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An Analog for the Gold Stocks Correction

An Analog for the Gold Stocks Correction

news.goldseek.com / By Jordan Roy-Byrne / Sunday, 12 March 2017

The gold stocks bounced strongly today after the February jobs report confirmed the Federal Reserve will hike interest rates next week. While precious metals rallied strongly following the previous two hikes, I’m not so sure today marks the start of a big rebound. For one, the Federal Reserve could hike rates again in July. Second and more important, the technical setup argues for more back and forth action in the weeks and months ahead. While the current price action in the gold stocks is different from that in the previous cyclical bull markets, we do think we have found one viable comparison for the current correction.

Although the gold stocks may rally for a few weeks in the short-term, I see them testing the December lows or close to those lows before retesting their February peaks. If this occurs and the correction that began last summer remains in effect, then what does that mean for the larger picture?

Put simply, the gold stocks formed a historic low in January 2016 and are undergoing a sizeable correction (in price and time) to the record advance that took place in the first half of 2016. A long and deep wave 2 correction, though not typical has a few historical examples.

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