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LOOK REPORT #15: GOLD
Background: Quick Look Reports will look at a possible dominant trend in an Index, Equity or Commodity and some possible long-term (monthly/yearly) trends which could emerge from the dominant cycle(s) (the datasets will be daily, weekly or monthly). Quick Look Report # 15 looks at an update to the monthly prices of Gold from 1967 when gold was fixed at $35 an ounce including a look back at a monthly Gold prediction made in August 2004 thru 2009 (see Magnificent Seven Part XIV in FSU Archives – Rinehart). Gold continues to be a hot topic after the wild volatility in the past few weeks (and will be for many years to come). The seven primary monthly cycles in the monthly price of Gold are: 13, 17, 24, 32, 38, 86 and 156. We also speculated in August 2004 that Gold would reach $500+ by Jan 2006 following a linear trend line (with a slope of almost $4 per month). While it has been speculated that a Stage II rally has started, we continue to believe that the real Stage II rally will launch off the coming bottom of the 86-month cycle in July/Aug 2006. In other words we have not seen anything yet as compared to what’s coming in the next fifteen years in Gold prices. If the Central Cartel can just manage to keep printing fiat money thru 2020 (including Sundays and “Holidays”) somebody may yet make some real money on rising prices of Gold over the next fifteen years. This is because the 86-month and 156-month cycles will bottom together over 2012 creating a significant upsurge for the next eight years in the period 2012-2020 marking a Stage III in Gold. In the past several years, there have been a number of sudden “spikes” in commodity/currency/bond prices of which Gold is the latest. In Engineering, if you want to determine the overall system response (i.e., the elasticity in a physical system), you can apply a short duration pulse to say a structure and measure the deflection (or response). The purpose is to be able to predict what would happen if a large number of forces were “suddenly applied” to your structure (like an earthquake or explosion) in a “three-sigma” event. The same thing applies to the world’s financial system as I have mentioned previously. It almost looks like a series of “calibrations” is being applied (perhaps thru derivatives) to the world’s commodity price structure to determine the overall response and health of the financial organism. In other words, the Central Banks would like to know the possible outcomes if commodity prices take-off or a major recession/deflation/war hits. The responses could be programmed into Neural Net(s) to identify “systemic problems” which are continuing to persist due to high debt structures – wait until we see what happens with food prices in 2006/2007 given the high natural gas prices. Chart 1 show the prior August 2004 prediction in Gold. The largest cycle in this prediction is an 86-month cycle or the proverbial seven-year cycle. This cycle is approaching a bottom (peak around July/Aug 2006) and already went thru its maximum downside acceleration in mid-2004. The prediction shows that we would expect gold to be around $502 an ounce by Jan 2006 if it continued along the linear trend from 2004 and this trend remains nicely intact. The chart shows a predictable growth in the price of Gold from August 2004 with a mid-2006 correction and a strong move upwards to over $600 an ounce by late 2007. Chart 2 shows the predicted versus actual monthly prices from August 2004 thru Dec 2005. Since the smallest monthly cycle in the prediction was 8 months, the prediction does not have the three and five month dips that is reflected in the actual Gold Prices but the overall trend of the prediction is being followed for a monthly prediction (i.e., using just the monthly closing prices). It seems that the Gold Price is closely following an inflation rate of 7%-8% which would reflect including food, energy and other commodities (metals) and not hedonic pricing algorithms. Chart 3 shows the predicted (linear trend) waveform for the Gold Monthly (averages) for 2006 and 2007 for the primary seven cycles. Gold will be pushing on to $600 an ounce by late 2007 based on a linear trend (sooner if trend goes parabolic). Chart 4 shows the detrended price of Gold from August 2007 thru 2009. It is predicting a wild downside move in gold after Feb 2009. This is just an observation on the passing scene – we will continue to monitor the patient’s pulse as we head into 2009. It could happen six months early or late and we should home in on weekly/daily cycles when the time comes up for greater fidelity (whatever that means). Summary: The second half of 2006 is going to be a special time for Gold (and Silver). The real bottom is coming in this currency and the let the fun and games begin as we head into the Gold Olympics of 2012. The Stage II parabolas will be setting up with this bottom in 2006 and the gold rush is on for years to come but with a lot of volatility (especially in 2009). We will continue to track and report on the developing wave fronts in the real (but secret since everything must be secret these days) world currency. The burning question of the Millennium (ok for the past week anyway) is can Gold reach $2018 by 2018 ?? The linear trend predicts $1247 but if one corrects for a parabolic rise by a Fib value of (1.618) x (1247) = $2018!! We are tentatively planning the Mega-Stage III blow-off beginning in May 2013 and going all the way into Oct 2018. So get your tickets punched early as there is only limited space available on this Stagecoach bound for Glory.. By the way, have seen any chickens hatching lately – now what’s all this about Bird Flu? …..and a (secret) Merry Christmas to All!
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INFORMATION DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, the author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments. |
