So far my 2014 expectations are playing out pretty much as planned, with a few adjustments. With the threat of war in the Ukraine I think the final bubble phase in stocks is now off the table. I doubt we can get the euphoric buying pressure necessary to generate a parabola as long as tensions in Eastern Europe continue to escalate. No bubble phase in stocks = no capitulation phase in gold. The Ukraine event was a game changer.
Just to refresh, I predicted we would see an initial rally in the commodity markets during the first quarter, followed by a corrective move into early to mid summer. Once that corrective move was finished I’m expecting a much more powerful rally in the commodity markets during the second half of 2014.
While we may get a countertrend bounce early next week I’m not looking for a final intermediate bottom until oil tests its three-year trend line sometime in the next 3-5 weeks.
Barring the manipulation in the metals market last year gold would have printed a similar consolidation pattern as oil. And now that the three-year bear market in the commodity sector is coming to an end the precious metals should also participate during the powerful rally that I foresee for the second half of the year.
Just a little more patience is called for as I don’t think the summer correction in commodities or the precious metals is finished just yet, although I do expect the metals to bottom slightly ahead of the rest of the commodity markets.
Considering the damage that has been done to the physical market by the manipulation last year I believe the biggest gains during the second half of the year will come in the metals and I think traders will get an opportunity in the late May or early June to enter long positions in preparation for the resumption of the secular bull market.