lamented that gold prices had been stuck in a rut for a long time. Others
were confused. A few bailed. And some, including me, have been stocking
up because we're convinced prices won't stay down forever.
fact, based on the data I
chart below, I believe the window of time to buy gold for less than $1,700 an ounce is very limited.
Here's why. I examined gold's three largest corrections since the bull market began in 2001, including how long it took to recover from those corrections and establish new highs. The
conclusion that emerged is that the current
lull in gold prices will almost certainly
end soon, if it hasn't already.
set a record on September 5, 2011 at $1,895 an ounce (London PM Fix) and to date has fallen as low as $1,531 (December 29,
2011), a decline of 19.2%. Gold has tested that level
several times since but never broke below
it. In order to determine how long it might take to breach $1,895 again, I measured the time it took to mount new highs after big
corrections in the past.
following chart details the three largest corrections since 2001,
and calculates how many weeks it took
the gold price to a) breach
the old high, and b) stay
above that level.
In 2006, after
a total decline of 22.6%, it
took a year and four months for gold to surpass its old high. After the 2008 meltdown, it was a year
and six months later before the metal hit a new record. The 16.2% drop in
2003 lasted seven months, and another two months before
the price stayed above it.
can see that our correction has lasted just shy
of a year. If we matched the recovery time of
2006, gold would hit a new high on Christmas Eve (Merry Christmas!).
here's the thing: that's how long it would take gold to breach $1,900 again – it will take
a couple months or more for the price
to work up to that level, meaning the remaining time to buy gold under $1,700 will likely be measured
in days or weeks, not months. This is bolstered by the fact that the price moved up strongly last week, and also that we're on the doorstep of the seasonally strongest month of the year.
is an educated guess, of course, but what the
data make clear is that all corrections eventually end – even the
bloodbath in 2008. The current lag will
come to an end too, and we're
certainly closer to the
end of this corrective period
than the beginning.
has direct investment implications.
once gold breaches its old high, you'll probably never be able to buy it at current
prices again in this cycle.
That's a rather
obvious statement, but
let it sink in. The next few days or weeks will likely
be the very last time you can buy
gold below $1,700. You'll
have to pay a higher price from then
think about this: it's entirely possible that by this time next year you
will never again be able to buy gold for less than $2,000 an ounce – unless maybe it's in "new dollars" or some
other currency that circulates with fewer zeros
on the notes.
the data can help you
ignore the noise about gold's bull market being over and other nonsense spewed from mainstream media types. If
gold doesn't hit $1,900 until December, you'll know this is simply normal price behavior and that they're overlooking basic patterns in the data. And when the price nears that level
again and they're caught off guard by it, you'll already
Regardless of the date, we're
confident that a new high in the gold price will come, because many major currencies are unsound, overburdened with debt, and being actively diluted by governments. Indeed, the ultimate high could be frighteningly higher than current
levels. As such, we suggest taking
advantage of prices that won't be
available indefinitely. I
think we all need some of nature's cure for man's monetary
window of time to buy
gold at current prices is closing.
I suggest taking advantage of the sale while you still can
(which is taking place in select
gold equities as well).