Gold is expected to break sharply higher soon, in sympathy with an important upside breakout by silver. A strong rally should follow that will probably take it to the $610 area. However, gold is already substantially overbought, being significantly more overbought than silver, although this is not expected to stop it - but once the move appears to be approaching completion, we will be noting the positions of the exits as the gap with its moving averages will then be huge.

The 6-month chart shows how gold has stalled out in recent days above its 10-day moving average awaiting the outcome of the silver standoff. A 10 and 20-day moving average have been added to this chart, in addition to the usual 50 and 200-day, in order to assist in gauging how overbought gold is on a short-term basis. It is clearly substantially overbought, as measured by various oscillators and the gap with its longer-term moving averages, but is nevertheless expected to advance considerably further, as a result of silver breaking higher coupled with its own intrinsic reasons for going up.

Any sidelined funds from recent sales of precious metals stocks should be immediately redeployed in strong gold and silver stocks that are not ridiculously overbought. If you have recently sold stock take the opportunity to redeploy into those with the most potential.