It’s time to consolidate and reduce volatility
Gold suffered a 20% correction over eight months. A 15% rebound followed in two months. He retraced some, but not most of the losses.
This action is part of the grip of a super bullish cut and grip pattern.
The handle itself is part of a much larger bullish consolidation, but the market is approaching resistance within the handle.
Below we plot the VanEck Vectors Junior Gold Miners ETF (NYSE :), the VanEck Vectors Gold Miners ETF (NYSE 🙂 and.
As you can see, gold has been held at $ 1,900 while silver has yet to break through resistance at $ 28.50. It is possible that gold could reach resistance at $ 1,920 or even $ 1,950 which would match resistance testing miners from Q4 2020.
In a bull market, sustained corrections in gold usually end in bullish consolidations. In other words, there is the initial decline, a rebound and then a consolidation.
In the chart below, we plot the average of the six historical corrections in the gold bull market as well as the average of the three corrections that could be the most comparable to those today.
Gold did not closely follow any individual correction but reflected both averages, which now argue in favor of bullish consolidation at the end of the year.
Consolidation and time can lead to downside and less volatility, which is a necessary condition that facilitates large impulsive moves.
We plot the gold below and several different indicators including Gold Vix (GVX) and Average True Range (ATR). The vertical lines show the points from which the gold has made great movements.
These indicators are on the decline, and I expect them to bottom out towards the end of this year through early 2022.
The second half of the year could be the setting for the next higher stage in precious metals, which I think could be one for the history books. It’s time to prepare your portfolio, but some quality juniors have already started to move.
I have positioned myself in companies with the best combination of upside potential and fundamental quality. These are companies that you can buy and hold for a few years and have the potential to be 5.7 and 10 baggers after gold goes over $ 2,100 / oz.