August 25, 2011 BMR Morning Market Musings…
bullmarketrun.com
It has been a wild few days for Gold…the yellow metal was down as much as $50 again this morning, hitting a low of $1,702, but it found support and has recovered almost all of its losses…what we’ve witnessed since Monday is one of the 10 largest corrections in Gold since the early 1980's and it was one we warned was likely to happen, though it didn’t take a rocket scientist to figure out that Gold had become extremely overbought on the charts…despite the $200 drop, Gold is still the second-best performing commodity so far this year, up 24.6% through yesterday which is just below Silver’s 30% gain this year…Gold’s sharp rise this month to slightly above $1,900 did not represent a final “blow-off” in a “bubble phase” as some analysts have stated…our contention, based on all the technical and fundamental evidence at hand, is that the “bubble phase” in Gold has not even started yet…the worst of the decline in Gold is now over and a consolidation phase has set in…after a $200 drop, a rally can certainly be expected but we caution that Gold likely won’t bottom out until it retraces down to just above $1,600 an ounce – a process that could take a couple of months…the final quarter of the year could be quite spectacular for Gold if John’s chart proves correct…his track record has been exceptional and his $1,938 target for Gold was only 1% off the mark…
Here’s how the scenario could play out in terms of a timeline for Gold bottoming out around $1,600…
Below is another interesting chart on Silver that shows how it needed a couple of months to consolidate and unwind an extremely overbought technical condition like Gold was just in…
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