Gold continued its sell-off overnight, plunging over $100 from Friday’s close for the second straight day – but is now showing signs of bottoming. Over the past 10 years of this gold bull market, large scale corrections have frequently taken the price back to/or near the 200 day moving average. Only once has a correction breached the 200 day moving average – during the height of the financial crisis in 2008. Last night, gold reversed right at the 200 day moving average, touching it for only a moment, before rallying $50 in a few minutes, and is now trading almost $80+ over that level.

OPINION

With Europe on the brink of a full blown sovereign debt crisis, broad systemic failures are again front page news, with some talk of the Euro failing as a currency altogether. Those who participated in the gold market in late 2008 saw the price drop dramatically from $930 an ounce to $685 in two week’s time (a 35% drop). The drop in gold over the past two weeks is eerily similar in both pace and magnitude. The counter-intuitive nature of the drop in 2008 prompted massive physical shortages as investors flocked to the yellow metal as a safe haven. The price responded thereafter as well…nearly tripling in three years. Physical demand through this pullback has been just as vigorous. So while the latest move will test the conviction of even the most ardent believer, those who remain committed in their resolve may very well see this range as the best buying opportunity in the gold market since 2008.

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