Diagnosis of Gold Correction: Normal

Diagnosis of Gold Correction: Normal

#1. We will never say goodbye to corrections. History shows that volatility, both up and down, is normal during bull markets, even manias. What this means is that while we can’t predict when they’ll occur, we know going in that they’re gonna happen. So before we exit this sector, understand that we will see some big and sharp corrections. Prepare your emotions accordingly. #2. Focus on the big picture. When the gold price declines in a bull market, history shows it’s almost always higher three months later. The only time this didn’t happen in the 2001-2011 period was during the 2008 financial crisis—but even then the price ended up more than doubling within two years. In the 1976 to 1980 mania, gold was always higher three months later. In other words, daily and even monthly fluctuations are nothing to fret over. Viewed on a long-term basis, corrections are nothing more than one step down before the next two steps up. This fact reminds us to keep the big picture in mind. #3: Corrections are buying opportunities. If you don’t have as much gold and silver as you need, every pullback should be viewed as your chance to buy them on sale. It’s an automatic discount on what you want to buy anyway. It’s not just gold bugs saying this…

  • Francisco Blanch, head of global commodities and derivatives research at Bank of America Merrill Lynch: “Investors should use the recent drop in gold prices as a buying opportunity… once the US central bank decides to raise interest rates, potentially causing equities to sell off and the dollar to rally, investors will see gold prices stabilize and eventually trend higher.”
  • Goldman Sachs analysts Jeffrey Currie and Max Layton: “We would view a gold sell-off below $1,250 as a strategic buying opportunity, given that substantial downside risks to global growth remain, and given that the market is likely to remain concerned about the ability of monetary policy to respond to any potential shocks to growth.”
  • Joni Teves, UBS strategist: “We think the recent price correction and sizeable decline in positioning improves the risk-reward for gold, allowing those who are looking to build longer-term gold exposure to build positions at better levels.”
  • Chris Gaffney, president of World Markets at EverBank: “the recent drop is overdone… Several factors can put a floor under gold in the short term, including increased tensions in Syria, the end of cooperation between Russia and the US, Brexit, and political uncertainty in the US.”
  • Ross Norman, chief executive officer at Sharps Pixley: “It is clear to us that the rationale for buying is more powerful than any time in living memory.”
The Ultimate Question to Ask So, does that mean we should buy now? What if the correction isn’t over? Buy enough gold and silver so that your fort is ready for all arrows—deflation, inflation, economic recession or depression, central bank blunders, government interference, war, helicopter money, a crashing currency, a monetary reset, capital controls, and any other scenario that could wipe out you and your family’s wealth.]]>

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