I think we are nearing a big bottom and a rally for gold.

You see, nothing goes up in a straight line. In bull markets, there are corrections and consolidations and corrections. There is an old saying that Mr. Market always wants people to be wrong.

During major bull markets there are crashes and smashes. These declines shake the weak hands out. What happens is there is a crash in stocks, like there was in 1987, and this scares people. Then they always think about that crash or correction.

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Sometimes you can look wrong in the short term during these corrections. For example, in 2008 many gold bulls looked stupid in the short term as gold prices fell 30 percent and gold stocks fell almost 70 percent from top to bottom. However, just over a year later, most gold stocks were trading at new highs.

We are seeing a similar correction at the moment, with gold nearly 20 percent and gold stocks nearly 35 percent off their highs of 2011. However, I think that this correction is nearing its end.

John Paulson and George Soros see this as well. Paulson upped his gold position last quarter and has been on the record as saying that his gold-based hedge fund will be his best performing in the coming years. Gold now makes up nearly 44 percent of his fund.

Soros’ fund more than doubled its position in the SPDR Gold Trust exchange-traded fund (GLD) in the second quarter.

It is obvious that both men are betting on some form of quantitative easing or money printing coming from the European Central Bank this fall.

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In addition, this combines with the positive seasonals we have going for us. Gold typically bottoms in the third quarter then rallies into the forth quarter and year-end.

Therefore, I suggest you take a look at where the smart money is going and look at gold and gold equities.

About the Author: David Skarica

David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.