Greetings, and welcome to this week's chart lesson.

Some traders are frustrated and worried that the bull market in gold may have run its course. Of course this is possible but we've seen this type price action in the past. In fact, the market has pulled back three times as it's doing at present. Of course, unless you think the bull market is over, the question on trader's minds is how long will it be before the market makes new highs?

Unless some sort of global shock that sparks another rush into gold which certainly cannot be ruled out in today's economic problems, I think the answer may lie in examining the size and length of past corrections and how long it took gold to reach new highs afterward.

It makes sense that big corrections would take longer to reach new highs than small ones, but I wanted to confirm that assumption with the data. I also wanted to determine if there were any patterns in past recoveries that would give us some clues that we can apply to today.

Gold set a record on September 5 at $1,911.60 an ounce and to date has fallen as low as $1,525.00 December 29, a decline of 19.2%. In order to determine how long it might take to breach $1,911.60 again, I measured how long it took new highs to be mounted after big corrections in the past.

The following chart details three large corrections since 2003, and calculates how many weeks it took the gold price to breach the old high.

As you can see, it took a significant amount of time for gold to forge new highs after big sell offs. And yes, the bigger the correction, the longer it took.

In 2006, after a total fall of 22.6%, it took a year and three months for gold to surpass its old high. After the 2008 meltdown, it was a year and seven months later before gold hit a new record.

Our recent correction more closely resembles the one in 2003 (see chart below). After a 16.2% drop, gold surpassed the old high eight months later.

So when do we reach a new high in the gold price?

Let’s apply the same ratio from the 2003 correction and recovery: If it took 32 weeks to reach a new high after a 16.2% correction, a 19.2% pullback, as we currently have on this pullback, would take 35 weeks.

An exact date is pure speculation, of course. On one hand, gold could drop below the $1,525.00 low if the selling resumes. On the other hand, Europe and/or the US could resume money printing on a large scale and send gold up quickly. The point of the data is that it signals we shouldn’t be too surprised if we don’t hit $1,912.00 for another seven months yet.

Think that’s too long? There are some important reasons to not let it discourage you…

Once gold breaches its old high, you'll probably never be able to buy it at current prices again.

That’s a rather obvious statement, but let it sink in. Buying now at $1,600 and then watching the price fall to, say, $1,500, wouldn’t be fun – but it’ll probably hit $2,000 or higher before the year’s over, never to visit the $1,600s again this cycle. If that turns out to be correct, the next seven months will be the very last time you can buy at these levels. You’ll have to pay a higher price from then on.

Look at it this way: If the “rebound ratio” is similar to the one in 2003, you have seven months and counting to buy whatever gold you want before it’s no longer on sale. It’s entirely possible that by this time next year you will never again be able to buy gold for less than $2,000 an ounce – unless maybe it’s in “new dollars” or some other currency that circulates with fewer zeros on the notes.

The data can also help you ignore the noise about gold’s bull market being over and other nonsense spewed from mainstream media types. If gold doesn’t hit $1,912 until summer, you’ll know this is simply normal price behavior and that they’re overlooking basic patterns in the data. And when September rolls around – seasonally the strongest month of the year for gold – and the price is climbing relentlessly and they’re caught off guard by it, you’ll already be positioned.

Regardless of the date, we’re confident that a new high in the gold price will come at some point, because many major currencies are unsound and overburdened with debt – and they’re all fiat and subject to government tinkering and mismanagement. Indeed, the ultimate high could be much higher than current levels. As such, we suggest taking advantage of prices that won’t be available indefinitely.

After all, you don’t want to be left without enough of nature’s cure for man’s monetary problems.

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