Gold Bottoming

Gold is bottoming, showing incredible resilience over the past 7 months. After suffering an epic plunge in last years second quarter, gold has held its ground ever since. This is despite still facing the same howling headwinds that forced that extraordinary selloff. Gold has found strong support and carved a massive double bottom. Thus 2013s gold super-storm has passed, and a mighty new upleg is dawning.

Obviously last year was exceedingly miserable for gold. This metal plunged 27.9%, its worst calendar-year performance in 32 years! When something hasnt been witnessed for a third of a century, there is no doubt it is rare and extreme. But the whole year masks the real story, the second quarter. The gold price plummeted an astounding 22.8% in 2013s Q2. That was its worst calendar quarter in 93 years!

Almost 4/5ths of last years entire gold losses happened during Q2. If the pair of epic gold selloffs that erupted in April and June hadnt occurred, last year wouldve looked radically different. And dont be fooled by the certainty of hindsight, market events so rare and extreme that they only happen on the order of once a century simply cant be predicted. These once-in-a-lifetime super-storms just have to be weathered.

After golds second-quarter free-fall, analysts swarmed out of the woodwork to forecast far-lower gold prices. They bought into the extreme fear spawned by that epic selloff, fully expecting golds downside momentum to continue. Dire predictions of sub-$1000 gold in the subsequent months abounded, even among veteran gold analysts. Their commentary back in June and July was overwhelmingly bearish.

But momentum-based technical analysis always fails at extremes. Just when everyone is convinced that a price has moved so far in one direction that its kinetic energy will carry it on indefinitely, prevailing sentiment is too lopsided to be sustainable. In golds case, the epic fear last summer meant everyone susceptible to being scared into selling gold low had already pulled the trigger. So gold started to bottom.

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Gold Bottoming