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« EU split over plan for second bailout of Greece | Main | 3 Ways to Shelter Your Cash from Inflation »
Thursday
Jun092011

How I Know Another Correction Is Coming

Gold Pullbacks casey 10 June 2011.JPG





By Jeff Clark, BIG GOLD

The gold price has been rising steadily for almost a year now, with nary a correction. It fell only 4% last month, and the biggest decline since last July was January’s 6.2% drop. These barely register as “corrections” when one considers that we’ve had 18 of them greater than 5% since the bull market began in 2001.

We’re getting used to a persistently rising gold price. Any decline is met with more buying, pushing the price to new highs. But how long can we realistically expect this pattern to continue?

The answer will ultimately be determined by the fundamental factors pushing on the price – more Greece, more money printing, and more economic bad news will all drive gold higher. But even then, have we really said goodbye to big corrections?

History can provide a clue. If we could find a time period within a gold bull market where the price sidestepped major falls, then it might be reasonable to think we’ve entered a period where it will continue steadily climbing. On the other hand, if gold saw big corrections even during, say, a mania, we might need to be on the lookout for them no matter how bullish the factors are today.

Here’s a chart of the corrections that occurred during the final two years of the 1970s mania – one of gold’s biggest parabolic runs in history.

During this historic run, there were seven significant corrections. On average, that’s one every 3½ months and a 10.1% decline. You’ll also see that they were very sharp; four lasted less than ten trading days and all were less than a month. This all occurred in the middle of the mania.

If history is any guide, our correction in January was small, and will be the first of many.

In fact, historical precedent shows that volatility is the norm, even during the Mania Phase of a gold bull market. Big moves, both up and down, are common. I can’t point to a date on the calendar, but sooner or later we’re going to have another downturn, and it won’t be the only one.

This means that great buying opportunities will present themselves regularly. And not just for gold but also for silver. To find out how and when to buy, and what forms of silver you should own, read our FREE 2011 Silver Investing Guide.


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sk chart 22 May 2011.JPG



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So, the question is: Are you going to make the decision to join us today.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.

SK logo 26 May 2011.JPG




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Reader Comments (4)

The corrections might be influenced by another buying public. At the moment we have half a billion Chinese and Indian potential buyers as well which may result in a complete different market.

June 10, 2011 | Unregistered CommenterWijRos

I think the subconscious mind of this guy already detected the end of the gold's bull market, but his conscious mind isn't seeing it.

June 10, 2011 | Unregistered CommenterDi

His subconscious mind probably also sees it going to $300, huh Di?

Here's a thought. What if he's actually detecting that volatility is the norm, even during the Mania Phase of a gold bull market. Big moves, both up and down, are common.

Just a wild guess on my part.

June 10, 2011 | Unregistered Commenterfallingman

Di,

We could well be in for a dull summer, flat to downish action, but don't let that trick into thinking that this bull market is over, it hasn't really begun yet in our humble opinion. So do go gently with your short positions, by Christmas prices will be a lot higher than they are now.

June 10, 2011 | Unregistered CommenterGold Prices

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