Stubborn Gold & Slumping Silver - Crazy Man, Crazy

The declines in gold and silver are continuing, although gold has exhibited stubborn resistance to silver's downside lead. Gold's potential for a huge price decline is not obvious to most investors because they focus on the assumed strength of the yellow metal, as evidenced by its refusal to stay below $4000.

I expect that to change soon, and it might already be happening. Currently, gold is well below $4000. This comes after several spikes higher, which have not held.

Silver, on the other hand, is stuck below $60 and seems ready to give up the ghost. The white metal has been unable to poke back above $60 for nearly two weeks, with closes below that mark for seven consecutive trading days.

IF GOLD BREAKS DOWN 

If/when gold breaks down, there isn't any technical support until $3400-3450, so it is reasonable to expect a sharp price drop of $500 oz. After that, there might be some stabilization, but it should be temporary.

Silver would follow suit, possibly stopping at $50. There is no technical support below $50 and nothing to stop a plunge straight to $40.

CRAZY MAN, CRAZY

With a nod to Bill Haley and The Comets, yes, the projections above may very well sound crazy to some. But these are crazy times, and crazy markets…

The gold price doubled, and the silver price tripled over 9 months last year. That's crazy, and it's not unreasonable or crazy to expect something similar on the downside.

CAVEATS AND CONCLUSION

Crazy is as crazy does. As long as investors and others continue to respond crazily to the crazy actions of others and a world full of crazy events and circumstances,  the markets will continue to reflect crazy results. This should not be a problem unless you have been dragged into the fray, where participants allow crazy emotions to displace common sense.

If you are dependent on explosively higher gold and silver prices for investment success and personal gratification, you might want to review your expectations and prepare for a longer period of lower prices.

A longer period of lower prices could last for months - or years.

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