The mind is its own place, and in itself can make a heaven of hell, a hell of heaven..
- John Milton
Precious metals certainly feel like they have been cast out of heaven…forced to wander the earth in scorn and shame while the yield-producers take their place in the clouds.
The technical action is admittedly broken, and the moving averages on all time frames are sloping downward. All that is left is the eternal battle between sentiment and momentum. While sentiment is not a short-term timing tool (and can be very costly as a form of confirmation bias), it provides a gauge for the potential strength of future rebounds.
Professional money managers that are evaluated on their quarterly performance vs. their peers have been throwing in the towel on their precious metals allocation. Even a small exposure since the fall of 2011 has crippled overall returns and dramatically underperformed equities. The ultimate effects of Operation Twist and Quantitative Easing have been a desperate search for anything that produces a yield and not the inflationary side effects that were forecast. Weakness in the underlying economy and a hesitance of banks to extend loans have crippled any potential sources of inflation, and this has created a rare sweet spot for equities and bonds alike.