Is the Gold Correction Over?

After the panic of a couple of days ago, gold has recovered nicely. As I was telling you, waterfall moves are the time to buy in a bull market. Spike moves are the time to sell, even in a bull market.

I think the odds favor a correction before $2000-$2100, but this was a nice trade for people with the discipline to buy. It takes discipline to sell when everyone is euphoric and it takes discipline to buy when everyone says the world is ending. The best traders do both consistently.

Gold equities remain extremely cheap and they are screaming buys on corrections. If gold stocks go down 20%, I buy. If they go down another 20%, I celebrate, then buy some more. This debt crisis was a long time in the making and the repercussions will therefore be very serious.

I’m so confident in this trade because I’m not trading against facts, I’m trading against human nature, self-imposed delusion, and government stupidity. Human nature is a constant. Government stupidity cycles, and we are in a clear bull market in government stupidity. These are the kind of trades that don’t come around often.

Even gold bugs are not believers, if this makes sense. These are the type of people that can see gold rise to $1000, but that’s it. Then $1200. Then $1500. Then $1800. At every point they were more bullish than the masses, yet they were dead wrong. They were not bullish enough. They did not grasp the full extent of the debt crisis.

For everyone who truly understands what lies ahead, I’m telling you that without a doubt the best thing that can happen right now is a monster correction. This is something I’m expecting. I expect a period of calm in markets where everyone thinks the worst is behind us. This is when you should be getting aggressive. Like a pendulum, gold will be building energy for the upside on any correction.

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  • Rdisraelbob

    Moses,
    Today was totally unexpected by me , sure thought gold would at least correct some more ..wrong again.If I understand you you see a correction coming again in gold sooner than later ?

    • Angie

      Hi Moses,
      I am waiting for GLD to drop to $160s but it only dipped to $166 briefly before bouncing back to $170s. Do you still recommend waiting patiently for te correction before starting some long position? I would like to enter at some point but want to wait for a more significant correction. Do you still see that coming soon? Also what do you think about Bernenke’s speech today? Market rallied pretty good. Do you think we are done
      With the lows of the year or will we retest 10700 or even Dow at 9000! I have been buying in the past months but stopped when dow rallied above 11100… Waiting to rebuy when it dipa back down 11000 but doesnt seem likely now. Any thought to share?

      Angie

      • http://www.expectedreturnsblog.com Moses

        Hi Angie,

        I wouldn’t chase stocks or gold up. Just buy on reactions and build a position. I think gold is going to see the $1600s again, but you can never be sure. As I said before $1730 is the line in the sand. We should have more information to work on soon.

        Moses

    • http://www.expectedreturnsblog.com Moses

      Yes, I think a correction will come within a month or so. There’s a good chance it will be a big correction. 

  • fubsy_cooter

    Hi Moses,
    Checked in today to find that once again we are on the same page.   Early last week I was waiting for the gold parabola to break, and break it seemed to do.  I initiated a small position short silver (appx 6% of my portfolio) on Tuesday.  However, the volume irked me as after the two and a half year run and vertical rise gold should have peaked with triple or more the high volumes of the rally.  I don’t see that.  Sure, volume rose, but not enough to satisfy me that big money had capitulated.  I think we have another move higher, and I believe the parabola will move to the miners.  I began accumulating Thurs and Friday, and now have a 20% stake in the mining sector.  With a breakout and close over 64.15 I’ll be adding to positions.  I’ll let the nature of the breakout determine how aggressive I get, but the HUI price action is projecting significant strength going forward, IMO.  I know that the end of this run will result in a substantial wash out that sends gold down 30% or more from its eventual high, and like you again, I will use this as an oppty to load my portfolio with PM positions. 

    Good posts the last couple days.  You’re obviously on point with the sector, as well as the global economic pulse. 

    The next few weeks should be interesting.   

    • http://www.expectedreturnsblog.com Moses

      Hey Fubsy,

      I agree with you, the miners look very good. We should get  a sense of where this market is going soon, but I agree that a correction is coming. 

  • Kwok

    Hi Moses – I have seen you being very bullish about miners at the moment. Could you shed some light on why these miners are being underpriced at this level? Thanks

    • http://www.expectedreturnsblog.com Moses

      Well I can’t really tell you why they’re underpriced- these things happen from time to time. Our job is to buy when these anomalies appear. 

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