I was interested in Marc Faber’s comment about gold, namely that it is “beginning to correct and that that correction may last for some time”. His choice of the word “correct” implies that its price has been wrong and inaccurate.

Or does he mean simply that, having been higher in value in 2010, it is going to be lower for a while into the future? If so, in what way is this a “correction”? In what way is the current lower spot price right and accurate in comparison to a wrong and inaccurate price last year?

Why use “correct” and “correction” at all? Why not say that the gold price has fallen for a while and may stay like this for some time?

I submit that to describe something as a correction, there needs to be some rather more general comparison rather than that its price was higher in the recent past since we all know that commodity prices rise and fall.

What about its current value being “wrong” in terms of inflation over 2010 or over a longer period? One could then say that the gold price has corrected against the price that inflation over time would accord it. But this would not apply to the small fall in gold price since the end of last year.

After all, over what period of time has Marc Faber’s gold “correction” operated? Only about two months! Today’s price of about £17.5/gram is the same as the £17.5/gram price at the end of November 2010. So, how can a return to a price level of two month’s ago be called a “correction”? A fluctuation, yes, but not a correction!

By choosing to use this word “correction”, Faber is saying, surely, that the gold price was really, in fact, too high last year – that is two month’s ago – quite unreasonably and out of financial context too high, so that its current fall, though slight, must be described as a correction. This is absurd!

To my mind, the only direction of the gold price which could be rationally called a correction is upwards and considerably higher than its present level or than the level last December. Its price at the moment is surely “wrong” and at an “inaccurate” level (if we must use the terminology of correction) when it is compared to the progress of inflation and to the quantity of wealth actually invested in gold at the present time, say, about 1% of all investments, when compared to the total quantity of wealth invested.

I suggest that gold is NOT beginning to correct and there is NO correction lasting for a while if the change, which is being called “correction”, is downwards in price. It is merely a fluctuation occurring in its historical upwards rise. After all, gold was £22 per gram in the first week of 2010 and it is now £27.5 per gram in the first week of 2011.

@John Mark:
While I can’t dispute the the gist of your commentary, I believe the term “correction” is one that traders use to explain the market’s movement. They even use this term even during a strong bull market of a long duration.

JPM is Very Successful in Engineering This Big Sell-Off:
What fascinates me regarding the current sell-off in precious metals during January is the extremely high degree of success that JPM & their cartel are having. Collectively, they must have secretly coordinated their moves beforehand, and it is likely that they also secretly agreed on the duration for this sell-off as well.

The Sell-Off May Last Another Two Weeks:
Two weeks ago, I mentioned on this blog that this sell-off appeared to be a very well coordinated effort by multiple banks, the FED, and the media. I also said that the sell-off may not ebb for a while, for a variety of reasons. Those not familiar with JPM’s motive may want to know that the primary reason for this sell-off is that JPM is highly motivated to reduce their massive silver short position.

Traditionally, JPM’s suppression scheme begins about 6 to 9 trading days PRIOR TO the options expiry date for the month. However, this month, JPM began their tricks at the beginning of the month. That was very strange.

January’s Options Expiry date is tomorrow, 21 January. However, something tells me that JPM may continue their manipulation game for a while longer, since China, who has consistently been a big buyer, will be celebrating their New Year in 12 days, and the Chinese precious metals markets are not as active at this time. Time will tell.

On the other hand, I notice that gold and silver are being suppressed unusually hard today, so maybe JPM is trying to complete their scheme for this month by squeezing out a few more tech longs today. Once again, time will tell.

For those wanting to buy physical gold/ silver, or the mining stocks, today and tomorrow would be a good time to buy your first “tranche.”