If you have been a regular follower of this blog, you would have noticed that I am extremely optimistic about the long term prospects of Precious Metals. I continue to buy during this bear market and try to time as many major intermediate lows as possible. However, simultaneously, I have also stated on many occasions during late 2011 and 2012 (on this blog and elsewhere) that Gold will break lower below $1,530. Many other investors and bloggers disbelieved this theory and argued that it was impossible based on their “cycles” and “theories”. Well, here we are at $1,225 per ounce.
Gold is the key asset for the whole sector, so it doesn’t really matter how oversold miners or silver or platinum is… until Gold finishes its downtrend, nothing will bottom. Now, please do not misunderstand me. I am not necessarily saying that Gold will correct as bad as it did in mid 1970s, but it very well could. And to make matters even worse for the perma-bulls out there, why couldn’t Gold fall even more then in 1976?
If we reach $1,150 that will be a 40% decline from the top, but still not as bad as 1974/76 sell off. And that is only about $70 lower from the current levels. As I stated many times, the only way parabolic blow off tops can occur (which I am betting on in both Gold and Silver) is to have a huge bear market crash before hand and currently we are definitely in the middle of it (or maybe near the end).
In my view, the current downtrend and discounted precious metals prices are offering a lifetime buying opportunity. We are moving closer towards a global currency crisis, which will affect confidence of all investors and the only way to protect yourself is to own some precious metals (and some agricultural commodities like Sugar too).