The ongoing gold correction has shaken faith in the metal among some investors, and the pain could continue for a while, argues James Gruber of Asia Confidential. However, once the smoke clears, he thinks a rebound toward to $2,000 is likely:
If I'm right about a further correction in the price of gold, the coming months will be a test for even the most ardent gold proponents. It's worth keeping in mind though that the current bull market in gold is likely far from over, for the following reasons:
* Commodity bull markets have lasted an average 18 years over the past century; the shortest bull market was 14 years. We're into the 13th year of the current gold bull market.
* Bull markets always end with parabolic spikes. For instance, gold went up 4x in 13 months during 1979-1980 and the Nasdaq climbed 171% in 17 months before peaking in January 2000. Gold hasn't had this spike this time around.
* Retail investors have minute exposure to gold. During bull markets, the general public invariably gets enamoured with assets whose prices are rising. We just haven't seen this kind of enthusiasm towards gold.
* More fundamentally, gold remains the best hedge against currency wars. ...
Though short-term caution is warranted, I eventually see gold testing, and possibly going well beyond, its real all-time high near US$2,400/oz.
If I'm right about a further correction in the price of gold, the coming months will be a test for even the most ardent gold proponents. It's worth keeping in mind though that the current bull market in gold is likely far from over, for the following reasons:
* Commodity bull markets have lasted an average 18 years over the past century; the shortest bull market was 14 years. We're into the 13th year of the current gold bull market.
* Bull markets always end with parabolic spikes. For instance, gold went up 4x in 13 months during 1979-1980 and the Nasdaq climbed 171% in 17 months before peaking in January 2000. Gold hasn't had this spike this time around.
* Retail investors have minute exposure to gold. During bull markets, the general public invariably gets enamoured with assets whose prices are rising. We just haven't seen this kind of enthusiasm towards gold.
* More fundamentally, gold remains the best hedge against currency wars. ...
Though short-term caution is warranted, I eventually see gold testing, and possibly going well beyond, its real all-time high near US$2,400/oz.
More information can be found online at http://www.goldbullionadvisors.com
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