Since last week gold and silver has put on a pullback after gold touched $1550 and silver went above $19.00. There is a key sign now materializing that the drop is getting closer to the end.
First I want to tell you that David Skarica of addictedtoprofits.net is fine. The island he lives on in the Bahamas was not damaged by the hurricane that came through last week, although the devastation to Abaco and parts of the Grand Bahamas are worse than you can imagine. Dave and people he know on his island have been busy trying to help out. If you want to help go to this gofundme page and make a donation. I did and you can do it too.
Dave did a podcast update about what happened with a special offer (subscribe to his service and all goes to the relief effort) you can find here.
Now as far gold and silver go whenever the metals have a pullback and even a bigger correction typically what happens is the stocks get hard at first and fall at a faster rate than the metals do. They lead the way down.
This happened last week as the GDX gold stocks ETF fell over over 7% in over the course of the last three days of last week.
But then once the metals correction gets into its final phase the gold and silver stocks start to do better than the metal by either going up as the metals fall or falling at a slower rate than the metals do.
This happened Tuesday as you can see from this GDX/GLD ratio chart, which tracks how the GDX performs compared to gold.
As you can see this ratio was even yesterday as gold went through $1500 an ounce. The last time gold and the mining stocks had a real drop was back in April and I circled the area then that this ratio started to firm up as that drop got close to its end.
Once that happened gold, silver, and the mining stocks went sideways for a few weeks and then turned up.
I expect we’ll see some similar action now. Now gold might go down to $1470 or $1480, the point of its 50-day moving average or even briefly below that level, but we are now getting closer to the end of this dip.
One remarkable thing about this recent action is that while the metals and big cap stocks have pulled back off of their highs many small cap stocks have not dropped at all and some have even gone up!
Take a look for instance at Aftermath Silver.
You would never know that the metals pullback is happening if all you looked at was this chart of Aftermath Silver. The company had news on Tuedsay that it appointed a new CEO with exploration ad development experience from Rio Tinto and Anglo American plc.
I talked about this pullback in gold in an interview with Jim Goddard of www.howestreet.com you can listen to by clicking here.
I am being patient and waiting for things to settle for some new buys in the small cap metals world. When pullbacks happen it gives us a chance to see what stocks hold up the best as they occur as they tend to lead to the upside on the next rally. In the meantime I’m also watching the action in various other individual stocks linked to technology going into next week.
-Mike
Disclosure: Michael Swanson has bought 200,000 shares in the private placement offering of Aftermath Silver mentioned in this post that includes 100,000 warrants with a strike price of 12 cents CAD. The shares have a four month hold from the date the offering closes. Because Aftermath Silver is a small cap stock with a market cap of less than $100 million he also is placing himself on a voluntary 30-day trading restriction period from the date of this post in which he will not buy or sell a share of Aftermath Silver stock. Some members of his private Power Investor membership group have also invested in the private placement and other members may have bought the stock in the weeks and days before this post as he made it a Top Seven Trading Position in the group in June in which he tracks his most favorite positions in a model portfolio. To join the Power Investor group yourself click here.
