The prevailing controversy, among gold bugs, is whether or not gold stocks have bottomed. As our Gold Stock Indicator has indicated, so far, gold stocks have a long way to go before reaching lows similar to what occurred in 2008, on a relative basis. This debate about gold stocks only arise out of the fact that they have fallen so much while the price of gold has been “stable.”
However, when the price of gold is viewed from the perspective of Edson Gould’s Speed Resistance Lines (SRL), we see that there is a lot room for gold to move to the downside.
According to Edson Gould’s Speed Resistance Lines (SRL), gold has as a minimum decline of -25% from the closing price of Friday March 1, 2013 to the conservative downside target of $1,179.25. From our experience with Gould’s SRL, the minimum downside target is often achieved, especially when the price experiences an almost parabolic price move to the upside.
The extreme downside target of $681.75, which seems outlandish from the current level. Therefore, we’ll split the difference with an initial extreme downside target of $930.50 until proven otherwise. Already, the $1,179.25 level seems extreme in our minds.
We can’t be certain that the price of gold has any further to fall. However, our experience with the work of Edson Gould cannot be ignored. We’ll have to assume that if gold breaks below $1,531 then it would be wise to build $1,179.25 into our expectations.