Gold & Silver: Parabolic or Catch-Up? – Part IV
Authored by Bernard Hunter via the 12 Temptations blog.
Indicators are meant to help us see, but over time many of them come to feel like rules. That shift is subtle and rarely intentional. Markets are noisy, emotionally charged, and difficult to interpret in real time. Indicators offer structure where experience alone can feel unreliable. They compress complexity into signals that promise orientation — overbought, oversold, divergence, reversion. These terms do more than describe conditions; they reassure us that the market remains legible.
The difficulty is not that indicators stop working. It is that we forget what they are working on. Every indicator is a translation of past price behaviour into a present signal, and that translation carries with it the assumptions embedded in the history from which it was drawn. Liquidity, participation, symmetry, and constraint are all quietly encoded. Most of the time, those assumptions remain close enough to reality to be useful. Occasionally, they do not.
When markets operate within familiar boundaries, indicators tend to behave well. Extremes invite response, excess is punished, and reversion restores balance often enough to reinforce confidence in the tools themselves. Over time, that confidence hardens into habit. And habit, more than error, is where temptation begins.
When Signals Demand Obedience
In periods of structural strain - when delivery matters, when liquidity hesitates, when abstraction collides with physical reality - indicators can begin to speak in unfamiliar accents. They still measure what they were designed to measure, but the meaning of those measurements shifts. An overbought reading may describe stretched positioning without implying imminent relief. A parabolic chart may reflect adjustment rather than mania. Elevated volatility may signal stress rather than excess.
None of this renders indicators useless. But it does make them incomplete. The temptation lies in treating that incompleteness as failure. When signals do not resolve as expected, the instinctive response is often to press harder and insist more forcefully that the market is wrong, that price must return to where it “belongs.” At that point, the indicator stops functioning as a lens and begins to act as a position.
This shift is dangerous precisely because it feels disciplined. It sounds cautious. It aligns with long-held principles about excess and mean reversion. Yet when applied rigidly to environments those principles were not designed for, it can quietly turn analytical tools into emotional anchors. Instead of informing judgment, they begin to defend it.
The Comfort of Declaring Excess
There is a deeper discomfort beneath this dynamic. Indicators promise distance; a way to stand apart from the market and observe it objectively. Structural transitions undermine that promise. They force us back into interpretation, judgment, and uncertainty. No model can substitute entirely for context, and no signal can absolve us of the need to think.
In those moments, the urge to outsource interpretation intensifies. Familiar frameworks offer psychological stability when reference points are dissolving. Declaring a market “unsustainable” restores a sense of control, even if the forces driving price are not yet fully understood. That comfort is real, but it may be borrowed rather than earned.
Markets rarely lose their minds. What they often lose is our confidence in familiar explanations. When interpretation hardens too quickly, it narrows the range of outcomes we are willing to consider. Uncertainty becomes a battle between “right” and “wrong” rather than an invitation to observe. Decisions then begin to reflect what we need the market to do in order to preserve coherence, rather than what it is actually doing.
Attentiveness as Discipline
The irony is that the same indicators we rely on for discipline can, in these moments, encourage impatience. They tempt us to act before understanding has caught up, to treat decisiveness as virtue and hesitation as weakness. They whisper that clarity is just one more signal away.
It rarely is.
This inquiry does not argue for abandoning indicators or dismissing technical analysis. It argues for restoring them to their proper role; as aids to judgment rather than substitutes for it. In transitional environments, their greatest value may lie not in the signals they produce, but in the discomfort they generate when those signals fail to resolve cleanly. That discomfort is information. It suggests that the system may be operating under conditions our tools were not calibrated for.
Seen this way, the real temptation is not misreading a chart. It is mistaking familiarity for truth. Indicators reflect the past with precision, but they do not guarantee continuity. When price behaviour begins to resist interpretation, that resistance is not an obstacle to overcome. It is something to notice.
When systems are under strain, price tends to move first and interpretation follows. The temptation is to reverse that order. Let interpretation lead and demand that price conform. That temptation has undone far more investors than volatility ever has. Sometimes the most disciplined act is not to decide, but to wait, and remain attentive long enough for uncertainty to reveal what it is actually asking of us.
Epilogue — An Open Question
This inquiry began with an observation that familiar explanations sometimes arrive too quickly. Parabolic charts are meant to resolve. Overbought readings are meant to correct. When gold and silver prices broke sharply lower on 30 January, many took that as confirmation that the old rhythms still held. The narrative restored itself almost instantly. Excess had been punished. Order had returned.
But what if that reflex is part of the structure?
Markets that have been trained for decades to interpret steep advances as speculative blow-offs will respond predictably when volatility spikes. Positioning adjusts. Stops trigger. Commentators reaffirm the framework. The move is absorbed into an existing story. Yet none of that answers the underlying question: whether the historical baselines embedded in those signals were themselves shaped by conditions that no longer apply.
If price was constrained - not by conspiracy, but by incentive asymmetry, leverage elasticity, and financial abstraction - then its release will not look orderly. It will overshoot. It will retrace. It will invite dismissal. Transitional periods rarely announce themselves cleanly. They oscillate between validation and doubt.
Gold and Silver's recent reversal may prove, in time, that excess had indeed taken hold. Or it may prove something subtler: that markets adjusting to structural strain do not move in straight lines. Sharp declines do not automatically invalidate the possibility of repricing. They may simply reflect how deeply participants remain anchored to familiar interpretations.
The deeper issue is not whether gold and silver are currently too high or too low. It is whether we are still interpreting them through frameworks built during an era when paper supply rarely faced meaningful constraint. If that era is shifting - even gradually - then volatility will feel confusing precisely because it challenges our assumptions about how price is meant to behave.
Some inquiries end with answers. Others end by clarifying where our confidence may be misplaced.
This one asks whether the signal we trust most - “overbought” - might itself be conditioned by a history that deserves re-examination.
That question remains open.
Other Parts in this Inquiry
Part I: When “Overbought” Stops Meaning What It Used To