above important supporting trendlines.
This chart shows that last week’s drop was just a “storm in a teacup”. Recall that the pattern that has been forming since mid-2016, for nearly two years now, is the Right Shoulder of its giant Head-and-Shoulders bottom that may be viewed on the 8-year chart in the last Gold Market update[1].
Last week’s drop actually improved gold’s technical condition by flushing out more jittery Large Specs, as we can see on its latest COT chart. Whilst there is room for further improvement, positions are now at levels that are moderate enough to permit a rally, which will happen if the dollar reverses here or soon.
Turning to the 3-year chart for silver, we see that its technical condition is becoming extraordinarily tight, with fluctuations narrowing into a very tight range. This is a situation that must lead soon to a big move, and for a variety of reasons, that move is expected to be to the upside.
Recall that the pattern that has been forming since mid-2016,...