Articles
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Gold And Silver: Entering Period Of Low Volatility, Disinterest
Gold and Silver have been correcting multi-year advances. In this article we illustrate what ultimately develops as these corrections progress into consolidations. Namely, volatility declines, general interest in the market evaporates and this produces sentiment that is conducive for an important bottom. Because these are long-lasting, sustained corrections, the bottoms take time to develop. There are many fits and starts and as a result, most bottoms are not obvious until months after the fact. We provide some charts to help understand what is currently taking place and what we can expect going forward.
Let’s start with Gold. At the top we plot the average true range (ATR) indicator which is a helpful volatility indicator of sorts. When it becomes stretched or rises too high on the chart, we can expect a reversal in trend.Note that the ATR indicator often hits a low prior to or soon after the start of an impulsive advance. This occurred with every major move with the exception being 2008 when volatility peaked during the financial crisis which sent Gold down 30%. Also, the yellow shows what was an uncorrected two year advance from $900 to $1900.
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