Posted by silverngold
@ 10:53 on October 13, 2016
Diagnosis of Gold Correction: Normal
By: Jeff Clark, Senior Precious Metals Analyst
Murphy’s Law, applied to gold and silver: the price will fall right after you buy.
New GoldSilver Law: it doesn’t matter. Prices will be a lot higher in a couple years (and you should focus on how many ounces you own anyway).
As most of you know, gold and silver have been on a tear this year. Gold hit $1,363.75 (based on London PM fix) on August 2. But yesterday it fell to $1,253.45, what amounts to an 8.1% pullback.
As you’re about to see, this decline is completely normal. That’s not me saying so; that’s what history shows.
I have some data on corrections I want to share with you. The reason I’m sharing it is because I want us all to be prepared for what’s ahead…
The following charts look at the size and frequency of corrections during gold’s two biggest bull markets in modern history. First up is the 2001-2011 run. Look how many corrections there were and how big some of them got. I added our current pullback so you can put it in perspective.
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| In the bull market that saw the gold price rise a total of 645%, there were 19 corrections of 6% or more. Ten were in double digits.
The average of all those corrections was 12%. That means our current pullback is, so far, relatively minor by comparison.
Corrections are normal even during manias. Here’s a chart of the pullbacks that occurred during the final two years of the 1970s parabolic advance. Notice not just the big drops but how quickly they occurred.
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| During the final phase of the gold mania—at a time when the price rose 392% in just 24 months—there were seven big pullbacks. The average was a 10.1% decline every three and a half months. And they were all very sharp—four lasted less than ten trading days, and all were over in less than a month.
So, in the two biggest gold advances in modern history, price corrections, even big ones, were completely normal.
This information gives us power…
There are three distinct facts we can take away from this data. If you tend to worry when the gold price falls, you may find the following points useful as we progress through what Mike and I are convinced will be a gold advance of historic proportions…
Read More: http://us11.campaign-archive2.com/?u=1dfb1043be28f924e36d99694&id=9e5427e783&e=bd8755ff65 |
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