Though gold and silver were able to make new highs in recent months, the gold stocks never did. The shares failed to break out and have fallen back into their consolidations at a time when the sector tends to consolidate and correct.
While this week was shortened due to the President's Day holiday, it has been quite a ride for traders and investors. The 24-hour news cycle intensifies market conditions as any news focusing on oil or the Middle East protests moves markets.
The factors that will cause stocks to reverse are the same factors that will propel precious metals into the early stages of a bubble. Increased monetization will be required as interest rates begin to rise and as the economy fails to grow fast enough.
We are very bullish for the long-term for the resource sector, i.e., gold, silver and the resource shares. However, we need to live life and the markets in real time and the question is where are we now and what should investors do, if anything?
Commodities are a very volatile asset class and unlike stocks, high prices will reduce demand while low prices will reduce production and supply. Buying weakness rather than strength is more advisable in commodities.
Shale gas changed everything. Using hydraulic fracturing technology, North American gas producers over the past decade have unlocked trillions of cubic feet of new, unconventional gas reserves from shale.
While some individuals create and use complete systems to make money there are some very basic trading strategies which still work well and require nothing more than basic charting, patience and a little money management.
The new week began amid apprehensions that global economic growth - while not quite fit for being labeled as heading for a double-dip - is slowing in concert, from the US, to Europe, as well as to China.