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See chart above for notes on gold. All data confirms a major breakdown occurring in gold. We are likely to see sharply lower prices in coming weeks. I would anticipate at least to the green circle area by Jan options expiration.
Historically, bull markets such as the current gold and silver bull markets, are likely to retrace around 85% of the bull market on average within 2 years. This is taking it from the 2008 lows. So, that gives us some reference points that these are likely headed much lower. How long it takes, I think probably not 2 years in this case, but we will see.
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The US Dollar Index is confirming commodities should continue down. Watch for this to heat up quickly.
If there is a factor that keeps stocks from the typical positive seasonality over the next couple weeks, I believe it is the precarious position of gold and the corresponding breakout in the US Dollar Index. I would not dabble on the long side here.
I'll say this. If gold really goes down to that green circle (between $1400 - $1500?), I'd back up the truck. I'd only buy real physical gold though!
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