As we look at the current price action in gold and silver there is no reason to believe the selling is over. There are many issues around the precious metals, and none support a major move in either direction which is signaling more selling pressure.
In the past we have discussed the pattern of consolidation, also known as the time of greatest uncertainty. The pattern itself is miserable for both bulls and bears. With the recent rallies failing, the path of least resistance is lower.
Looking at the major levels in gold, the current short-term range is 1850 -1900, longer term range is 1800 – 1900. Silver ranges are short term 22-24 and long term 21 – 26. These levels are general guidelines and should be used based on your time frame for holding.
There is good news for gold investors, the most bullish pattern known as Cup and Handle has been forming over the last 12 years. When gold breaks to the upside the move could be huge, however the patience to wait for it is always problematic.
Precious metals should be owned on a physical basis with capital that is not needed tomorrow or anytime soon. Trading should be done with paper knowing that we can trade either side without emotions.
In all markets price action determines what will happen in the next day, week, or months. Keep the two strategies separate, the worst trade anyone can make is turning a trade into an investment hoping for a way out. Traders must learn to take their losses and move on to the next trade.
Patience, discipline, and money management always win the day. Let the map of the markets show you the way.
Todd Horwitz Chief Strategist BubbaTrading.com
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