Lorimer Wilson is in China assessing the health of its economy, seeing the sights and gathering material for future articles on China’s economy and its future prospects.
Below is a guest post by Goldrunner of www.goldrunnerfractalanalysis.com
The Fractal Gold chart work is a direct comparison of Gold, today, to the late 70’s Gold Parabola. Thus, “timing” is taken directly from the late 70’s cycle, with price targets created from a combination of the late 70’s Gold price and different technical analysis techniques. We developed a price target back in 2006/ 2007 for Gold to reach the $10,000 to $12,000 range during this Gold Bull. Anything above that range would mean that the “Stagflation” comparison to the late 70’s was exceeded and “Hyper-inflation” would become a real possibility. Let me explain where we are at this point in time.
During the early stages of the Gold Bull we were able to show Gold’s advance versus the late 70’s on a single long-term chart since similar chart resistance points were evident. This gave us the timing for what we coined in 2007, “the Deflation Scare waterfall decline” into the 4th quarter of 2008. Below, is a sample chart from 09-29-07.
Intial Projection of $1860 (Later Revised to $1920) Achieved in August 2011
After Gold re-tested the “old 1980 top” in the 4thquarter of 2008, the move to new historic highs left no horizontal resistance on the chart to help guide the way. Thus, in late 2010/ early 2011, we used the time and price relationships from the late 70’s to project Gold’s price advance into the middle of 2011 to $1860- later adjusted upward to $1920 via normal technical analysis methods. [Read: Goldrunner: Gold on track to Reach $1860 to $1,920 by Mid-year ] That projection was fulfilled late in the middle 3rd of 2011.
Next Projection of $3500-$3600 by Middle of 2012
Gold’s next momentum rise off of the late 70’s fractal model projected a price rise up to $3500 to $3600 into the middle of 2012. [Read: Goldrunner Called $1,920 Gold High Exactly; Now Expects $3,000 – $3,500 by Mid-Year and Goldrunner: Fractal Gold Analysis Says Gold On Way to $3,500 Mid-year! and Gold Tsunami: on the Cusp of $3,000+?]
The fundamentals and the Gold Chart looked good going into March of 2012 compared to 70’s Gold with the Fed printing up over $1.3 Trillion Dollars in swaps to Europe since the Gold Bull is driven by US Dollar inflation/ devaluation. Yet the markets “listened to what the Fed said- not what it did” as it printed over $1.3 trillion Dollars-over double the amount of Dollar printing that shot Gold up from $1300 to $1900 into mid-2011. Thus, the markets have not yet devalued the Dollar based on the huge Dollar printing done since December of 2011 and have not marked up Gold, yet. This leaves a huge amount of Dollar Devaluation for the markets to factor in, with much more to come, that will drive Gold sharply higher.
We have often noted that “the Fed owns the psychology of the markets”- the main tool they use to heavily manage the markets. Thus it appears, the Fed has created a sort of delay in the cycle that fits their apparent needs. The above is the reason for the strong support along Gold’s log channel bottom with value investors, smart money, and Central Banks heavily accumulating Gold.
3 fan-line Formation Playing out to Perfection
When Gold failed to continue the rise to match the 70’s in March of this year, we turned to a Model of a 3 fan-line formation for subscribers as an alternative potential corrective formation. That model has played out almost to perfection, with the corrective formation recently terminating. This delay in terms of a longer correction fits with Elliott Wave Theory since corrections sometimes extend based on the current psychology- in this case one created via Fed speak to accomplish their needs.
At this point, nothing has changed for the Gold Bull except that a huge Dollar Devaluation will now need to be factored, in- one that will drive Gold much higher. This creates a higher price potential for Gold- one that approaches what “Alf” posted on Jim Sinclair’s site per his Elliott Wave work. [Read: Update of Alf Field’s Elliott Wave Theory Based Analysis of the Future Price of Gold and Sinclair: 1980 Was Just a Dress Rehearsal!]
The Dollar Printing since December of 2011 fulfills the need for a pretty constant acceleration of Dollar printing in effect to stave off a true period of deflation. The parabolic printing of Dollars leads to a parabolic devaluation of the Dollar and parabolic Gold. This is all about Dollar devaluation, not so much where the Dollars are going. Thus, the economy will continue to deteriorate creating the need for more Dollar printing, QE. The Fed still needs to print massive numbers of Dollars to cover unfunded liabilities like Social Security, Federal Pensions, Unemployment Insurance, failing loans at Freddie Mac and Sallie Mae, and the list goes on.
The Fed’s management of Gold was a necessity to prevent Gold from flying into free-rise before the Federal Government has all of these liabilities on its balance sheet.. It also appears that many Central Banks needed time to accumulate Gold- Gold that will serve as an asset base to “balance the budget” as the price of Gold rises dramatically. The truth is that the paper currency system cannot survive without Real Value Gold for any long period of time.
