by Jason Hamlin, SilverBearCafe.com:
The gold price fell through key support today, declining by $84 or 5.4%. Silver dropped by $1.81 or 6.5% to just $25.85. I have no problem with corrections in general, as they are a healthy part of any bull market and provide a platform from the which the next upleg can spring. But something is not quite right about the recent price action in precious metals as the markets have become increasingly divorced from reality over the past few months. Let’s look at some of the glaring contradictions and then discuss the implications.
Gold and Silver Drop Sharply Despite USD Holding Steady
Gold is down 4% today and silver has declined by roughly 5%, yet the USD trades essentially flat. Nothing says that gold has to always adhere to the inverse correlation with the USD, but it has been one of the strongest correlations over the course of this bull market. Kitco has a page that shows how much of the daily price change is due to the change in the USD vs. selling pressure. None of today’s decline can be attributed to weakness in the dollar. One has to ask what exactly is causing such extreme levels of selling in the face of a steady dollar?
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