Regular readers of my articles on gold know that I have a theory on this gold bull market. I believe we are in a 13-Fibonacci-year uptrend that started in 2001, and now we are in the final four years of that uptrend.
It is in this last five-year window, which I theorized started in August 2009, that investors really get involved. As the crowd comes in, prices push higher and higher, and then more and more investors come in, and so forth.
The very recent rally has pushed gold bullion up to about $1,420 per ounce, on the way to my projected $1,480-$1,520 pivot highs on this leg from the $1,040 area in February.
Based on Elliott Wave Theory, if I am correct, we are in the third wave up of five total waves from the August 2009 $900 per ounce levels. The first leg went from $900 to $1,225, the second leg was corrective to $1,040, and now this third wave should complete at around 150% of the first wave’s amplitude. In plain English, the probabilities are for gold to continue higher to about $1,527 per ounce, possibly a tad higher if the typical Elliott Wave patterns take hold.
One of the better ways to play this next four years of upside with intervening corrections is to look at prospect generator companies. These are gold, silver and copper explorers that do the early field work in identifying prospects for drilling. They then farm out these projects to willing partners and retain equity stakes and/or percentiles of the project itself. This reduces their need for capital while retaining nice upside for shareholders.
They also offer some diversity. When you are a tad long in this current wave pattern’s tooth, this is way to stay onboard, but not go overboard. Should one of the projects not pan out, you are not placing your entire shareholder bet on one drill project, and yet if they hit on a few, the upside can be substantial.
Below is a chart pattern of where I see this rally peaking out and where I forecasted recent pivots. As we approach these levels ($1,480-$1,525), it may be a good idea to pull back on some of your positions whether in the metal itself or individual stocks.
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