International Gold Market trend next week

Trying to predict short term direction is notoriously difficult, especially in the volatile metals market, but I'm going to take a stab at it today.

First off let me start with the big picture: For almost a year now I've been saying that the inflation that's been stored in the stock market for the last three years is eventually going to start leaking into the commodity markets. This process has begun as smart money investors begin to move capital out of an overvalued and overextended stock market that is destined to top some time during the first half of this year, and into undervalued commodity markets where they are getting a better return on their investment.

While the stock market is up 10% over the last month and a half, the CRB is up 12%. But that's not the whole story. Gold is up 14% in the last two months, oil 15%, wheat 20%, corn 23%, sugar 27%, and the big winners, coffee at 90%, and natural gas at one point over 100%.

These kind of gains are going to draw more and more capital away from the stock market, at least until commodities form an intermediate top (probably around the first or second week of April). Yes this kind of explosive rally is going to have some kind of corrective move later this spring, but I don't think the rally is done just yet. I'm looking for an acceleration of the move in March to at least test the 2012 high at 320 on the CRB index before commodities enter a multi-week correction/consolidation phase in April and May.

Next week has the potential to begin this acceleration phase if a couple of things fall into place. First off I think we need to see the dollar continue down into its next daily cycle low, potentially on the March 19 FOMC meeting.

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