In the gold market, we are in an intermediate decline. Here is what has happened before in gold, and what I think will happen again. Back in 2010, we were in the C-wave rally and we had a nice run-up and traders were waiting for a pull-back to get in. We got the pull-back and a rally, a convincing rally - similar to what we just had.
But that rally failed. And with the benefit of hindsight, now we can say that this was not the bottom of the intermediate cycle low. We had to make another leg down and undercut the market's previous low, and we had a final bottom.
I remember the sentiment at the time: this was very frustrating for gold bugs. They were losing their minds and it's a similar sentiment to what we're seeing now. They were saying gold is a worthless asset and there's no reason to ever trade it. And that's the kind of sentiment that builds the fuel for a huge trending move UP over the next two or three years.
Back to today, I am assuming the gold market is going to make a lower low, just like it did in 2010, it's going to dip. Spot gold has already made a lower low. Miners have already made a lower low. When December contracts make a lower low, gold holders will panic. We can probably expect silver to make a lower low as well. I have my doubts that gold will make it all the way down to the March low, but it could definitely dip down to 1850 or maybe 1862 is a potential target.
We could be setting up for a bloodbath phase: five to seven days of all-out panic selling, everybody becomes bearish - just like everybody was massively bullish, everybody thought "gold to the moon" after we already had a huge rally. And now we're getting rid of excessive bullish sentiment. Mostly this has been a sideways churn, but if we come down and trigger this bloodbath phase, and that takes us down to 1850, then we are going to generate some massive bearish sentiment. As a trader, that is what we want to see.
You have to buy at the right time in metals to make money. Especially in the miners; it's a terrible business and they are trading vehicles, not long-term holds. Long-term holds are your physical gold and physical silver. Miners are not long-term holding positions, so you've got to trade these.