In recent posts, we have discussed a potential precious metals breakout and a possible reversal in trend. After rallying pretty strongly for the last several weeks, the sector has now given up some ground.
What is going on and how will the prices behave in the coming weeks?
Hedge funds and other speculators have piled net long bets on Silver
Source: Short Side of Long
So far, the 200 day moving average has acted as a strong resistance across the board in the precious metals sector. Gold (SPDR Gold Shares ETF (N:GLD)), Silver (iShares Silver (N:SLV)) and Platinum (ETFS Physical Platinum Shares (N:PPLT)) all stalled at this important pivot point. The same has been true for Gold Miners (Market Vectors Gold Miners (N:GDX)), Gold Mining Juniors (Market Vectors Junior Gold Miners (N:GDXJ)) and Silver Miners (Global X Silver Miners (N:SIL)).
From a contrary perspective, hedge funds and other speculators have piled into assets such as Silver over the last couple of weeks. This is a rather sharp reversal in sentiment and usually tends to signal a correction during uptrends or a potential for another leg down during downtrends.
Current positioning looks pretty bearish from a contrary perspective, unless of course assets like Silver can continue a sustained rally with a break above the 200 day MA.