Only three weeks ago gold broke through its November high and then smashed through long-term resistance when it closed above its $1880-$1900 resistance zone, which had held it back for over a year. Silver also had a key resistance pivot point at $24 an ounce, which it punched through last week. Despite these moves, most people have been cautious about getting on board.
One problem has been news driven gap ups that have gotten sold several times in the past week. That changed yesterday, though, when both gold and silver put on big rallies that lasted through the day and got stronger into the close. That type of momentum represents escape velocity for the metals, meaning that they are getting far enough away from resistance that those who have been hesitant to buy, in fear that the breakout is not real, will now chase the prices up to buy in fear of missing out. It is chasing that fuels rallies and most people love to chase.
Take a look at the silver chart, which posted a 4.82% gain yesterday.
The top big cap mining stocks also had big days. PAAS went up 8.93%.
Money is flowing into big cap mining stocks now as the metals go up. Typically in a mining stock rally the big caps jump first and then the small caps start to move. That’s why I think my top small cap stock pick for this month is in a good position now. To read about it click here.
-Mike
