Gold and Historical Average measured against John Williams’ shadow CPI statistics shows that the 1980 peak of $850 equals $9,000+ today, and clearly demonstrates gold is far away from making new ‘real’ highs. That an an additional 9 other charts confirms that the gold bull market continues.
The following is presented by Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com and www.munKNEE.com and the FREE Market Intelligence Report newsletter (see sample here – register here) and may have been edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. This paragraph must be included in any article re-posting to avoid copyright infringement.
Charts shown below and summary of each:
- Relative Gold chart (a reliable indicator for spotting tops and bottoms in gold).
- Monthly Closes (useful for pinpointing bubbles).
- Gold & Historical Average measured against official CPI statistics (indicates that the 1980 peak of $850 equals $2,500+ today, and since no secular bull market ever ended without making new ‘real’ highs, gold’s current bull still has a long way to go).
- Gold and Historical Average measured against John Williams’ shadow CPI statistics (shows that the 1980 peak of $850 equals $9,000+ today, and clearly demonstrates gold is far away from making new ‘real’ highs).
- Gold shares vs gold (mining shares have been lagging the price of gold, but this won’t last).
- Gold vs Dow since 1930 (when the Dow/Gold chart tops buy gold, when it bottoms buy equities).
- US Monetary Base M0 (exploding money supply clearly shows that the current monetary system is broken).
- US Public Debt (officially $14+ trillion, the real debt is multiples of this number. Total US debt is about $57 trillion and total US unfunded liabilities exceed the $100 trillion mark).
- US Treasuries and Foreign Holders (foreigners are no longer flocking to buy US Treasuries. This is when gold reasserts itself as currency of choice, in an attempt to stabilize America’s balance sheet. Gold would need to be over $12,500 in order to counterbalance total US debt held in foreign hands).
- Gold vs Dow since 2003 (gold has been the investment of the decade with gains of more than 550%, thus outperforming the Dow, NASDAQ and S&P 500 by great margin. Despite this, it still hasn’t caught the interest of most retail investors, indicating that this bull market still has a long way to go).
Below are the charts and commentary taken directly from the original* article on www.valcambigold.com entitled ValcambiGold Charts – last update: Sunday, May 12, 2013
1. Relative Gold chart – gold divided by its own 200 dma
The r-GOLD chart is gold divided by its own 200 dma. It has proven to be a reliable indicator in spotting major bottoms and tops for gold in the past 10 years. Recently the rGold chart bottomed out again and points towards new highs in 2013.
2. GOLD & Monthly closes since 1970
When experts claim gold to be in record high territories and therefore being in a bubble, they mostly refer to gold’s long term chart (monthly closes). When looking at this chart one would easily believe that gold is a bubble indeed therefore an accident waiting to happen. It’s recent high of $1925+ seems to be too far stretched from its long term average of $383. The problem however with this chart is that it is extremely distorted. The distortion arises from the fact that this chart doesn’t take into account the loss of purchasing power of the dollar over time.
Needless to say the purchase power of a 2011 dollar doesn’t match the purchase power of a 1980 dollar. Yes, bull markets do end when approaching bubble territories, but we are far away from that. During previous ‘real’ highs more than 20% of all invested money was in gold and gold shares, today this percentage is still below 1%.
3. Gold & Historical Average measured against official government CPI statistics[The chart above shows] that the 1980 peak of $850 equals $2500+ today. Since no secular bull market ever ended without making new ‘real’ highs gold’s current bull still has a long way to go.
4. Gold & Historical Average measured against John Williams’ shadow CPI statistics
In order to calculate ‘real’ highs for gold one has to adjust for inflation. When using shadowstats inflation statistics we’ll see that the 1980 peak of $850 equals $9000+ today. The inflation.. [statistics] published by John Williams at http://www.shadowstats.com present a more realistic picture of true US inflation numbers. As this chart clearly demonstrates gold is far away from making new ‘real’ highs.
5. Gold & HUI – Gold shares vs Gold
Gold shares move in tandem with the gold price. Historically gold shares tend to outperform gold to the upside but as of 2008 the gold hares have been lagging the price of gold tremendously. Such extremes as we’re witnessing today won’t persist for a long period of time, which will translate eventually into much higher share prices (mining shares).
6. Gold & DOW – Gold measured against the DJIA since 1930
The DOW/GOLD chart is a powerful tool in order to determine major turnarounds. It’s simple, when the DOW/GOLD chart tops you buy gold, when the DOW/GOLD chart bottoms you buy equities. Once you’ve established your position you can ride the wave up or down for at least a decade.
