Major developments are taking place in the precious metals world. As we have noted here in Penny Sleuth, the price of gold is destined for upwards of $2,000. However, we are currently experiencing a very natural correction.

With everything in the world of finance, people get scared. Last month, gold broke the $1,000 threshold and silver broke the $20 one. So of course, weak investors got anxious. They pulled back and sold off some of those gains.

As I write, it would cost you $880 for an ounce of the yellow stuff, while silver is going for $16.90 per ounce. That’s 20% cheaper than it was a few weeks ago. Great. But, why should you care?

Money…and lots of it…

First, let’s take a look at the last gold rally, back in the late 1970s.

As you can see in the chart below, gold underwent an eerily similar correction at the end of 1978. It lasted exactly one month before it righted itself again.

Does This Correction Look Familiar?

On October 30, 1979, the spot price for gold was $242.75. Exactly 31 days later, it had shed $50. That’s a hair over 20% off its high.

See the similarities?

So, the next question you may be asking is: “What happened after the last time this happened?” Oh, just the largest bull market we’ve ever seen in the precious metals world.

In 1979, and then again in the first month of 1980, gold went from this puny little sub-$200 metal to an $850 investment. It ended up being a 340% jump from the bottom of the correction to the top in January 1980. That’s nearly four and a half times your money in 14 months!

Now, I’m not saying we are bound to repeat that this time around. But, others are:

“Market ructions, the sub-prime conflagration and a collapse of the dollar could send gold prices to more than $3,400 an ounce within the next three years.”

— Dr. Clive Roffey
Publisher, Gold Action

“If 1979 to 1980 is anything to go by, [gold] could exceed several thousand dollars per ounce.”

— Bloomberg

…And my favorite:

“Gold and silver are now early in a historic bull market that will dwarf the 500-1700% profits we made in the ‘70s. Gold will hit at least $2,172 and $100 silver is inevitable.”

— Marketwatch

Honestly, it doesn’t make a bit of a difference if you believe any of them. At current levels there are already some huge profits to be made.

We’ve written to you about the potential juniors have right now. I’m not going to bore you with any more. If you want to, you can check it out right here.

As for what you should do now…the precious metals world is on a silver platter. (No pun intended.) Take what you like.

We will continue to let you know when the best ones come along. This is something worth following for quite some time.

Sincerely,

Jim Nelson
April 2, 2008

Jim Nelson

Jim Nelson is the managing editor of Penny Sleuth. He has been playing the stock market since he was 14, always with a preference toward smaller companies. He has honed his stock picking skills at Agora Financial since 2004, effectively combining a growth and value approach. Like Greg Guenthner, Jim also contributes to Penny Stock Fortunes on top of bringing you the Penny Sleuth every weekday.

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