Important Gold Update!

Issue #128

Dear Member,

Update: Since yesterday’s plunge, a lot of investors have thrown in the towel on gold, silver and mining shares, yet again.

But that’s actually music to my ears!

Yes, gold did break a support level I previously gave you. But that line in the sand, so-to-speak was merely a short-term line in the sand, a break of which, yes, would confirm a move lower, but — and very importantly:

It would not change the long-term picture, which remains exceptionally bullish for gold, silver and mining shares!

Let me explain why, and bear with me for getting a bit technical. I have two charts to show you.

Here is the first chart. This is the wave pattern I used to draw my line in the sand at $1,278 gold, a price that was broken last week.

In this chart, I have labeled the waves for you. In a nutshell, gold was acting as if it wanted to hold the $1,278 level which would have implied a 4th wave correction, to be followed by a 5th wave to the upside and a price target just above the $1,400 level (for the first major leg up in the new bull market).

That in itself was bullish. But it was not as bullish as what is now unfolding!

Let’s now take a look at my second, updated gold chart, based on the latest action. Here’s the chart. Based upon hidden Elliott Wave theory, and now that gold has broken the support level at $1,278 (yet the entire decline since the March high is corrective in nature) …

I can confidently say that we now have the first leg up in place, and that gold is now instead in a higher degree wave 2 decline …

Which means, unequivocally, that as soon as gold bottoms, a very powerful wave 3 to the upside will unfold, with a HIGHER price target of at least $1,531 and probably much higher to near $1,600!

That in turn would be followed by a fourth wave pullback, and then a fifth wave higher to much higher prices thereafter.

Now, I fully realize that this is a bit technical for most of you. So let me flesh out a few additional points.

First, my sources in Asia tell me that gold demand has dramatically picked up as of late. The chief reasons: Beijing is expected to soon loosen its monetary policies and the martial law in Thailand is driving many investors there back into gold.

In addition, gold demand in India is picking up, they say, due to the recent election of pro-business leader Narendra Modi.

Second, trading volume during last week’s decline reached its highest level since last July, a cathartic sign, indicating lots of recent bulls are getting washed out of the market, and typical of important bottoms.

Third, sources also tell me that Russia and China are about to come into the gold market, in a very big way. That would not be surprising, given both countries’ recent natural gas agreement and closer ties with each other, as part of an anti-Obama stance.

Moreover, again, forgive me for getting a bit technical, but my system models, not based on Elliott Wave theory of any kind, also agree that last week’s decline was merely a shakeout of the bulls, one that will prove to be far more bullish than bearish.

So what to do? Right now, I want to wait a bit and see how gold closes out the month, which is tomorrow, the last trading day of May.

If gold closes at or above the $1,250 level, I will likely recommend repurchasing the VelocityShares 3x Long Gold ETN (UGLD) on Monday.

Meanwhile, hold ALL other positions and stay tuned! I expect to issue some new recommendations next week.

Best wishes,

Larry