A reader sent us along this chart, and channels Martin Armstrong in arguing that gold has another couple hundred dollars of upside before a leg down.
1355 tgt…(got to slide to the right-depending on your screen format) . This is a trial analysis based on formations going all the way back to 1971. You can’t see that part, but I have the data in my head.
Very first move was from 37.50 Gold Parity at the time to 198 (post Nixon gold standard abandonment), then a retrace down to 100 and up to 880ish futures. Take that ratio (198/37.50) = 5.28x. Take that times the post 1980 low (double bounce 1999 (when IMF decreed to limit gold sales) and Bush inauguration (perhaps NOT a co-incidence) and you get 1335.
The orange overlay moves are the sub cycles, starting IN TIME in 1985 (Plaza accord) and the increment rally then, completing with huge intervention in favour of the $ in Jan 1988. Then a long 13 year retrace after that. One of the reasons was most likely that Central Banks had discovered that they can make 1 ½% pa. So they lent it to banks and hedgefunds and screwed themselves in the process…Borrowers were taking the stuff and selling short and made money on the cash for whatever they did with it AND could cover the shorts at lower prices. No conspiracy as many claim, just incompetent central bankers.
But the market has funny ways of working. So after all the cb’s started selling on top of that, the Brits were making the bottom in 1999 until the “cartel” (CB’s) got together and via IMF agreement limited their sales to 600 tons p/a (9/99).
That was the end of the rout. The reason then for the meteoric advance (considering the time frame since spring 01) was basically that we had spent so much (in my mind I would say TOO much) time going sideways. So we hat to “catch up” with that delay to stay within the time frame. This might sound somewhat abstract, but if one were to draw an analogy one could look at stoxx post ’66/68. We spent 13 years “sideways” (DJIA) with the compression caused by several oil crisis’ and wars…Nam, Israel I and II, Oil embargo, Iran crisis. Once that was out of the system, we shot up into 1987 by about 3.5x. Crude post 98 did similar moves after having been contained from ’86 to ’99, again after about 13 years sideways.
Even after 1929, we consolidated 13 years, until the next 26 year bull market (ending 68) in stoxx.
Besides that, I am watching the headlines on Gold. India buys…China will buy…(private vault were sold out in Germany last fall, cause people stacked up their gold). Also look at C/O/T reports…all the managed money that moves in there. Dreams for sale, come and get it!
Markets move indeed in a “predetermined” fashion (but not based on hourly or 5 mins charts, as some well known “wavers” make belief). Think of it as a black box of time and price. Draw a square, put in a diagonal lower left to upper right.
That would be a “normalized” time/price move…If mkt gets to top line “too early” it will stall out…(See dow from the fall of 1999 to May 01). Or the inverse would be the 1987 crash…) Same if too much time at the “bottom” we race.
Back to gold: (and this is a trial …first breakdown should come within the next 2-5% (abs 1265ish- quant tgt) then perhaps a breakdown of some 10/15% and then new high at 1350ish..(we can go straight, this is just based in submoves)
In a hyper-bubble, perhaps 1500, but given the chart I sent you, I would be surprised if we exceeded that. As an abs number (but markets are not absolute) 1335 would be the best fit.
A word on the inflation (expectation) argument for gold. Most pundits use the top of 1980 (880futs) as a BASE for predicting inflation adjusted prices in the 2k and Schiff was just talking of 5000…(yeah, real estate was going up forever, too and so were stoxx in 00 and 07 and crude at 150….If one were to do an OBJECTIVE analysis on that one should go back to 1913 (gold had been about 18.50 for more or less all the time after the civvy war) which coincides with the founding of the FED and income taxes in 1913 (prior to that a mild deflation of about 0.5% since 1876). If one take the FED inflation calc gold should be no more than 400$ if inflation is the only driver over time. So that would be a good level to look for, if we can stop at the 1300/1400 level.