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Take Note

Folks, what’s going on with gold is just phenomenal. I said yesterday that I was anticipating a correction in the 150 ballpark, down to near that 1750 range, but the way it’s moving now it could go down into the 1600s before it’s done. Take time to analyze this break, because this is the kind of move that can really teach you something about how market psychology works.

In a parabolic move straight up like the one gold was making, there is no fear in the market. It’s all greed and euphoria. Remember back in 1999 when everybody from your co-worker to your cab driver was telling you about a dot-com stock they were getting rich on? That’s when you know that the fun isn’t going to last. Same thing was happening with gold.

Of course, gold is not a bubble like tech stocks in the ‘90s were. This is a market that got a little ahead of itself—the same way silver did earlier this year. What’s taking place is a healthy, bull-market correction. Will gold climb up to 2500, 3500? I believe it will—just not right away. Whether you like it or not, inflation is the new reality. Like Shah Gilani of www.capitalwaveforecast.com and www.moneymorning.com said on the show this morning, as global currencies around are further debased, gold will continue to act less as a safe haven and more like a de facto currency.

Before I go, another guest on the show today, Chris Gessel of Investor’s Business Daily—who, as you may recall, has been absolutely right on before—said something I think everyone should pay attention to. After the serious correction and all that wild volatility, this week the market retested lows and held above them. We also saw big gains on heavier volume. Chris said these are signals of a confirmed temporary uptrend—there’s no telling how long it will last, but it’s likely we’ll see a continuation of price movement that feeds off this momentum.

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