If you don't study history, you are doomed to repeat it

Man is that ever true.  A quick look at the past in the metals here to get an idea of what the future may hold.

The first picture I am going to provide is the consolidation under $1000 in 2008-2009.

As you can see after hitting an extreme low, gold rallied to retest it's major resistance point, then retraced about 50% of the move hitting a low in April of 2009.  It later climbed back up to that major resistance and shattered it in the fall of 2009, running up over 20% in only a few months.

This is gold today forming an almost exact replica of its 2008-2009 formation in a slightly more condensed fashion.  Note,  after hitting an extreme low, gold rallied to retest it's major resistance point, then retraced about 50% of the move hitting a low in April of 2012...  Yes, I just copied and pasted the same sentence from above and changed the date to 2012... because I can...because it applies.  We are now at the equivalence of the 860 bottom we saw in April of 2009.  By May, gold retested just shy of $1000 followed by our typical summer doldrums and a break of $1000 by fall that shot up an additional 20%.  If past is prologue, expect at least 1800 by May or so, followed by a pullback this summer to around the 1700.  If things light on fire as they typically do this fall, a 20% break above 1800 puts us at 2160.  A 20% break above 1900 puts us at nearly 2300.

If you haven't read Bob Hoye's latest on 321gold comparing today's action to that of 1979s, here it is.  http://www.321gold.com/editorials/hoye/hoye040512.html

I think Bob is dead right on this and there are a few points I wanted to add.  Well, really a table of the junior miners returns in the time that followed.

I've posted this before but wanted to add, it wasn't until gold began to go parabolic.  Gold saw a glimpse of such a move top going into 1975, but that was just a warm up for the major parabolic move it made after that.  I believe we saw a glimpse of such a move in 2011 as we rocketed to 1900.  I think a clean break of that level, through the 2000 area will be the beginning of a parabolic move.  And again if past is prologue a similar move on the GDXJ would bring it to 500.  (the avg appreciation of the 15 stocks listed was 2300%.)

Ok everyone thats all.  Nice and quick.  Be sure to read the Bob Hoye article, and as always (especially now)  be careful out there.

-Jonathan M Mergott