A mini-panic settled in on the precious metals markets this week after gold’s one-month low. The Wall Street Journal even ran a headline “Gold Hits Fresh One-Month Low Ahead of Fed Gathering.” A couple of gold bulls I follow had to yell “Stay the course” to their readers.
It’s all pretty humorous actually. Let’s look at the facts.
Gold’s “one-month low” was a drop of just 3.2% from its early July high. The current VQ on gold is 12.8%. Gold has corrected about a quarter of the way to its SSI stop loss. Here’s the latest SSI chart on gold.
It’s comical that national headlines can be written about such trivial events. I hope you see it that way too.
The corrections in silver and in the mining companies were a bit more severe … but not when you look at them in the context of what kind of volatility you should expect for these assets.
Silver is down about 10% from its peak. That’s about half of its 19.3% VQ. Silver’s correction was the most dramatic but it’s not even to its SSI Low Risk Zone yet.
GDX, the ETF that tracks the performance of the larger precious metal miners, was off 14% from its recent high. The VQ on GDX is currently 36.6%. GDX is only about a third of the way to its SSI Stop Loss which currently sits at $19.87.
As I wrote last week, I am expecting a correction in gold and its related assets. It’s possible that this week was the start of that correction, but that remains to be seen. What we’ve seen so far can hardly even be called a correction. The fact that panicky headlines are being written about this minor of an event bodes well for the eventual continued upside.
Have a great weekend,