Technical analyst Jack Chan has examined the charts and says that if we are in a new bull market, prices in both gold and gold equities should begin to pull back and consolidate soon.
As suggested in our previous analysis, we need to see a couple of things happening in order to welcome a potential new bull market:
#1. COT data to return to bull market values.
#2. Gold price to exceed the 2015 high at $1,302.
Nobody can predict when this will happen, but we can prepare by looking at the past bull and bear markets so that we can recognize a new bull market if and when it materializes.
The bear market from 1981 to 2001
After topping above $700 in 1981, gold lost more than half of its value in just over a year, followed by two sharp bear market rallies, and then died a slow death over the next 12 years.
Gold stocks as represented by $XAU had two bear market rallies during that 20-year bear market, with both rallies gaining over 100%.
The bull market from 2001
The bull market in gold, which began in 2001, did not start with a price spike. In fact, rallies were followed by sharp pullbacks and multi-month consolidations, which are signatures of a bull market.
Gold stocks as represented by $HUI did the same. In fact, the initial rally gained about 100% and was followed by a multi-month consolidation. And this same pattern went on continuously throughout the bull market.
The gold market now
So far we have a 20% price spike in gold, with no correction/consolidation yet.
Gold stocks as represented by $HUI have spiked up 100% with no pullback.
Summary
If we are in a new bull market, prices in both gold and gold stocks should begin to pull back and consolidate soon.
If we are still …read more