Correction Nearly Done....Theory and Evidence Provided by Four Charts

kitco commentary,  David Petch

This will make your eyes bug out, or roll:

When gold takes out $1800/ounce, it will create a move that powers well above the $1900/ounce...this is due to the significant amount of price action and time required to correct the top. Gold is expected to top out anywhere between $2500-3074/ounce before the end of August 2013. If $3000/ounce is hit, then a 61.8% retracement of the move from the end of wave [X] is expected, or $2200/ounce. This move down should occur between Q3 and Q4 2014, which will subsequently see gold go to anywhere from $6000-10,000/ounce. In order to balance all global debts by 2020, I calculated a valuation of $30,000/ounce would be required. I do not think the price will get to this level, but one thing I can guarantee....if gold goes above $7000/ounce, gold should be owned over stocks because most countries will be nationalizing mines for financial security.

We may be about to see a huge move in the gold markets, if this is correct.

Look at the fundamentals, one by one:

1. Political:  Barak Obama is still President.  That means no new trend here.  Obama has been good for gold.  No reason to think otherwise now.
2. The Fed is going to keep interest rates at near zero.  A point may have been reached which forces them to keep it at zero, because higher interest rates will cause the deficit to zoom higher.
3. There's no political will to address fundamental budget issues.  That means borrowing will continue in order to fund the deficit, with the Fed providing the necessary purchasing power to buy the bonds that are needed to fund such a deficit.  Taxing the rich will not raise the money needed.  This means the money supply will continue to be diluted.  To put it another way, inflation is bound to come and when it does, it could be devastating.
4. The US is moving towards a weaker defense posture while the bad actors are moving toward a stronger one.  This will eventually mean war, whether the peaceniks like it or not.
5. The US Dollar as a reserve currency could be over if the US loses a war.  That is where we are probably headed.
6. If the dollar takes a big hit, the domestic situation could become dire.  Gold thrives in periods of instability.

Everything points to higher gold prices.  But don't mention this to Paul Krugman.  He doesn't think we are experiencing any inflation, and isn't opposed to that even if we do.