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Monday, April 15, 2013 12:51 PM

Gold, Silver Hammered; End of the Precious Metals Bull Market? What's Next?

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After drifting slowly lower for months, gold has been crushed in the past few days as the following chart shows.

Gold Daily

click on any chart for sharper image

Gold 30 Minute

Silver is pretty much the same story as gold.

Silver Daily

Silver 30 Minute

This certainly is a steep correction, but does this mark the end of the gold and silver bull markets, and the everlasting triumph of paper currency backed by nothing?

Before you decide let's look at a historical chart courtesy of Sharlynx Gold.

Gold 1974-1979

click on any chart for sharper image

After Nixon closed the gold window, gold soared from $35 to nearly $200 in late-1974. Gold then dropped almost to $100 in mid-1976. Was the gold bull market over following a near 50% plunge?

The answer is no. Gold topped $250 in 1978 before falling back to under $200 in the same year. Was the gold bull market over then?

Hardly, gold then blasted to $850 in 1980. Was the gold bull market finally over? Yes it was, for nearly 20 years until it bottomed near $250 in 1999.

My point regards the volatile nature of bull markets, nearly any bull market.

What's Next?

Is the gold bull market over now for another 20 years? While no one including me can say what happens next, fundamentally I see no reason to believe the gold bull market is over.

There is no indication central banks have anything under control. There is no indication central banks are going to stop flooding the world with paper. Indeed, there is every indication they are going to escalate their printing of paper.

That said everyone must do their own due diligence and assess market conditions before making investment decisions. The last thing you want to do is go into any market with leverage or greater than your risk tolerance and panic out of a good investment at the wrong time.

If you are investing in gold, it's important to understand why! It's also important to understand your risk tolerance, timeframes, and the volatile nature of bull markets.

Mike "Mish" Shedlock

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