1 Step Closer To The End Of The Precious Metals Correction

[Some excerpts from the latest issue of the Weekend Update in the subscribers section of the website.]

Gold and silver prices fell for the third straight week as traders speculated that the Federal Reserve will end its current $85 billion per month money printing program sooner than expected. This bolstered the trade-weighted dollar, a move that often times leads to weaker commodity prices, and important technical support levels were breached for both precious metals.

Along with the rest of the natural resource sector, bullion was already under heavy selling pressure before the release of the Fed minutes due to unsubstantiated rumors of a large commodity hedge fund being forced to liquidate its holdings and a fast-approaching “death cross” sell signal for gold.

Note that, despite the mild hysteria associated with this technical indicator, according to Ryan Detrick of Schaeffers Investment Research (as detailed in this WSJ story) the gold “death cross” is not only an unreliable indicator, but, in fact, a contrary indicator, meaning that higher gold prices are now more likely in the months ahead.
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On Wednesday, the gold price dropped below $1,600 an ounce for the first time since August after details of the Fed’s last policy meeting showed that some officials favored ending its bond-buying program sooner than planned.

As was the case six weeks ago when the release of the December Fed minutes indicated a similar sentiment (and markets also reacted negatively), this was again a very misleading take on future central bank policy since the views of hawkish, non-voting regional Fed presidents are given equal weight to members of the policy committee within the minutes.

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