Remember how much fun silver was back in April? It was nothing but upside, one glorious rally after another. Silver investors were making piles of money and it seemed like the fun would never end.
Of course, that’s usually when the fun does end. Silver peaked at $48 per ounce at the end of April. Then it collapsed 30% over the next two weeks.
There were plenty of caution flags warning of silver’s impending decline. We warned you about that here.[ad#Google Adsense 336×280-IA]Today, those same caution flags are waving over the gold market.
Okay… let’s get the basic understanding out of the way. Yes, I realize the dollar is doomed and gold is going to something like $10 bazillion per ounce over the long term. So are silver, platinum, palladium, copper, diamonds, barrels of oil, acres of farmland… and my grandmother’s antique lace doilies.
I get it. Please don’t waste your time trying to convince me gold is going to the moon. I agree. Over the long term, gold is going much higher.
As a trader, however, my job is to profit on short-term moves. And in the short term, gold is vulnerable to a sharp decline. Let me explain…
Gold investors have enjoyed a terrific run over the past few weeks. While financial markets around the globe were melting down, gold was bubbling up. The precious yellow metal is up 20% (or $300 per ounce) since early July. Check out this chart…
It has been a lot of fun for gold investors – nothing but higher prices, day after day.
But wait… Before we get too carried away, take a look at the silver chart from earlier this year…
Notice the parabolic move on the silver chart, the brief decline, and the quick rally to new highs. Go back and take a look at the gold chart. Notice how it’s showing a similar pattern?
Now, take a look at what happened next for silver…
Gold has had a terrific summer. But, like silver in the springtime, the gains look like too much, too soon. The metal is in need of a rest.
The best case gold investors can hope for is the metal could hang out here near $1,800 for a while and consolidate its recent gains. The worst case is gold could be headed for a nasty correction.
Either way, if you’re looking to buy gold, you’ll likely get a safer entry level a few months from now.
Best regards and good trading,
— Jeff Clark[ad#jack p.s.]
Source: The Growth Stock Wire