(Kitco Commentary) - Nearly two weeks ago, we wrote that Gold and Gold Stocks were due for a pause. Naturally, that includes Silver.
The miners were very overbought and at resistance while Gold was approaching measured upside targets of $3000 and $3050 after a sharp move over the previous 12 months. Silver had only a tiny bit more upside before reaching very stiff resistance at $35.
Friday’s decline confirms a correction has begun.
History shows that some of the absolute best moves in Gold occurred after the market's first correction after breaking to new all-time highs.
Gold has broken to a new all-time high and sustained it thrice. After each breakout, Gold tested its 200-day moving average (or came within 2% of it).
Here, we circle the correction and note Gold's advance before the correction, followed by the decline in percentage terms.
At the bottom of the chart, we circle the corresponding corrections in Silver.
After Gold tested the 200-day moving average, the gains in both Gold and Silver were spectacular.
The minimum of the three gains for Gold was 80% in 18 months, and for Silver, it was 228% in 14 months.
That type of performance can repeat itself into 2026, but only if there is a fundamental shift.
Interestingly, the timing for a fundamental shift lines up perfectly with the two most important charts.
Gold against the 60/40 Portfolio is working on a breakout from a decade-long base, while Gold against the stock market is close to breaking out of a 4-year-long base.
Breakouts in these charts would signal that capital is moving away from stocks and conventional assets in favor of Gold.
The setup is there for Gold and Silver to achieve spectacular gains if two things occur.
First, Gold needs to correct for a few months and successfully test and hold its 200-day moving average.
Second, and more importantly, an economic downturn must lead to a resumption of interest rate cuts, which would shift some capital away from conventional assets to Gold.
That would be expressed through breakouts in Gold against the S&P 500 and Gold against the 60/40 Portfolio. The setup of those ratios signals they are ripe for a breakout.
Senior gold stocks, mid-tier gold stocks, and junior gold stocks are also ripe for a breakout, after the next correction.
We are already positioned in the leading companies but are actively uncovering more companies that could lead the next move higher.
Now is the time to pay attention. This correction will bring about an excellent buying opportunity.
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