Friday, January 11, 2013

Last Friday Might Have Been the Start of the Next Rise in the Gold Price

11 January 2013, 14 July 2013

I have mostly stopped commenting on the gold bull market, as the widespread adoption of inflationary monetary policy by every major government on the planet has all but guaranteed a continued rise in the gold price. However, last Friday (January 4, 2013) may possibly have been the day that the most recent gold price decline came to an end, due to the technically meaningful and usually decisive "bull hammer bottom" technical signal that day (this type of bottom usually confirms an exhaustion of selling pressure).

My current thoughts follow. The use of the capital letters "A" through "D" refers to the theoretical model of gold price advances and declines put forward by Mary Ann and Pamela Aden. That is, "A" is a modest gold price rice (the last one occurred between December 2011 and October 2012), "B" is a modest decline (we have been in a B decline since early October 2012), "C" is a massive and extended gold price rise running for a year or longer (the last one extended from May 2009 through September 2011 - over 2 years), and "D" is a sharp and decisive (though temporary) downturn in the gold price, with the last one having occurred between September and December 2011.

Nobody I know of can predict "when," but the directionality of the gold price has been clearly upwards since December 2011 (D bottom). The current (C) rise appears only to have started last Friday, January 4, 2013 (the probable conclusion of the "B decline"), so it is "young." 

Friday, January 4, 2013 looks like the "bull hammer" bottom, which appeared decisive. However, since this is (probably) the C rise now, it can run 1-1/2 to 2-1/2 years. What we're waiting for now is for the mainstream analysts to stop saying, "Oh, gold topped out in September 2011, it's done now." (Before that, it had supposedly topped out in 2006, 2008 and 2009, not to mention 2003 and 2004). 

The way you know that gold is nearing a top is when the people you meet on the street are buying (and talking about) gold investments - just as they did with tech stocks in the 90s, and with real estate investments this decade. That has not really started, though you do now have little stores selling gold as well as "taking it off your hands." There is also gold advertising on television now. 

Following this "last" very big pullback, the final blowout bubble top in gold would finally occur. By the Adens' charting system, 2019 would be the true top of the secular gold bull market - if it is typical, and it would be somewhere north of $5000 by then, probably $8000 or higher. This is all approximate. 

It is also possible that gold could go into an extended secular mega-bull market, as bonds have done for the past 30 years.That is, most bull markets seem to run 17-18 years (so 2001-2019 would be a "standard" 18-year gold bull market, as was the case from 1962-1980). 

But mega bulls are almost twice that duration. The duration of the gold bull market, of course, depends on fiscal policy. 

So long as governments print trillions per year in new and worthless currency, we know that gold will rise (nothing else is possible). When that stops, the gold bull market will be over. 

However, I'm not sure that moneyprinting and competitive currency devaluation by most major world governments will necessarily stop in 2019. Note that bonds have been in a 3-decade-plus uptrend since 1981-82 (the end of the last major inflationary period). If gold is in a mega bull market, it could rise through 2030 or longer, before massive global inflationary monetary policy would ultimately defeat itself.

So, hang on until 2019 at least (be careful in 2016), and keep your eyes on 2030 if governments are still printing away by the end of this (still young) decade. 

14 July 2013: But it wasn't....

Well, my last few predictions on the price of gold have been dramatically wrong. Despite arguably the strongest fundamentals in history, gold has managed to plummet while essentially all the factors that normally tend to lift the price of gold have been advancing steadily. I've been watching the gold market for a decade now. What have I learned? In brief, when the fundamentals are bullish, the following two rules have so far applied: (1) When the price of gold goes down more, it then goes up more. (2) When the price of gold goes down longer, it then goes up longer. Stay tuned for $5000 gold, and higher. When? Don't ask me. I don't know. But nothing has happened to alter my prediction. 

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