Saturday, February 25th, 2017 MST

Why gold & silver prices are stuck in a narrow trading range

One of the reasons gold and silver prices are stuck in a narrow trade range is that stocks are stuck in a narrow trading range.  Still, widely-followed indexes recently made new highs, specifically the S&P 500, the NASDAQ and the Dow Industrials.

However, the much ignored (except by professionals) Dow Transportation index is some 850 points below its December 29, 2014 high.  The failure of the Transports to reach a new high could, according to Dow Theory, be signaling that this six-year bull stock market run is over.
100-gram Gold Bar

Under Dow Theory, when either the Dow Industrials or the Dow Transportation index hits a new high but the other fails to confirm (also reach a new high), a bear market is on the horizon.  Yet Dow Theory is not universally accepted, but no stock market theory is universally accepted.

Analysis shows that Dow Theory is much more reliable when indicating major tops, and after six years of rising stock prices this could be a major top.

However, there remains the possibility that what stocks are waiting for–before punching to new highs–is for the Fed to announce that any rate increases will put off until 2016.  Such a development could send stocks rocketing higher.

And, it could launch gold and silver prices higher as well for such a move would proclaim that the world’s central banks are wed to massive money creation.

But, if the Fed indicates it’s moving toward higher interest rates, stock will probably decline, validating Dow Theory, and metals prices will resume their upward movement in this long-term secular bull market.

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