Early this month we sounded the alarms as gold and many gold stocks became clearly overbought and a correction appeared imminent and even desirable. Our alarms are now going off again, but this time it’s to “jump back in” as gold is ready for an explosive year-end/January move. That bodes well for our favorite stock picks including our latest star, Gold Bullion Development Corporation (GBB, TSX-V), which we will be covering extensively here in the days and weeks ahead.
Gold’s intra-day reversal Tuesday (an important “V” shape pattern that also showed up in silver) was just another sign that this correction has run its course and the bulls are about to regain control. Gold fell as low as $1,073 Tuesday morning, then rallied back significantly to create a “V” shape pattern that technical analyst Clive Maund has identified successfully before at market bottoms.
Other technical indicators suggest gold’s advance is about to resume: Stochastics are at very oversold levels, from where strong moves have originated before, and the oversold TSX Gold Index came within two points Tuesday of our earlier identified “worst case” bottom of 325 where it is supported strongly by a rising 200-day moving average.
Most importantly, as we have been stating here repeatedly recently, the Venture Exchange keeps telling us that gold is headed higher – much higher. Gold’s $150 drop in price barely put a dent in the CDNX these past three weeks. From its December 3 high of 1466, the Venture dropped only 66 points or just 4.5% (vs. gold’s drop of 12.5%) to its monthly low of 1400 December 8. After that, the Venture firmed up which told us clearly that gold’s primary trend was not going to be broken and its correction was likely going to be short. The Venture Exchange remains in a parabolic uptrend that may not seriously correct until the Index has tested the 2,000 level in early 2010 – yes, that is a stunning 41% move from current levels. We speculated on this earlier in the month – a massive move in the CDNX appears to be building, a move reminiscent of the 2002-2004 period.
So The Perfect Storm is upon us and investors need to fully grasp what’s about to happen here. This is a low-risk entry point with huge gain potential in quality junior gold stocks with sound management, money in the bank, and excellent properties to explore. Now is the time to pull the trigger.
By the way, as a point of interest, in a period covering the last eight years (2001 through 2008) the CDNX has gained an average of 50 points or 3.68% over the final three trading days of the year. Over those 24 total trading days, the Index was up on 23 of them. With the markets closed this Friday and next Monday prior to the final three trading days of the year, NOW is the time to be a buyer.
Gold Bullion Development has firmed up nicely this week and is right on track for a major breakout. We’ll be reporting more on GBB Wednesday – this one has serious “legs”.
