Expect a gold price correction. By a correction, I
mean a 5-10% drop in the price of gold. Also, expect it to happen quickly.
This bull market in gold is 10+ years old, and over the last year alone,
the price of gold is up over 50%.
A correction will undo part of that 50% run-up in weeks if not days. It
will be dizzyingly, nauseatingly fast.
Don’t get dizzy. Don’t let the short-term fall of gold prices nauseate you
away from gold’s long term trend.
Use it to your advantage.
When gold prices dip, you should be buying gold.
Why? Because nothing has changed. The fundamental reasons for owning gold
are still in place.
We know the trend in gold prices are intact because sovereign debt problems
are as bad as ever with no signs of improving. In fact, they’re likely to
worsen. Western Europe’s monetary experiment, the Euro, is standing on the
precipice of history’s waste bin.
The dollar still pats itself on the back as the tallest midget in the
Really, a better metaphor for both the Euro and the dollar is that each one
is like a skydiver who has jumped out of an airplane and pulled their main
chute, and their reserve chute – and though neither chute produced anything
except for an Acme anvil and a pair of polka dot boxer shorts, they’re
hoping for some other skydiver to float by with an emergency chute in the
nick of time.
So nothing has changed. The world economy still operates on the immutable
laws of scarcity. No government can will goods or production into existence
– even if they have the printing presses that issue the world’s reserve
The world’s reserve currency is not the reserve chute that will arrive in
the nick of time to save our hapless skydivers.
Given these facts, we know what happens to precious metals after a
Let’s take a look at the aftermath of silver’s fall earlier this year for
what might be a useful predictor of what’s to come for the price of
I’m continuing to average in to gold and silver on a more or less regular
basis, but a possible gold price correction is a great reason to keep a
little extra powder dry.
I hope you’ll join me.