Categories: General Market Commentary / Precious Metals
Topics: General Market Commentary / General Precious Metals

Sprott's Thoughts Corrections, Patterns, and Positioning

Sprott's Thoughts

Corrections, Patterns, and Positioning

The yellow metal advanced mightily in the first six months of this year and then held those gains for the next three, so it was not a surprise to see it give up some ground in October.

The correction is providing an opportunity to enter stocks that we thought got away. The question is precisely when to make those moves.

That’s both tough and easy. It’s tough – impossible actually – to know exactly when and how this correction will bottom. It is much easier to look at historic patterns and overlay significant pending events to estimate likely time frames.

Looking ahead from here, there are a couple pertinent patterns.

Gold’s strength declines in the final months of the year. September is almost always good and October often is as well, though the tenth month starts with a weeklong holiday in China that creates an opportunity for gold shorters to hammer the price while Chinese traders, who would usually counter such a push, are away. Shorters used that opportunity this year: gold started to fall the first trading days of the month, precisely when China was on vacation. Had Chinese traders been at their desks, I imagine the fall would have been less.

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