An Incorrect Correction: Regaining Momentum

Well, that was quick.

I recently wrote about the detailed technical setup for gold that was predicting a correction in the gold price. I shared a couple of areas of concern.

First, gold’s relative strength index (RSI) had risen to overbought levels. We’ve seen this before during this year-old bull run, and in each instance it presaged a correction. The good news is that these corrections had been fairly mild, and the gold price quickly resumed its uptrend.

Second, I featured a chart, courtesy of Ron Griess at TheChartStore dot com, showing how gold had soared above its upper Bollinger band and stayed there. As you can see in the chart below, Ron marked two previous instances where this had occurred, and each of those preceded lengthy corrections lasting the better part of a year.

A correction of that degree was worrisome, but those previous instances came in vastly different market environments. As I shared last week, I didn’t expect that kind of a decline this time.

That’s because powerful fundamentals — from the Fed’s debt trap to the newly sparked global trade war and more — argue for much higher gold and silver prices over the long term.

Given that gold had soared $200 over only about a month to begin the year, it seemed only natural that some of that froth would get blown off.

And thus, gold quickly gave back about half of what it had gained, as you can see in the chart below.

But, as you can also see, that correction didn’t last long at all. We’ve gained back about $80 from the lows over the past few days, as President Trump’s tariff talk has shaken the markets.

And gold opened down about $20 this morning as the bears took another swing at gold, but the relentless buying pressure drove the price right back up. It’s trading slightly in the green once again as I write.

Now I’ll be the first to admit that neither I nor anyone else have any idea what the metals are going to do in the near term. As I always say, however, we can be very confident that we want to own them over the long term, given the fundamental trends in place.

And now I will argue, strongly, that we should own the gold and silver equities.

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