Precious Metal Market Headwinds

April 15th, 2012
in gold, silver, other precious metals

Written by Goldfinger

The market is starting to look sick, including the metals and their stocks.  Let's take a look at some of the problems.

1. Fed says no new easing for now.  We have been living on a printing high for the last 3 years.  Just the thought of no new stimulus has the market falling.  I showed in a previous article, Has Gold Lost It's Way, how stimulus affected the metals and the market.

2. No new money is coming into the market.  You can see from the chart below that the money flow is tapering off and so are the stock prices.  Less money chasing the same amount of goods usually means lower prices.

Follow up:

3. Global economies are in flux and not giving the market confidence.

4. Lower daily volume in U.S. stock trading: Daily volume of 1.8 billion shares in March 2012 decreased 23.6 percent compared to March 2011 and decreased 0.6 percent compared to February 2012, according to

5. Options market is up.  Is it possible that the risk of holding equities is too much and the market is turning to options as an alternative?  Hat tip to for the chart.

6. Insider sales.  According to the Financial Times on March 28,2012, "Insiders have sold $4.7 billion worth of stock so far this month, putting March on pace for the highest total since last May. And the ratio of selling to buying reached 20.8, the most bearish it’s been since early last year, according to TrimTabs Investment Research, which tracks insider transactions

7. New stock highs declining.  According to a Wall Street Journal Blog of March 28,2012,  there are 63 stocks at a 52-week high, and 25 at a 52-week low, for a net of 38. “This is a bearish sign of selectivity that tends to occur when strength by big-cap stocks masks weakness in the broader market."

8.  Volatility.  Although low compared to the last 2 years, VIX, or the fear index, (S&P 500 Index Options) is starting to rise.

Yahoo chart:

Add to these:

  • A recent Washington Post-ABC News poll showed 76% think we are still in a recession.
  • "Sell In May and Go Away" adage that indicates there is usually a soft market between May and September each year.
  • High gas prices.
  • Social unrest here and around the world.
  • Political uncertainties in an election year.
  • Rising taxes on the horizon.

I don't see any wind in the market's sails, including metals and their stocks at the moment.  No stimulus equals no market gains.  In addition, I see many economic and political problems facing this nation.  Unless we start finding some answers to this nations problems, we may be better served finding ways to protect our wealth.  At the moment cash is very appealing, but I feel it won't take much to start the safe haven buying.

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