This column was originally published on RealMoney on April 19 at 12:38 p.m. EDT. It's being republished as a bonus for TheStreet.com readers.

I've been bullish on precious metals and commodities for some time, and still consider myself bullish in the long run, but if there isn't a gold and silver blowoff in progress, I'll eat my hat.

Let's go over a few of the things that bother me.

Gold Bugs Are Getting Too Popular

Who's more popular than the precious-metals crowd at the moment? Investment publications are running large, one-sided feature stories on gold (

Time

&

Newsweek

: Where are your cover stories on the subject? They must be coming soon). Owners of precious-metals Web sites are being quoted as analysts, when in reality they're cheerleaders with a one-sided interest (and perspective).

Most telling of all, some pretty outlandish predictions for gold's price objective are starting to be heard.

Is a price target of $850 an ounce, gold's 1980 high, reasonable in today's environment?

Heck, it feels like it might get there next week at this rate. I'll even listen to a well thought-out case for a long-term run to its inflation-adjusted high, which would be just north of $2,000 an ounce. But near-term predictions for $4,000 to $5,000, as I've been seeing lately?

I even saw one recent commentator quoted as saying gold would reach $20,000 an ounce by 2020 (with silver at $2000, by the way), only to be topped by another who suggested that $36,000 was not unrealistic! Ironically, just imagine the ridicule these same individuals would heap on a forecast for the

Dow

at 36,000.

Silver

Often referred to as the "poor man's gold" because it feels difficult to pay so much for just one ounce of gold when many ounces of silver can be had with less money, the white metal tends to move later than gold and has in the past marked the end of important precious-metals rallies when it surged violently. With that in mind, how can we ignore the technical condition of silver at the moment, as shown in the three-year chart below?

Three Year Extension
Silver is parabolic here.

Source: Stockcharts.com

I don't care what the asset is, when a chart starts to look parabolic, I get nervous. And just look at the short-term momentum indicators pictured (RSI, MACD and stochastics, which I like to view together). Overbought would be the understatement of 2006. The last two times silver looked remotely like this on a technical basis -- in the spring of 2004 and again later that year -- it marked the beginning of meaningful precious-metals corrections.

And it's not just on a daily basis that silver looks to be in the midst of a blowoff. I know these charts are large, but the weekly and monthly charts going back to 1990 just have to be seen:

Weekly Chart Is Stretched Thin
It's extended here too.

Source: Stockcharts.com

And as off-the-charts as the weekly momentum indicators are, the monthly gauges are similarly extended:

Monthly Chart Similarly Silly
Doesn't get any better looking here.

Source: Stockcharts.com

Maybe this is a sustainable trend, but look again at the momentum indicators, especially compared to what they looked like at important peaks in the past. If you threw out the symbol and someone brought you this chart, would you rush to buy the stock it represented?

Central Banks

One gold-bug theme that interests me at the moment is the argument that central banks are buying metals, which is a bullish development. When did government officials and central bankers become so brilliant in the eyes of the government-wary precious-metals community?

Wasn't it Treasury Secretary G. William Miller who announced in January 1980 that the U.S. would no longer auction its gold, doing so literally days before the metal peaked near $850? And don't gold bugs unanimously ridicule central banks around the world for having engaged in their heaviest selling near gold's secular lows of $250 an ounce just five years ago?

Astonishingly, precious-metals permabulls now point to signs of central-bank buying as bullish support for their arguments. And two of the nations that have signaled most clearly their intentions to add to their gold holdings, Russia and Argentina, are both less than 10 years removed from defaults on their sovereign debt. But that's the past. Today they're geniuses.

Maybe, but since governments refused to sell any metal at gold's all-time high 25 years ago and were furiously unloading as it ultimately bottomed, doesn't history suggest we should see any renewed central-bank interest in gold as a negative contrary indicator?

Misreading the Federal Reserve

Tuesday's rally in both stocks and precious metals, which was based on the release of the most recent

Fed

minutes that gave rise to the hope that interest rate increases would soon cease, seemed more than a little optimistic to me.

When in a tightening cycle, the Federal Reserve typically tightens too much, moving until there's visible evidence of economic slowing. While some members are clearly mindful of this history and would like to stop earlier than normal to let the lagged effects of rate increases take their toll, the central bank would lose all remaining credibility were it to signal that its work is done, especially with commodities prices where they are. The members who wanted to stop would have little to say if the Fed met today on rates.

The central bank simply can't stop until the momentum in this commodities run is broken, meaning a fed funds rate of 5.25% is the least the market should be expecting, which should eventually impact both stocks and commodities alike. Tuesday's Fed-inspired rally struck me as a shortsighted one that buyers may soon regret.

Tops Hard to Pinpoint

What's most difficult in writing an article like this is trying to answer the question "OK, smart guy, where will gold and silver top?" Tops and bottoms are hard enough to call in the midst of a normal move, and they're even more difficult when an asset gets parabolic.

Personally, I'm selling some physical silver I own this morning.

Do I expect to buy all or part of it again? I do, but I expect to do so in single digits. I'm aware I may look wrong for a little bit, and that these metals may spurt even higher in the short run, but I refuse to forget how volatile commodities prices can be.

Am I suggesting investors unload all of their precious-metals exposure? Not at all. Simply put, those who are overweighted in metals, either by design or as the result of this move, should consider lightening up. Those who are still underweight or lack exposure to gold or silver should be extremely careful and should do any buying very, very slowly.

In summary: Don't lose sight of the fact that commodities remain one of the most volatile sectors of the market, precious metals included.

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At the time of publication, Hanlon was long silver and gold, although positions may change at any time.

Charles P. Hanlon focuses on nondollar investments. He is currently the president of Delta Global Advisors. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Investing in foreign markets involves unique risks including, but not limited to, currency fluctuation and political risk. In addition, international investing is typically more expensive for U.S. investors than buying shares listed on a U.S. exchange. Hanlon appreciates your feedback;

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