In the space of just 36 hours, we have seen gold prices collapse from an all time high of $1,923.70 to $1793.80 (at the time of this writing).

Most technical analysts will be asking themselves if we just saw the gold market's last gasp.

After all, isn't gold supposed to be the currency of last resort, and aren't all fiat (paper) currencies doomed to failure? This is a widely held belief among much of the world's population -- and yet even in the face of anemic global growth, spiraling budget deficits, and out of control printing of the US Dollar (the biggest fiat currency of them all) is rallying!

Remember, gold is now trading as a de facto alternative currency, not as an industrial metal.

Gold prices are going to live and die at the whim of global currency traders. As currency traders become less fearful of paper currency, they will sell gold and buy up paper currencies. As they become more fearful, they will sell off paper currencies and go into gold.

These moves will be extreme in nature, and while it may look as if the bull market in gold is finished, I don't think it is.

During this 10 year gold bull run, we've seen gold go through many consolidation periods, and it appears as if we may be going into one of those now.

For those of you who are afraid that the gold bull market is over, just remember that most bull markets typically end in a massive move higher amid a torrid speculative frenzy.

That's exactly how the stock bull market ended in 1999-2000, when every internet stock went vertical. That’s also exactly how the last gold bull market ended in 1980. Gold prices in January of 1980 went from $550 to $850 (all in early January), then plunged to $650 little more than a day after hitting its high. It then further plunged to $490 before rallying back to $690, and by mid 1982 it was at $290!

Bull markets end in spectacular blow off tops, and I don't think we have seen that yet in gold. Additionally, in every major bull market -- whether in stocks or commodities -- we typically see the underlying trade to an all time inflation adjusted high.

According to the U.S. Labor Department’s inflation calculator, in today’s dollars, that would be approximately $2,287 an ounce. But even if we were trading at $2,287 I'd still think that there would be plenty of upside, because in big bull markets you generally see prices go much higher than the inflation adjusted high.

Just look at oil: its historical high had been about $40, and its inflation adjusted high was approximately $90. Was the oil run over when it hit $90? No it wasn't, because in 2008 we saw oil move above $150 a barrel.

The bottom of this consolidation range could be as low as $1,600, and if we see $1,600 you'll see a lot of people panic. Make sure you are not one of them.

Here's why:

The problems in the global economy that propelled gold from $250 an ounce to $1,900 an ounce have not gone away. Wall Street can play pretend all they want -- it's your job to profit from their short term blindness.

So long story short, this pull back in gold should be viewed as a buying opportunity rather than the beginning of a new down trend in gold.

Teeka Tiwari
Tycoon Report