Repair Mode Is Complete. Now Comes the Test.

Over the past few weeks, we’ve spent a lot of time talking about just how extended this precious metals trend has become and why it would make sense for the market to pause at any moment. 

After all, going into late January, Gold, Silver, Platinum, and Palladium were historically stretched relative to their long-term means, trading miles above their respective 200-week moving averages. 

That kind of trend is powerful, but it’s also unstable, and environments like that tend to resolve with sharp corrective waves rather than orderly pullbacks. 

That’s exactly what we saw in late January and early February, when precious metals were hit with some of the most extreme volatility we’ve seen in years. 

Silver alone experienced what amounted to a ten-sigma move to the downside based on the 250-day Z-score of the one-day rate of change. 

Statistically speaking, that’s the kind of move that shouldn’t ever happen, but markets don’t care about statistics when positioning becomes crowded, and trends become overextended.

In the weeks since that volatility event, we’ve been watching closely for signs of deterioration beneath the surface. 

Last week, we highlighted some of those cracks, including our key risk appetite ratio reaching fresh multi-month lows. 

That kind of behavior is something we want to take seriously. 

But at the same time, the behavior of the metals themselves has been constructive. 

Instead of cascading lower after that initial shock, both Gold and Silver have spent the past few weeks absorbing the selling pressure and building out what appear to be textbook accumulation patterns.