The Fed decision was the catalyst for the final breakdown in precious metals.
On Thursday Gold closed at a new low, below $1200 and the gold shares also
closed at a new low. Last week we wrote: "The bulk of the evidence leads
me to believe that we probably have not seen the bottom though we are very
close.....Bottoms can happen in an instant or develop through a basing process.
Huge immediate rebounds originate from extreme oversold conditions. We don't
have that at the moment."
The bad news is obvious. Precious metals are breaking again. However, the
good news is this will lead to the end of the bear market and a "back up the
truck" or "fat pitch" type of buying opportunity. History makes a strong case
that this bear market is about to end. Couple that with precious metals touching
multi-year support levels and the bear market has a very high probability of
ending.
First, we'll look at Gold. The chart below shows all of Gold's bear markets
though we excluded the two extremes: the 1980-1982 (a 65% decline) and the
1987-1993 bear (lasted five years and only declined 35%). The current bear
best resembles the bears of 1976-1976 and 1983-1985. The fact that the current
bear is longer suggests it will be less severe in price. Gold's shorter bears
(including 1980-1982) ended in a panic selloff. It appears this bear will share
the fate.
![24hGold - Precious Metals Bear...](http://www.24hgold.com/24hpmdata/articles/img/Jordan Roy ByrnePrecious Metals Bear is in its Final Throes-2013-12-20-001.gif)
![](../style/all/img/bouton/Zoom_in_6.png)
Where would a panic selloff take Gold? Gold should find strong support at
$1085 which is the 50% retracement of the entire bull market. That is a 9%
decline from Thursday's close. Also, major trendline support comes into play
in the low $1100s.
![24hGold - Precious Metals Bear...](http://www.24hgold.com/24hpmdata/articles/img/Jordan Roy ByrnePrecious Metals Bear is in its Final Throes-2013-12-20-002.gif)
![](../style/all/img/bouton/Zoom_in_6.png)
Moving to the gold stocks, we can see that the current bear market (in black)
only needs to go a bit further to be on par with past bear markets. Note that
the three bear markets that lasted the longest were far less oversold at the
current point. This suggests the current bear should end quite soon.
![24hGold - Precious Metals Bear...](http://www.24hgold.com/24hpmdata/articles/img/Jordan Roy ByrnePrecious Metals Bear is in its Final Throes-2013-12-20-003.gif)
![](../style/all/img/bouton/Zoom_in_6.png)
The chart below is a weekly line chart (weekly closes) which shows the HUI
Gold Bugs index and the GDM index (forerunner to GDX). The HUI has 10% downside
to 9-year support while the GDM, a broader index has 5% downside to support
dating back to 2002.
![24hGold - Precious Metals Bear...](http://www.24hgold.com/24hpmdata/articles/img/Jordan Roy ByrnePrecious Metals Bear is in its Final Throes-2013-12-20-004.gif)
![](../style/all/img/bouton/Zoom_in_6.png)
History, as it does for the gold shares, makes a strong argument that the
bear in Silver is nearly complete. With a bit more of a decline, the current
bear will become the second worst ever. Again, note that the bear markets which
lasted longer than the current one were far less oversold at the present point.
![24hGold - Precious Metals Bear...](http://www.24hgold.com/24hpmdata/articles/img/Jordan Roy ByrnePrecious Metals Bear is in its Final Throes-2013-12-20-005.gif)
![](../style/all/img/bouton/Zoom_in_6.png)
Silver, like Gold has very strong, multi-year trendline support that could
mark the bottom after this final selloff.
![24hGold - Precious Metals Bear...](http://www.24hgold.com/24hpmdata/articles/img/Jordan Roy ByrnePrecious Metals Bear is in its Final Throes-2013-12-20-006.gif)
![](../style/all/img/bouton/Zoom_in_6.png)
Given the weight of this historical analysis and technical analysis, I don't
see how anyone can argue that the bear market isn't coming to an end. Bear
markets typically last two to three years and are a function of price and time.
The more severe the bear is in price, the shorter it lasts. Bears that last
more than a few years are less severe in price. These historical charts make
a strong argument and the fact that Gold, Silver and the gold stocks are nearing
decade long support should increase your confidence substantially. Moreover,
the biggest bubbles (Japan,
Nasdaq, Gold, 1929) on average deflated by 65% to 85% in two and a half
years. The Silver bears chart shows its 87% decline in the early 1980s. If
the secular bull market was over, Gold & Silver would already be trading
at much lower levels.
Last week we concluded that: "The bottom line is there is no need to aggressively
buy yet unless the market becomes extremely oversold and plunges to a new
low. Wait for that to happen and if it doesn't, then a base is likely developing." Now
we know that a final plunge is developing rather than a base. The key to
catching a falling knife is to do so at an area of very strong support. I
think we've laid out the strong support for Gold, Silver and the gold stocks.
Good Luck!
If you'd be interested in more of this analysis and the companies
poised to rocket out of this bottom then we
invite you to learn more about our service.