When any asset class begins a vertical climb, emotions cause people to think 'this time is different' and price can’t go back down. It’s almost never different, and the further metals rise, the more severe they will correct. People erroneously assume that because the rally is so strong, the correction will be mild. That is not how markets work. The one exception would be if metals were entering the final bubble stage like 1980, which saw gold increase 400% in a year. Pull up any monthly chart on Bitcoin 2017, Gold 1980, Silver 2011, or Oil 2007. The bottom line, when price goes parabolic you always have a reversion of price to the mean.
The only time this principle changes is in the final bubble phase of an asset, shown above. In gold and silver's case this lies ahead of us. To expect price to keep climbing so far stretched above moving averages at this stage is unrealistic. After a sling shot effect takes place and price has a violent sharp 4-6 week pullback into the early fall, a sustained advance above $2000 in gold will ensue. Intermediate tops can be complex, so expect price to drop, bounce, then crash. The dip buyer will buoy price initially after a mini-parabolic rise like this.
Sentiment will need to cycle down below the green dotted line into our buy zone .
Miners will often turn down first in the metal’s complex. An early warning signal.
Although silver is undervalued compared to the gold price, it will not be spared during a violent correction.
Now if one is holding longterm, you can buy tomorrow at the bell and weather a 300-400 point pullback in gold and be in great shape in years to come. Years from now, it will be just a blip on the chart, but in real time that is not a fun experience. We do not recommend shorting any asset that is in a bull market for the average investor. Large C wave declines we will attempt to short at HFZ. Shorting emotionally is much tougher than a long trade. The bulk of the return comes in a period of a few days while most of the time you sit even or at a loss until the damm breaks - the exact opposite of trading the long side. Most asset prices rise like escalators and drop like elevators.
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