Gold On the Verge of Moving Into Bubble Phase of the Bull Market
All of the conditions necessary to launch the bubble phase are now in place.
However, all of the conditions necessary to launch the bubble phase are now in place. Gold is in the process of putting in an intermediate degree bottom. That bottom, which is only days away (if it hasn't already happened today), is likely going to be the single greatest buying opportunity of the decade.
Gold sentiment is at multiyear lows. Retail traders that bought at $1,900 have gotten wiped out. The media is full of stories calling for the death of the gold bull. Institutional traders from John Paulson, George Soros, and Dennis Gartman have all gotten knocked off the bull.
Breadth in the universally hated mining sector is back down to levels that have only been exceeded during the crash in 2008.
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This sector has consolidated for so long that no one believes in mining stocks anymore. This is exactly the same sentiment that was prevalent in the silver market in the fall of 2010.
All the conditions are in place to launch the next stage of the secular bull market.
Up until now my expectation has been that we would see gold consolidate for probably the better part of a year before the next C-wave breaks out to new highs.
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However, the scenario that is unfolding in the CRB Commodity Index and Dollar Index has me wondering if the gold bull isn't going to start evolving much faster than I originally expected. Let's just say that if I am correct and the dollar is on the verge of topping, then we are probably going to see a much shorter consolidation than originally expected. Gold could launch much more quickly out of the B-Wave bottom than I expected and move to new all-time highs as early as the next intermediate cycle.
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As a matter of fact I'm pretty confident that if the dollar turns down it is going to trigger the beginning of the third and final bubble phase in the gold bull market.
The public is already starting to become aware of the gold bull. All we need at this point to start the flood is for gold to recover quickly from this sell-off. If gold quickly shoots back up and tags or moves up through that big psychological $2,000 number, I expect it will be the siren call that draws the public into the bull market. And it is the public coming into a market that triggers the bubble phase.
During this phase of the bull I expect we'll see the normal ABCD wave pattern break down as gold starts to accelerate into what will almost certainly be the most incredible parabolic advance in history. By the fall of 2014 I expect we will see gold somewhere between $7,000 and $20,000 an ounce.
Editor's Note: Toby Connor is the author of Gold Scents, a financial blog with a special emphasis on the gold secular bull market.
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