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Gold’s great week turns ugly

Commentaries & Views

Last week gold, silver and platinum were rolling along without a care in the world. Gold was in the middle of making a move through $2,000, but suddenly the buyers were gone and panic set in. It was like a switch was flipped and sellers took total control.

Markets are interesting and there are never any guarantees; however, last week's action was epic. Looking at all markets in general, Thursday saw equities plunging, with gold, silver, platinum, crude, grains, and others charging higher.

Although we call the moves at the end of the week epic, it really shouldn't have been a surprise, except for the size of the move. If you recall, a couple of weeks ago, we wrote about the fear-based short covering that turned the trends in precious metals. This was almost identical, except we were already long.

One market fact that must always be remembered, no market can sustain the speed and parabolic nature we watched last week to the downside in equities and the rise in metals. At some point, there will always be some mean reversion. The bottom line: we are still long, and the early action will determine the next move.

Precious metals should be owned on a physical basis with capital that is not needed tomorrow or anytime soon. Trading should be done with paper, knowing that we can trade either side without emotions.

In all markets, price action determines what will happen in the next day, week, or month. Keep the two strategies separate. The worst trade anyone can make is turning a trade into an investment hoping for a way out. Traders must learn to take their losses and move on to the next trade.

Patience, discipline, and money management always win the day. Let the map of the markets show you the way.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.