Gold and Gold Stocks – A Comment on the Correction

by Pater Tenebrarum
Acting Man

A Bigger than Expected Downturn

The recent downturn in gold and gold stocks has become bigger than we expected. We basically thought that gold might correct to the support area around $1320 and then resume its rally to test the interim high around $1420 to 1430 that was reached last August. Clearly that has turned out to be an overoptimistic assessment.

One hint that things may turn out otherwise was probably the fact that gold stocks turned down again very shortly after making a standard upside move from a small triangle/pennant, which is usually a bullish continuation pattern. Often when bullish (or bearish) formations fail, there is a tendency for prices to overshoot in the other direction (see the GDX chart further below).

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