Eyes on the Prize: Gold & Silver Shake Off “Bubble” Fears

When January ended, concerns regarding gold and silver flooded the internet. "A bubble had popped" and the "speculative blowoff" had burst with a crash of prices on January 30. What would February bring? 

Gold Price Trends And Long-Term Bull Market Outlook

In these columns, we expressed optimism regarding the long-term trend, and now that February is in the books, we're glad we did.

Yes, optimism. Those daily candles from January 30 were indeed ugly, but they were just that—daily candles. Stepping back, there was reason to believe that the sell-off was just a one-off. To wit, here are a few of the articles posted here in the aftermath:

•           The Supposedly Hawkish Warsh: Gold Price Analysis 

•           Back To Reality: Gold Prices Rebound as Fed Hawk Narrative Fades 

•           Gold Price Bubble Myth And Market Reality

If you're an active trader—and I'm not sure why you would be given the overt criminality and price manipulation that is clearly present on the exchanges—then the daily charts can matter. Traders move in and out of "markets", chasing a dot on a screen for fiat profit. It's a hard life, somewhat akin to casino gambling, and I respect anyone who can make consistent profits from it.

When January ended, the daily chart looked pretty scary. Massive red candles will do that to a chart!

Gold - Daily Candlestick Chart

But if you took a step back and eased away from your computer screen, a different picture emerged. Yes, the daily chart can help determine the short-term trend, but it's the monthly and quarterly charts that determine the long-term, more secular trend, and as January ended, the monthly gold chart still looked pretty good.

Monthly Gold Chart Analysis And All-Time High Close

Despite the collapse of January 30, the price of gold still posted a green monthly candle and a gain of about $550. And note something very important: The monthly close was above the previous (December) intramonth high. To me, that always indicates that the primary trend remains intact.

Gold - Monthly Nearest Candlestick Chart

And guess what. The primary trend did remain intact. February is now in the books, and gold rallied another $375 over the course of the month. Traders may have bailed out in late January, but long-term investors have seen handsome gains as the gold price painted another new all-time high monthly close. 

Gold - Monthly Nearest Candlestick Chart

Mining Stocks Rally And GDX ETF Performance

And it wasn't just the gold price. As January ended, there were also many cries of a "blowoff top" in the mining shares too. But the daily chart readers had seemingly forgotten that Q4 earnings season was upon us and that nearly all mining companies were about to report record profits for the quarter and the year. As such, the GDX ETF rallied nearly $22 or about 23.5% over the course of the month! Look closely at that February candle, too, and recall what was written earlier about a monthly close that exceeds the previous intramonth high.

GDX - Veneck Gold Miners ETF - Monthly Nearest Candlestick Chart

Silver Price Surge And Bull Market Momentum

Silver has its own battles to fight, but it, too, staged a pretty decent rally. From its low of $64.14 on February 5, the spot price surged 46% to finish the month at $93.78. Not too shabby!

Silver - Monthly Nearest Candlestick Chart

The point of this week's post? There will always be short-term noise and shenanigans that rattle traders and disrupt sentiment. However, if you can keep your eyes on the prize and focus instead on the long-term bull market trends, you're very likely to be rewarded as an investor.

Explore physical ownership options through gold bars and coins, and silver bars and coins. For additional perspective, read this analysis on silver positioning.