From here, the fractal charts of Gold in the 70’s saw a dramatic rise to “double the log channel.” Such a potential move might sound crazy, but that is what the Fractal Model from the late 70’s suggests. With the 3 fan-line formation in Gold appearing ready to execute, Gold appears ready to fly on the upside into the first half of 2013.
THE MONTHLY LOG GOLD CHANNEL CHART
We can see that Gold has held the dotted blue line channel bottom for the main body of “price”- except for the deflation scare of 2008. The log chart for Gold in the late 70’s is similar. The dotted blue line held support while value investors and Central Banks heavily accumulated Gold.
The upper set of angled blue lines represents a doubling of the log channel. This is the point in the 70’s cycle where Gold made a huge parabolic move on the log chart, and a break-out from a 3 fan-line formation can be explosive and relentless.
Please understand that the above is just the opinion of a small fish in a large sea. None of the above is intended as investment advice, but merely an opinion of the potential of what might be. Simply put: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a
Gold is in an historic Bull Market because most nations are printing their paper currencies like they are going out of style (and maybe they are) as each nation tries to battle off the massive deflationary backdrop of debt that has permeated most of the world. This surge of debt monetization – this devaluing of the U.S. Dollar for one – has set the scene for a parabolic rise in $Gold to $1860, or even more, over the coming months before an intermediate-term correction takes place. Let me explain. Words: 1831
The parabolic rise in Gold and in Silver still have a very long way to go as measured directly off of the late 1970’s Charts. In fact, we expect the arithmetic ratio targets for Gold and for Silver, based on the late 1970’s rise for each, to get blown away since we are seeing a logarithmic rise in dollar inflation compared to the late 1970’s. We have just hit the point where the more parabolic rise in Gold set off the leverage for the Gold Stocks in the late 1970’s. Therefore, we expect the real parabolic PM Stock Index Bull is just now commencing. Let me explain. Words: 1769
Early this year we suggested a 50% rise in Gold to $1860 – $1,920 into mid-year. Now, we see the Gold tsunami realizing an approximate 100% rise that will crest at $3,000+ into the middle of 2012, drowning any doubters in its wake. Below are a number of factors that support that view. Words: 1250
Our work with Gold is based on a “Model” off the late 70’s Gold Bull that has been replicating nicely since we started the Fractal Work with Gold back in 2002 and 2003. Short-term volatile moves in Gold, as we have seen over the past weeks, do not affect our projections based on the model, leaving the expectation of a move in Gold up to $3,000 into mid-year intact as outlined in our previous article entitled Gold Tsunami: on the Cusp of $3000+? Words: 996
Our Fractal Model suggests the wave for Gold in US Dollars will sweep up into the $3500 to $3600 area into the mid-year time-frame. The leading edge of that time-frame begins in May and extends out for a few months. A potential for Gold to spike to a $3900 extended fib level exists. Like all parabolic moves in Gold, the late stages create the biggest price movements. Personally, I would be happy with a huge Gold run up to the $3200 level. Words: 1400
The Elliott Wave Theory (EW) gives superb results in predicting the gold price. [While] it is a complicated system with many difficult rules [which] I explain in simple terms in this article, [I have determined that] once this present correction in gold has been completed it should [undergo] the largest and strongest wave in the entire gold bull market. The target for this wave should be around $4,500 with only two 13% corrections on the way. [Let me explain how I came to that conclusion.] Words: 1924
We now have a really strong probability that the correction which started at $1913 on 23 August 2011 has been completed both in terms of Elliott waves and also in terms of time elapsed. If this is correct, the gold price should soon be expressing itself in violent upside action as it moves into the third of third wave which is still targeted to reach $4,500. [Let me explain in detail (with charts) how and why my most recent analyses confirm my earlier target of $4,500.] Words: 1085
Gold has been moving within a mega upchannel since 1970 and still has a ways to go before reaching the top side of this mega uptrend. How high is anyone’s guess but were gold’s price rise to match the 2300% rise realized in the 1970s (and our research suggests we could see the start of the bubble phase by next year) we’d see a $6000 gold price, which would blow the gold price well above the mega upchannel. [Let us explain our conclusions with the use of 2 charts.] Words: 495
This is not a typical bull market. Gold is not rising in value, but instead, currencies are losing purchasing power against gold and, therefore, gold can rise as high as currencies can fall. Since currencies are falling because of increasing debt, gold can rise as high as government debt can grow. Based on official estimates, America’s debt is projected to reach $23 trillion in 2015 and, if its correlation with the price of gold remains the same, the indicated gold price would be $2,600 per ounce. However, if history is any example, it’s a safe bet that government expenditure estimates will be greatly exceeded, and [this] rising debt will cause the price of gold to rise to $10,000…over the next five years. (Let me explain further.] Words: 1767.
