Is the gold bull market over or are we going through a tactical correction? That is the trillion dollar question that every gold investor on earth would love to have an answer on. We can find a potential answer in historical gold charts, in particular the comparison with the latest gold bull market.
The first chart compares today's correction (orange line) with the one of the gold bull market of the 70ies (yellow line). If anything, it is clear that the similarities are truly striking. The pattern on the chart is almost identical. Coincidence? Probably not, as corrections follow a similar path:
- Lower highs close to the top
- A sudden but very aggressive breakdown
- Slightly lower lows.
What followed after gold's correction in the mid 70ies was truly staggering. The next chart shows the continuation of the chart above. The yellow line shows the full bull market of the 70ies until the peak in 1980.
Note on the chart what happened after the correction stopped:
- A final washout bottom (panic bottom)
- A breakout which took out several intermediate tops
- Consolidation around the first (aggressive) breakdown level
- A series of higher highs
Will this gold bull market develop in exactly the same way as the one of the 70ies? We would say that the possibility is very high. So far, the correction seems to be losing steam, which is an argument in favor of gold. Gold bulls would hope that the $1,300 level is taken out with a vengeance, and that the rally stops around $1,400 /oz. That would be a first step to confirm the continuation of gold's great bull market.