I've been warning for weeks now that gold should likely have another leg down. Now I want to look at the mining stocks. I'm seeing a very destructive behavior amongst the gold bugs right now. Denial is it's name. There is way to little fear and way to much bottom calling in the precious metals sector.The XAU is on the verge of breaking through major long term support. The current 18 week cycle still has 5 to 15 days to go yet before reaching the timing band for a low. I have to wonder, can the miners hold above that $120 level that long?
Now here is a scary thought that I dare say none of the gold bugs are even considering. What if the bear flag is in reality a midpoint consolidation of a T1 pattern. If it is we could see the XAU drop fairly quickly to the $70/$80 level.
I will say that this decline probably won't halt until precious metal investors experience enough pain to put an end to the bottom calling. From the comments I see on most of the gold blogs that's not even close yet.
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