There will be a catalyst coming soon, probably some concerted action of money printing between the Fed, IMF and the ECB. That will happen as a result of the economies, worldwide, collapsing….The catalyst could come from anywhere but the money printing will be part of the next move in gold, that’s for certain….[and it] will lead to collapsing currencies, and investors buying gold at any price…I see gold reaching $3,500 to $5,000 in the next 12 to 18 months. Within 3 years, I see the gold price reaching at least $10,000.
Lately analyst after analyst (161 at last count) has been climbing on board the golden wagon with prognostications as to what the parabolic peak price for gold will eventually be. That being said, however, only 51 have been bold enough to include the year in which they think their peak price estimate will occur and they are listed below. Take a look at who is projecting what, by when and why. Words: 644
Around this point in the fractal cycle in the late 70’s, Gold busted out of its channel to rise sharply higher, along with Silver. Silver’s channel top will lie up around $68 to $70 over the coming months which we believe will be reached in 2012. The next higher angled resistance bands for Silver run from $112 to $115, and then up at the $123 area. By the end of the Silver Bull, we expect to see Silver reach $500+. Words: 1765
…[A]t some point they [the central banks] will all start printing money. At some point they will recognize we are not going to have a deflationary collapse, that we are not going to have a deflationary debt liquidation…. If we get some serious stock market weakness, on top of the economic deterioration, then I think the central banks of the world, and in particular the Fed, are going to panic and do something big….They are going to print money and try to inflate the debts away….[As a result, there] is going to be this big, unridable phase of the bull market in gold that’s going to take place. That’s in front of us. It’s probably closer than most people think.
Is gold still cheap? No, gold left bargain territory long ago [but] we remain bullish on gold, not because we think gold is still cheap, but because we expect it to get a lot more expensive. [Why?] Because the world’s most important central banks and governments remain committed to a course that ends in catastrophe for their economies and currencies. [Let me explain further.] Words: 565
That governments will want – and will NEED – much, much higher gold and silver prices in the future is counter intuitive, given that they have done everything within their power to throttle back and to keep a lid on bullion prices. Let me explain why. Words: 1300
James G. Rickards, author of the current best seller Currency Wars, is so informed and articulate that he is almost scary in his clarity. He is the only person who essentially says what I have been saying about the “hidden” intent of the US Treasury and Central Bank – to deliberately weaken the US dollar and to cause price inflation, all in the interests of improving US competitiveness and to pay debt through financial repression. Ergo…they indirectly want and will cause the price of precious metals to escalate. Words: 398
We are all focused on the short-term and that’s natural, but let’s step back and look at the longer-term picture…We know the debt levels are too high today…but, because less than 1% of world financial assets are in gold, we have yet to really see the gold market react to the massive global money printing binge of the last 10 years. Once the gold market starts reacting to all of this, that’s when gold is going to go exponential. It doesn’t matter whether investors are buying gold at $1,600 or $1,800, it’s irrelevant in the long-run. What’s important is they are invested in physical gold in order to preserve their wealth. [Let me explain why.]
The fundamentals supporting a mania in gold and gold stocks are such that I think a strong case can be made [to support my contention] that the current bull market in gold is far stronger than the one from the 1970s. [I present below] the major observations I feel…support such a thesis. Words: 700
Gold is operating on a smaller Contracting Fibonacci Spiral Cycle that is in synch with the larger Contracting Fibonacci Spiral the markets are in. Adding together the sum of parts… the price of gold will move up in price in 2013, 2016, 2018, 2019 and 2020, with each subsequent leg moving less in percentage terms than the prior move. Gold advanced 4 foldish from 1999 until 2008 ($252/ounce to $1046/ounce) suggesting that gold should top out below $4000/troy ounce by the end of January, 2013…[on its way] to $7,000 and $10,000 per troy ounce by 2020. [Let me explain.] Words: 834
I believe that the price of gold will… reach… $3,000, $4,000, and even $5,000 [per troy] ounce…during the course of this long-lasting bull market, a bull market that still has years of life left to it…[although] prices will remain extremely volatile – with big swings both up and down along a rising trend…The future price of gold is a function of past and prospective world economic, demographic, and political developments [and in this article] I review some of these developments and trends – so that you can come to your own “golden” conclusions. Words: 3800
“There’s no cliff here. There’s no need to panic whatsoever…[In] the two previous bull markets in gold, 1980 and 1934, gold ended at essentially a 1/1 ratio with the Dow Jones and the Dow today is over 13,000. Would I be surprised to see gold past $10,000? No. I know it sounds crazy but it sounds a heck of a lot less crazy than it did five or six years ago.”
In this extraordinary interview Jim Sinclair lays out precisely what investors should expect in the future from policymakers and in the gold market and why. He takes listeners from where gold is trading today, through the rest of the bull market, all the way to the conclusion.