Chart 1: Precious metals are still in well defined pattern of lower highs...
Precious metals continue to puzzle the majority of investors. From the bullish aspect, market participants see great value and extremely depressed prices, so it only makes sense that we see a random "guru" or "finance expert" call a bottom in this sector every second month. Recent price action showed us an oversold condition being reached in December 2014, from which a powerful rebound occurred in January of 2015. Obviously, it was only normal to yet again hear calls that the Precious Metals sector bottom has finally been reached.
But the simple analysis of the price action so far disagrees. Neither Gold nor Silver registered a higher high on the weekly chart, which usually—in its purest form—signals an uptrend. It is quite clear that both metals still keep printing a pattern of lower highs. Finally, as we should be able to observe in both Chart 1 above, and Chart 2, below, hedge funds and other speculators piled into the hype and were holding the largest net long position since late 2012. So, should we be surprised at the way both Gold and Silver have reversed in recent weeks?
In my opinion: No.
Chart 2: ...while hedge funds and speculators have piled into the long side!
Disclosure: The recent purchases at the start of the year, of SPDR Gold Trust (ARCA:GLD) and Market Vectors Junior Gold Miners (ARCA:GDXJ) from my newsletter portfolio, have been closed this week for only a very very minimal gain.