March 26, 2012
BY: Robert Hallberg, Topics: Gold
Gold has been up for 11 years in a row, which is impressive in any bull market. But with a sharp 20% correction at the end of last year the question is whether gold will be able to make new highs this year.
Anything is possible at this point as the world is becoming more and more unpredictable. A breakout of war in the Middle East or another black swan event certainly has the possibility of sending gold to the moon. But if we strictly use historical data as our only measurement stick we can see that it has previously taken anywhere from 68 to 78 weeks for gold to make a new high and stay above the old high after a similar magnitude correction. This would put the new high in gold around December of 2012 to March of 2013. The chart shows previous corrections in the gold bull market.
Price consolidation does not mean that is the end of the bull market, but rather that gold is taking a break and building a base for the next move higher. After an 11 year long run of positive returns, a correction is only healthy and just makes the bull market last that much longer. The charts show the year-over-year performance in gold since 1999.
Our human psychology makes us want to see constantly higher prices, but regrettably the market does not function like that; it "climbs a wall of worry" and shakes out all the weak hands it can find. Only the investors that can manage his or her emotions will be able to ride out the ups and down and reap the full rewards that the bull market has to offer.
To learn about trends and spot the next investment opportunity read the Casey Report from Casey Research. It's a monthly investment news letter that breakdown economic trends in a way that is easy to understand. They make recommendations based on economic reality and their track record is several times better than the market or any mutual fund for that matter.blog comments powered by Disqus