In the past two years, a similar trading pattern has surfaced in gold. We have seen very strong Decembers followed by corrections in January.

However, this year the correction seems to have occurred one month early.

As gold has weakened, we are seeing a lot of momentum selling push down the metal. However, I think a lot of this has to do with the year end for hedge funds. Hedge funds don’t want their gold trades on their books because gold has been weak in the fourth quarter.

However, as we begin the New Year, this means that we should see a bounce. In the past two years, we saw very strong rallies in February and March follow these lows.
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In addition, the narrative toward gold is very bearish. According to Peter Brimelow and Mark Hulbert, both trackers of sentiment services, bearishness toward gold is getting toward its 2008 levels, which was a major low.

Therefore, if you don’t have any precious metals investments I would use the current weakness to accumulate some.

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In addition, the small gold stocks, or juniors, are especially cheap as the tax loss season has taken their toll on them. In my publication Gold Stock Adviser, I cover some of these companies and have outlined some that I see possessing great value for my readers.

About the Author: David Skarica

David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.