Expect a gold correction. By a correction, I mean a 5-10% drop in the price of gold. Also, expect it to happen quickly. This bull market in gold is 10+ years old, and over the last year alone, gold is up over 50%.
A correction will undo part of that 50% run-up in weeks if not days. It will be dizzyingly, nauseatingly fast. Don't get dizzy. Don't let gold's short-term fall nauseate you away from gold's long term trend. Use it to your advantage. When gold dips, you should be buying.
Why? Because nothing has changed. The fundamental reasons for owning gold are still in place.
We know the trend in gold is intact because sovereign debt problems are as bad as ever with no signs of improving. In fact, they're likely to worsen. Western Europe's monetary experiment, the Euro, is standing on the precipice of history's waste bin.
The dollar still pats itself on the back as the tallest midget in the room.
Really, a better metaphor for both the Euro and the dollar is that each one is like a skydiver who has jumped out of an airplane and pulled their main chute, and their reserve chute - and though neither chute produced anything except for an Acme anvil and a pair of polka dot boxer shorts, they're hoping for some other skydiver to float by with an emergency chute in the nick of time. They're cheerfully hopeful that they'll be rescued by someone or something, and the fact that they haven't hit the ground yet is all the proof they need that nothing is wrong at all.
So nothing has changed. The world economy still operates on the immutable laws of scarcity. No government can will goods or production into existence - even if they have the printing presses that issue the world's reserve currency. The world's reserve currency is not the reserve chute that will arrive in the nick of time to save our hapless skydivers.
Given these facts, we know what happens to precious metals after a precipitous correction.
Let's take a look at the aftermath of silver's fall earlier this year for what might be a useful predictor of what's to come for gold:
I'm continuing to average in to gold and silver on a more or less regular basis, but a possible gold correction is a great reason to keep a little extra powder dry.
In any event, whether gold or silver rise or fall from here, I will be buying one or the other or both on August 27th in protest of the Fed. And I hope you'll join me.