Precious metals have changed their behaviors: bottom is likely in

It has been brutal in the past few months on precious metals, especially the metal stocks. But I think the bottom appears to be reached. In addition to the contrarian’s indicator regarding extremely depressed sentiment for precious metals, the most powerful signs are the behaviors of the metal stocks in the past few weeks:

• Barrick Gold (ABX), the largest gold company in the world reported very poor earning results 2 weeks ago. In addition, it reported over $8 billion write-off for the loss they had incurred from their non-performing projects. Even more, they announced to cut their dividends. All these were extremely bearish news for any company and would have triggered a huge sell-off normally. But what happened? ABX shares did not budge much on the very bad news and are even heading up now significantly since then. When a stock did not go down with bad news, this is a strong signal that no one is left to sell anymore and the bottom is likely in. This phenomenon has occurred to other major gold companies as well in the past 2-3 weeks.
• Another strong signal is the relative strength in terms of the price action for gold vs S&P index and for silver vs gold. In the past 2 years, the general trend is that gold goes down while stocks go up. Also, silver goes down more than gold. But this pattern has changed lately. See the chart below: gold (GLD) is going up when S&P index goes down and silver (SLV) goes up more than gold. This is likely an early sign of the trend change for gold and silver.

Together with the very bullish technical indicator that both gold and silver have broken out to upside over their 50 moving average, I think we have seen the bottom for this 2 year long correction for bold and silver. I keep my fingers crossed! Gold and silver will likely come down a bit in the near future but if this change of trend is true, then any weakness will be the great buying opportunity.