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Gold Set to Plunge to Its Final Bottom

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While this bear market is finally coming to an end, don't expect it to end quietly.

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There are a few more important things to note. Gold from 1975-1976 had a very weak rally from point A to B. It was in a weaker position and then consolidated for the longest. That is why it had the steepest final decline. The S&P in 2009 consolidated for only four months. When it broke to a new low, it made its final low the next week. Like the S&P 500, Gold today had a stronger rally from point A to B. Also, unlike the other two Gold today has been in a bear market for over two years. Considering these things, I'd expect Gold's final bottom to be more similar to the S&P in 2009 than Gold in 1976.

How would this final decline in Gold affect the gold stocks?

The chart below is a monthly chart of the HUI Gold Bugs Index (INDEXNYSEGIS:HUI) and the AMEX Gold Miners Index (INDEXNYSEGIS:GDM) which is the parent of the Market Vectors Gold Miners ETF (NYSEARCA:GDX). Both markets bottomed in late June not to far above the major support which dates back to 2004. In fact, we referenced this chart when we penned an editorial, one day before the June bottom. Maybe Gold will break to a new low but the gold stocks won't. If the gold stocks do make a new low, this chart is telling you that it won't last for long. There is very strong support sitting right below the summer lows.



Unless Gold is able to close above $1350 in the near-term on a weekly basis then consider the short-term trend bearish. Gold looks set to plunge to its final bottom. Gold bugs will cry manipulation, CNBC (NASDAQ:CNBC) and Twitter (NYSE:TWTR) types will be mocking the Peter Schiffs of the world and many will be calling for $900 Gold. I urge you to avoid all this nonsense and focus on one thing. Get yourself in position to take advantage of this bottom. It's the very smart money that is looking forward to buying this bottom. I suspect the coming bottom will be the one the typical huge rebounds originate from.

Good luck!

Editor's Note: See more from Jordan Roy-Byrne at The Daily Gold.
No positions in stocks mentioned.

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