Cycle, timing, and technical signals in precious metal charts have now become overwhelmingly bearish, and I am therefore going to bail out of my long positions in gold and silver today. Directional momentum is still mixed bullish and bearish in silver charts, but gold is 100% bearish, and the two major gold and silver mining company stock indices (HUI and XAU) have both turned 100% bearish this week. Precious metal mining company stocks often lead the prices of the metals themselves, so this is a very bearish sign. Gold has broken below an important level of support at $1250 which indicates that this market could remain bearish for at least another month (probably longer). Prices will very likely break $1200 and possibly approach the $1100 area, so short-term traders that are long are advised to bail out now.
I want to emphasize here that the long-term technical and cycle picture of gold and silver remains very bullish. Current global economic, political and social factors are also pointing towards an imminent bullish precious metals market. What we are seeing now in these metals is the bottoming of a long-term cycle. Once the bottom is in, gold and silver prices will start a long-term uptrend that should take prices to new all-time highs.
Short-term technical signals indicate that gold prices may rise a bit into tomorrow or early next week, and if they do, I will consider going short to make up for some of the loss of bailing out today. Again, I want to emphasize that I am short-term trading here. Very long-term traders (for example, those holding gold coins or bullion) should consider holding their investments as I don't feel the final correction will take gold below $1000, and (as stated above) once it bottoms, gold will be starting a strong long-term uptrend. While it is still possible for the final bottom to occur this year, cycle studies are indicating the possibility of it being pushed into early next year. The cycle timing will become more clear as we move into December.