Gold Correction: The Silly Season

Gold has sold off now from $1555 all the way down to $1530! Woah. It would be very surprising after months of steady rise if it did not back off for a period of 6-8 weeks. It's not possible to call a price at which you should begin to accumulate. You can see on the Daily Chart of GLD above that there are any number of reasonable targets to which the price of gold could fall.

And you can see on the Monthly Chart above that, that gold can fall a long way before it retests the breakout signalling phase 2 of the bull.

But generally speaking time is more important than price in a bull market correction.

It should go on just long enough (6-8 weeks) and deep enough to hear very low-IQ cases who analyze markets make all sorts of inane and bizarre argumnets as to why the gold bull is essentially dead,

After a couple of days sell off I heard a great one last night on the radio between Larry Kudlow and some dude at the Wall Street Journal who were guests on the clueless John Bachelor Show:

The WSJ guy announces that George Soros is selling gold because the Deflation Threat has passed and the economy is now mending. (First off, George Soros - if he says anything at all about his trading - it's to mislead everybody as to what he's doing and thinking. Second the idea that he was accumulating a huge gold position solely as a Deflation Hedge is absurd. Third, the idea the economy is mending is totally unsubstantiated)

But then Larry Kudlow chirps in that he has to agree with George Soros this once, because now that Osama is Dead and the dollar is rallying it should definitely bring down the Inflation Threat thus accelerating the new economic boom. (There's so little sense in this comment it's not worth dissecting - except to point out that he thinks he's agreeing with his co-analyst while not seeming to realize he just contradicted him.)

It's like listening to a bunch of first graders explain the seasons by talking about how the sun moves closer and then farther from the earth as it zig zags across the sky.

Anyway, know this: The more stupid talk, the better for gold. It keeps weak hands and minds out of the market. And a correction here, no matter what form it takes, is long overdue and very healthy. It will wrest gold from the weak hands of latecomers. It allows the rise to maintain a steady sustainable flow. It will give the rest of us a wonderful chance to load up at a (hopefully) cheaper prices.

If you bought late, don't panic. This is a healthy, natural part of any bull market. It's a gift. Buy more lower, systematically.

And, meanwhile, try to enjoy the barrage of senseless chatter that's sure to flood print and the airwaves.

But wait! How do you know the gold bull isn't over?

Because gold is a Monetary instability Hedge. And global monetary instability is accelerating. You really need to make an effort to understand what that means if you're going to be able to ride out this bull market. I've explained it many times in past posts. For much more complicated analysis read the Fofoa blog.