This post is very interesting:
tfmetalsreport.com
MathMan believes that this current "bull market" in gold began in January of 2001, with gold at $275/ounce. Using that as a basis, gold then rallied for over seven years, finally peaking at $1033 in March of 2008. That is a move of $758.
A Fibonacci 38.2% retracement of that move would have been:
$758 x .382 = $290
$1033 - $290 = $743
Thus, $743 was a likely target for the inevitable "correction". When it came during The Great Financial Crisis of 2008, it should not be surprising that price overshot just a bit. In those crazy days of fear and illiquidity, simple technical targets were easily overrun. It should be noted, though, that the final bottom was just a shade lower, at $683, in October of 2008. Then, in creating a bottom, price made a low of $700 in November 2008 and $742 in December of 2008 before resuming the bull market rally in January of 2009. Therefore, MathMan concludes that the 38.2% number is significant for measuring future corrections within the gold bull market.
Let's also look at the correction on absolute terms. Again, price peaked in March of 2008 at $1033 and then fell to $683 in October of 2008.
$1033 - $683 = $350
350 ÷ 1033 = 33.88%
OK, here comes the interesting part. Using the same math, gold began it's rally in January of 2001 at $275. It peaked in September of 2011 at $1920. That is a move of $1645.
$1645 x .382 = $628
$1920 - $628 = $1292
Thus, a reasonable target for this current correction is something similar to what took place in 2008. Though $1292 is a full 38.2% correction, could price overshoot again? Of course.
Let's also use the same absolute comparison to 2008. Again, back then, price fell 33.88% from its highs before reversing and resuming the bull market.
$1920 x .3388 = $651
$1920 - $651 = $1269
Ultimately, the questions you have to ask yourself are these:
Do you believe that the bull market for gold is still intact?If so, under what conditions could this current correction be "worse" than that of 2008?Does it even matter? (Not really. I just keep buying. They'll pry MathMan's gold from his cold, dead fingers.)
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