Two Scenarios for the Ongoing Precious Metals Correction

By Boris Sobolev, GoldSeek

Five weeks have passed since the recent correction in the gold market commenced. Gold lost 10% in this time period, while the precious metals stock indices fell by 16%. Over the past two weeks, precious metals stocks stabilized ($XAU even climbed by 1 point). Is this a temporary breather before more downside or did $1075, set one week ago, mark the bottom?

If we are in the midst of a short term correction similar to those that occurred in December 2005 and November 2007, then in the next couple of weeks, gold is likely to find support and should commence its rally to new highs, likely to $1300-$1400. This scenario, from our point of view, is most probable. It will remain our preferred scenario if gold will be able to hold the main (black) uptrend line in January and not close below $1025.

If the black uptrend line and the $1025 level do not hold, this will mean that the high of $1225 set in early December was an intermediate period top and that gold has entered into a multi-month consolidation.

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