We are briefly going to look at the short term and the long term prospects for gold, which are quite different in our opinion.
Firstly, short term we see a correction coming in gold prices. After such a great run up gold needs to correct, consolidate and generally take a breather from consistently putting an in excellent performance day after day for the last two months. A correction would take gold prices significantly below $800, to $750-$730 area. Similarly, the HUI should reflect gold in this correction and drop to 400 or below. We took some profits earlier on, as we had loaded up rather heavily on gold and silver stocks in the summer, particular in late August when we described the HUI as a “screaming buy”. However the vast majority of our investments are still in the market and benefiting greatly from the recent rally in gold and silver prices. However the stocks were somewhat hesitant today to follow gold to its new high and perhaps this is a sign that gold has gone a tad too far, too fast. In the short term we expect a correction and consolidation that should provide us with another great buying opportunity.
The long term picture for gold is much more positive. Although many are making a big deal out of the fact that gold is making 28 year highs as Dustin Hoffman said in the film Wag The Dog, “This is Nothing”, and it really isn't. Gold is not approaching an all time high at all, it isn't even close. True the number in front of the gold price may be the same as the one in 1980, the number is just a number, we must translate that number into an actual value. In terms of real value, gold is still nearly $2000 away from any “all time high” as inflation adjusted $850 gold is closer to $2500, perhaps more. So we are not even close to the end of this bull market, this is just the beginning, a mere taster of what is to come over the next few years.
This next correction could prove to be another good buying opportunity for gold and gold stocks so stay updated by subscribing to the FREE Gold Prices Newsletter, just click here and enter your email address.