We have been long gold and silver based on the assumption that gold and possibly silver recently started new medium-term cycles (gold on Aug. 15 at $1161 and possibly silver on Sept. 11 at $13.95). Weak rallying from those lows, however, is casting some doubt on this idea. In last Tuesday's blog I wrote:
"Gold and silver are rallying very weakly as we enter a new reversal zone for the precious metals (Sept. 18 - 27). If this rally doesn't pick up some momentum soon, we could easily see new lows into this new reversal period. That's not so bad if silver dips a bit below last week's low of $13.95 and gold remains above its Aug. 15 low of $1161 (in fact it would be an ideal set-up to buy). The danger here is the possibility of a stronger correction with gold breaking below $1161."
Well, the rally has not gained much momentum, and there are technical signs suggesting prices could turn lower now. Silver made a new weekly high yesterday while gold is staying well below last week's high so we are getting a bearish divergence signal, and it is happening in a reversal zone for the precious metals (that ends tomorrow). There is a good chance we could see lower prices into next week's reversal zone for equities (Sept. 28 - Oct. 8) which could also influence these metals. That reversal zone could easily turn out to be the final bottom(s) for gold's and/or silver's cycle(s). I am tempted to stay long and "ride out" any such correction, but there is a chance one or both metals could fall significantly lower. Right now our gold position is break even and we are a bit above our silver entry point with a small profit so I am going to sell these long positions now with the idea of buying them back sometime next week. Even if my analysis here is wrong and one or both metals break higher, it will be early in the new cycle, and we will have other opportunities to buy. Selling my long positions in gold and silver today.