Precious Metals Bear Market Update

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We haven’t looked at these in awhile, so its time for a quick revisit. With a strong rally in the US Dollar Index over the last several months, many commodities including Precious Metals have been under pressure. However, in recent weeks sentiment got so bearish and prices so oversold, that we were due for a rebound. And this is exactly what is happening right now.

 

Chart 1: Gold’s downtrend is mimicking 1996 to 1999 sell off very closely

Gold Downtrends

Source: Short Side of Long

 

Gold’s current downtrend is resembling the price and time frame of what we saw between 1996 to 1999, while Silver’s downtrend is now one of the longest and most oversold in modern history. Interestingly, Gold has barley made a lower low, while silver has taken a whole new leg lower. Something of note is that both of these charts exclude the super crash of 1980-82. To view those charts click here for Gold and here for Silver.

The question Precious Metals bulls have been asking themselves is how much more pain is there to go before a new bull market restarts? It is hard to say unless you have a crystal ball. In my opinion, it all depends on Gold. Many times throughout this bear market, various assets within the sector (such as Gold Miners) looked extremely cheap and oversold, yet prices eventually went lower and lower…

 

Chart 2: Silver bear is one of longest & most oversold in modern history

Silver Downtrends

Source: Short Side of Long

 

Bottom line is, until Gold corrects properly this bear market isn’t over and I personally think that Gold still hasn’t corrected properly. Remember that Gold has barley declined 40% from its all time highs set in September 2011, while even S&P 500 declined by 55% in 2008/09 period. Why couldn’t Gold go through a same period? Please note that I continue to buy Silver (added recently just above $15), I still think that the bear market could take Gold lower and test of $1000 per ounce.