Seem whenever there's a "correction" these days there are plenty of takers waiting at the window - matters not what the gold equities are doing anymore. It will be interesting to see what happens this next time around - I'm betting this guy is wrong in calling for a large,
long correction in gold.
Gold Is Getting Overbought
http://www.kitco.com/ind/swanson/may032006.htmlToday I browsed half a dozen of the largest financial websites on the internet. Almost every single one of them had an article about the gold bull market. At the end of the day, on Fox News, I continued to shake my head as I saw Tobin Smith make bullish comments about gold stocks. A year ago, in case you don't remember, he was laughing at them.
If you've been a member for a while you've certainly heard me mention that this many people making bullish comments about a market (gold or whatever) must be a sign that the top is near.
But here's the difference. Last year, we were in phase one of the gold bull market. Now we seem to be in phase two and in phase two people can be bullish and the market can continue higher. We certainly seemed to be going higher now. The dollar is showing signs of re-entering its bear market, which will provide a further catalyst for gold purchases, while worries about Iran, inflation, and higher oil prices are also putting a prop underneath the market.
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For the past week, the XAU gold stock index has been lagging the metal. While gold has rallied like mad, gold stocks have barely followed suit. This is the type of setup in the past that has led to intermediate-term corrections lasting several months. Indeed this type of action led me to sell most of my gold stocks back in December. But things turned out to be different back then to clue us in that we are now in a stage two bull market.
Over the next few weeks I expect the metal to pullback and provide an entry point in the gold stocks. We have two recent pullbacks that can provide a model for what might happen. Back in December, the XAU lagged gold as gold blasted higher and made what appeared to be a parabolic top at the time. That action accurately warned that a correction loomed. And it came, with gold falling almost 90 points and back below 500. However, gold stocks held up during that drop and gold snapped back and rallied into the end of the year.
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