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Clark goes on to say, in part:
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It makes sense that big corrections would take longer to reach new highs than small ones, but I wanted to confirm that assumption with the data. I also wanted to determine if there were any patterns in past recoveries that would give us some clues that we can apply to today. [As such,] I measured how long it took new highs to be mounted after big corrections in the past. The following chart details three large corrections since 2001, and calculates how many weeks it took the gold price to a) breach the old high, and b) stay above that level. As you can see, it took a significant amount of time for gold to forge new highs after big selloffs – and yes, the bigger the correction, the longer it took.In 2006, after a total fall of 22.6%, it took a year and four months for gold to surpass its old high. After the 2008 meltdown, it was a year and six months later before gold hit a new record [while] our recent correction more closely resembles the one in 2003. After a 16.2% drop, gold matched the old high seven months later. It took another two months to stay above it.So when do we reach a new high in the gold price? Let’s apply the same ratio from the 2003 correction and recovery: If it took 29 weeks and four days to reach a new high after a 16.2% correction, a 19.2% pullback would take 35 weeks and 0 days. That works out to Monday, May 7, 2012.An exact date is pure conjecture, of course. On one hand, gold could drop below the $1,531 low if the need for cash and liquidity forces large investors to resume selling. On the other hand, Europe and/or the US could resume money printing on a large scale and send gold soaring overnight. The point of the data is that it signals we shouldn’t be too surprised if we don’t hit $1,900 for another four months and if it takes another two months or so to stay above it.[If you ] think that is too long there are some important reasons to not let it discourage you:
- If the “rebound ratio” is similar to the one in 2003, you have four months and counting to buy whatever gold you want before it’s no longer on sale…
- Once gold breaches its old high, you’ll probably never be able to buy it at current prices again…[Gold] will probably hit $2,000 or higher before the year’s over, never to visit the $1,600s again this cycle. If that turns out to be correct, the next four months will be the very last time you can buy at these levels. You’ll have to pay a higher price from then on.
- If gold doesn’t hit $1,900 until May, you’ll know this is simply normal price behavior… and when September rolls around – seasonally the strongest month of the year for gold – and the price is climbing relentlessly…you’ll already be well positioned [to take full advantage].
Conclusion
Regardless of the date, we’re confident that a new high in the gold price will come at some point, because many major currencies are unsound and overburdened with debt – and they’re all fiat and subject to government tinkering and mismanagement. Indeed, the ultimate high could be frighteningly higher than current levels.
As such, we suggest taking advantage of prices that won’t be available indefinitely. After all, you don’t want to be left without enough of nature’s cure for man’s monetary ills.
*http://www.caseyresearch.com/articles/when-will-gold-reach-new-high |
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