Last week we put out a chart
that may have scared some investors. We stated that a gold pullback was
imminent and we could expect the Gold BUGS Index to lose another 14% in gold
miners before markets stabilize. In just three days, we have lost another 3% -
this rapid decline is unprecedented as investors were already hesitant about
golds enormous rally.
We plotted three of the most recent gold equities bull markets on one chart (one year out), and it appears that the current recovery is overbought and due for a correction.
The 2016 bull market is rising fast, but if history repeats itself, the market should have already taken back some gains, something we may be experiencing the beginning of.
It appears that both of the previous corrections occurred four months after the initial run-up; in 2008 the Gold BUGS Index lost 20%, while in almost the same time span, the 2000 gold bull lost 18%.