This is still a very possible scenario; thus gold may very well top around 1500, correct down to ~1000 and then start the next big rally. I'm following a slightly different scenario now though, I think the big up wave in gold is about to start:
The big up wave? Isn't gold in a bubble already?
I don't think so, as you can see in the chart above there wasn't really any absurd exponential rise in gold, it looks more like a healthy bull market. So, I think the gold bubble has yet to start!
Yesterday, I found a very nice chart that illustrates this perfectly:
What you see on the chart is an overlay of gold and the recent two bubbles. So if history is any guidance the 'real' gold bubble may start very soon and take gold prices way higher than today. And by the way, the 'gold bubble' is even fundamentally based unlike the others...
Medium term I think gold should peak sometime in February either to complete wave [1] of III or wave I. This isn't some wild guessing, it's simply the seasonal play:
As you can see gold usually peaks mid February, moves sideways for half a year and then starts a big rally late August. In the past decade this has worked almost every year, thus I don't see any reason not to expect the same happening again in 2011: a top in February, a correction until late August and then the next rally.
Whichever way it decides to go, physical gold is a great hedge against the worst case, hence it should be in every portfolio in my opinion. ; )
