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Live Event - Three Steps Forward And One Step Back

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Simply put it is a rare instance when a market goes parabolic, or trades in an extended extremely long-term rally or correction without having peaks and valleys. In fact, most rallies are composed of periods of price growth followed by periods of corrections. What defines an upside rally is that the upside moves are always greater than the subsequent corrections. I like to think of it as a stair step moving to higher ground with the corrections a necessary component within a trend.

Such is the case today in the precious metal’s markets, as all four precious metals in the complex are trading lower on the day. In terms of percentage losses today it is silver that is at the top of the list. As of 5 PM Eastern standard time silver futures are currently down by 2.45%, which amounts to a $.40 decline in pricing, resulting in a current fixed price of March futures at $15.77.

Gold contains the number two spot in terms of percentage draw downs today. Currently, April futures have given up 1.61%, a total of $21.70 taking that precious yellow metal to $1326.10. This is the largest single-day drop since August of last year. Palladium which is been the most interesting precious metal in the complex hit a high of $1480 yesterday before beginning a correction today. Currently, palladium is down 1.01%, with March futures currently fixed at $1441.40. Oddly the precious metal that has been under the most long-term pressure, platinum, is experiencing the smallest percentage drawdown today coming in at just 9.99%. Platinum futures currently are down $8.30 and fixed at $825.90.

The precious metals complex has been long overdue for some sort of a correction after completing an extended rally, up until this point any downside pressure has been short-lived and limited to a shallow price decline. In today’s instance multiple analysts are citing the release of the FOMC’s January meeting yesterday as the initial spark which ignited today’s selling pressure.

As reported in MarketWatch, Michael Armbruster, managing partner at Altavest, said that “Gold was due for a correction is the current rally was getting very extended”, he went on to say that “in our opinion, the pullback we are seeing in gold is technical in nature.” That being said the question now becomes how deep could this correction be and where will that take the pricing for gold, silver, platinum, and palladium.

Our technical studies indicate that should this become a deep correction we could easily gold moved to $1308, which is the .23% Fibonacci retracement of the extended rally which began in August when prices bottomed at $1167, up until yesterday’s top of $1350. The .38% Fibonacci retracement comes in at $1280, which would still be a quite acceptable level of retracement within the confines of an extremely bullish market run. One thing I believe that will remain true to its nature is that gold will continue to rally and move to higher pricing but will do so by taking three steps forward and one step back.

Wishing you as always, good trading, 

Gary S. Wagner - Executive Producer