You can plainly see from the monthly gold chart posted above that gold is heading towards the breakout point marking Phase 2 of the gold bull. It is right, and usual and healthy for it to test this breakout. How far down does this support lie? Somewhere around 136-139 in the GLD tracking stock, which translates to around `1360 in the price of spot bullion. Wow, that's a long way down, right? Not really. Does it have to get that far? It doesn't have to do anything at all. The key is time.
I know many analysts are calling for a short sharp correction. It's possible. Most likely is that it plunges, reverses up sharply some time next week. Then plunges again, sticking a dagger into the hearts of late comers and those trying to play the plunge. Then it stabilizes early next month somewhere right around the support from the breakout line drawn above.
If you're foolhardy enough to trade, (like me) you'll wait patiently for the obvious support.
(But if it's so obvious won't everybody play it , thus erasing its effectiveness? No. It's obvious to me, but everybody draws these charts somewhat differently, and most people use much more complicated reversal schemes involving Fibonacci numbers, exponential moving averages, and Relative Strength Indicators.)
If you're smart you'll just keep buying bullion systematically all the way down, and thank God for this opportunity.
Because, remember, Gold is a play on Monetary Instability. Monetary instability is increasing. This is just a technical correction, prompted by nothing other than the need to move the gold from weak to strong hands.
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