With the noted range up move yesterday clearly reversed today and the declines taking place without notable outside market influences or significant geopolitical headlines, the markets have the feeling of a corrective mode. Certainly given a very significant four day rally in gold and silver, the markets are short-term overbought and perhaps they ran into psychological resistance at key chart levels.
Apparently some traders interpreted the Fed news yesterday as "not as dovish" as was expected prior to the release of the Fed's notes from the January meeting. With a key gold mining ETF seeing a significant volume spike yesterday, significant gold trading volume to start the week on Tuesday and generally favorable earnings news from mining companies there are a number of reasons to suspect corrective action.
On the other hand the markets should derive support from news of an increase in Kazakhstan central bank gold holdings, evidence of Peru shutting down illegal mines in the Amazon and a trend of hedge funds liquidating shorts as that might cushion prices against a wholesale washout.
There has also been evidence of reduced Indian retail buying because of the significant increase in prices over the past three months. A normal corrective setback from this week's rally gives a retracement target of $1332.50 and then $1327.25. Near term corrective/retracement targeting in March silver has already been violated with the $15.82 level a potential bull/bear pivot zone early today. The next logical support point in March silver is seen at $15.71.
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