There has been a significant bullish development in the precious metals market today. Major bullish signals have appeared in the charts of the the two major gold and silver mining company stock indices HUI and XAU, and so directional momentum is now 100% bullish in both. As I have mentioned in previous blogs, stocks in precious metal mining companies often lead the prices of the metals themselves, so this development could be signaling an imminent breakout in gold and silver. The precious metals market is very tricky to call right now as prices are on the cusp of either breaking upside into a new cycle rally or making a final corrective leg down before beginning such a rally. Technical signals have been ambiguous, but today's upturn in the HUI and XAU are a bullish sign. Unfortunately, there are also technical studies forecasting high volatility in all markets through the end of this month. This means that markets are susceptible to flip-flopping and giving false breakout or breakdown signals. Momentum in silver is currently still bearish. I will continue to watch for a good entry point to go long in gold and silver as the medium and long-term picture for these metals is still very bullish.
Janet Yellen's first public statement today as the new chairwoman of the U.S. Federal Reserve was comforting to investors as she suggested the Fed will keep its key short-term interest rate near zero for a prolonged period (a rising rate is a major fear associated with QE tapering). She also stated that she didn't think the recent volatility in global markets posed a serious risk to the United states at this time. The failure of the Fed to comment on global market instability on Ben Bernanke's last day as Fed chairman two weeks ago was thought to have exacerbated the stock market's steep correction. Ms.Yellen's mention of it today was likely intended to ease investor fears, and it seems she has succeeded as the DOW is up over 200 points at the time of this writing. Momentum signals are remaining bearish, however, even with this rally in the DOW, and we know from past experience that market surges triggered by Fed speeches can be short-lived. We should note that today's rally has lifted the DOW and S&P 500 to significant resistance points in their charts. I am remaining on the sidelines of the broad stock market until technical signals confirm a significant bullish shift in momentum.