The DOW/GOLD chart flashed a ‘buy’ for gold again in the year 2000 and indeed 11 years later gold is almost up 450% from its lows [but it’s not quite] that simple…The thing is the DOW/GOLD ratio chart isn’t a useful indicator in order to predict yearly price movements. Next year could very well clock higher readings than this year instead of expected lower readings thereby losing confidence as being a reliable indicator….The problem is that the DOW/GOLD cycle has a wave length that’s so big that we humans have a hard time to figure out where to position ourselves into this cycle.
7. US Monetary Base M0 – or Exploding Money supply
This chart clearly demonstrates that our current monetary system is broken. In times of economic stress/uncertainties government tends to inject enough liquidity into the system to keep things going. Then when things turn back to normal government drains the injected liquidity from the system. A good examples concerns the Y2K crisis and the 9-11 event. The banking crisis of 2008 however dwarfed all previous events, the base money supply tripled almost over night, yet, many people still don’t understand why gold prices have tripled since 2008.
8. US Public Debt
This chart represents the official US public debt which stand at $14+ trillion. Of course the real debt is multiples of the official public debt. Total US debt is about $57 trillion and total US unfunded liabilities exceed the $100 trillion mark.
9. US Treasuries and Foreign Holders
Sure enough the US spends more money than it earns. The gap is and has been financed by foreigners willing to buy US treasuries in ever increasing quantities. This trend seems to be coming to an end since foreign governments no longer value the US dollar as they used to. It is here when foreign governments start losing faith in the world’s reserve currency, that gold reasserts itself as currency of choice. It is then when gold attempts to balance the balance sheet of the US. Gold prices required in order to counter balance the total US debt held in foreign hands exceed the $12.500 mark.
10. GOLD performance vs DJIA over a decade – Where was your money?
Gold started its current bull run in April 2001 after hitting a 21 year low at $256. Gold has been without doubt the investment choice of the decade closing the decade at an all time high of $1425 resulting in an astonishing gain of more than 550% and thus outperforming the DOW, NASDAQ and S&P 500 by great margin. Despite its stellar rise gold still hasn’t caught interest of most retail investors, a clear indication this bull market still has a long way to go.
(Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)
*https://www.valcambigold.com/Charts.aspx (Copyright © 2012 ValcambiGold Inc.)
CombiBars™ are precious metal bars which are constructed with predetermined breaking points so they can be separated easily without any loss of material. Indeed, they are designed such that the divisible bar can easily be carried in your wallet. Read More »
You cannot control what others do, especially those in power. You can control what you do. Just keep buying, regardless of price, because if/when the price of gold and silver were to go lower, you may not be able to buy. If/when the price of gold and silver were to go higher, it may be at such an accelerated rate that any price in the past few years seem cheap. Words: 550 Read More »
We are seeing signs of a bottom…in gold…but… prudence calls for waiting for some signs of stabilization before getting long. I would rather miss the first 10-20% move than lose another 50% should I get long prematurely. [Let me show you some charts that illustrate my caution.] Words: 288; Charts: 6 Read More »
Volatility in the gold market often results in extremely bullish and bearish views. Below are 4 facts to remember about gold that should help neutralize such views and allow you to take a more balanced and thoughtful approach to the yellow metal. Read More »
The monthly silver chart does not reflect what could be viewed as ending action for the decline. If/as price rallies, it may be more of a futures selling opportunity than a sign of recovery. As the structure stands, odds favor lower price attempts. Read More »
The recent panic selling in gold bullion caused those who were speculating to get out as their losses added up…[but] retail investors and central banks seem to be rushing to buy more. [Why is that? Let me explain.] Words: 260; Charts: 1 Read More »
It would appear that the price of gold has fallen enough to qualify as a “bear market,” and we’ve begun hearing about what a terrible investment gold is now… and throughout recorded history. Below are the 12 most commonly-spread myths about gold as an investment. Read More »
$10,000 Gold offers a candid insight into the current state of the economy, the underlying causes of gold’s rising value and why the price of gold will continue climbing to $10,000/ounce and beyond in the years to come. The book contends that intelligent investors have no choice but to invest in this precious metal to stay safe no matter what lies ahead. Read More »
The majority of analysts maintain that gold will reach a parabolic peak price somewhere in excess of $5,000 per troy ounce in the next few years. Given the fact that the historical movement of silver is 90 – 95% correlated with that of gold suggests that a much higher price for silver can also be anticipated. Couple that with the fact that silver is currently greatly undervalued relative to its average long-term historical relationship with gold and it is realistic to expect that silver will eventually escalate dramatically in price. How much? This article applies the historical gold:silver ratios to come up with a range of prices based on specific price levels for gold being reached. Words: 691 Read More »