Financial Sense Univ. ~ "Quick Look Report #29" by Stephen Rinehart 10/03/2006

QUICK LOOK REPORT #29
by Dr. Stephen Rinehart
October 3, 2006

Background:

Quick Look Reports performs the forensics of the dominant trend in an Index, Equity or Commodity. This report looks at the possible long-term daily trends in Gold ($/oz) which could emerge from the dominant cycle(s) (the dataset for the Comex Gold is the daily closing prices from March 1969 (truncated from a dataset going back to 1920s) using an updated dataset from Nick Laird (see www.goldmarketdata.com). I have previously published information about the long-term cycles for the price of Gold on FinancialSense University (see Quick Look Report # 15) A very conservative prediction was made using a linear trend model (which is still intact). The current dominant (daily) cycles in the daily Gold prices are the 2540-day cycle (10 year cycle), 812-day cycle, 676-day cycle (very interesting) and the 496-day cycle. In addition, there are a number of smaller daily cycles at periods of 357-days,273-days,231-days,168-days, etc.

Chart 1 presents the growth in the 168-day cycle from Oct 1976 thru Jan 1980 (peak gold) for the daily Gold price. The current amplitude of this cycle is about the same as it was in April 1977. The cycle has not yet started to really grow in amplitude as occurred in the period leading to the top in Jan 1980 (translation: We are not yet in a Stage II rally yet much less seeing the start of the big wave(s) up).

Chart 2 presents the growth in the 496-day cycle from 1969 thru Jan 1980 (peak gold). The current amplitude of this cycle is about the same as it was in Sept 1974. The cycle has not yet started to really grow in amplitude as occurred in the period leading to the top in Jan 1980 (translation: We are not yet in a Stage II rally yet much less seeing the start of the big wave(s) up).

Chart 3 shows the growth of the 676-day cycle from 1969 thru Jan 1980 (peak gold). ). The current amplitude of this cycle is about the same as it was in Nov 1969. The cycle has not yet started to really grow in amplitude as occurred in the period leading to the top in Jan 1980 (translation: We are not yet in a Stage II rally yet much less seeing the start of the big wave(s) up).

Chart 4 shows the growth of the 812-day cycle from 1969 thru Jan 1980 (peak gold). ). The current amplitude of this cycle is about the same as it was in Sept 1972. The cycle has not yet started to really grow in amplitude as occurred in the period leading to the top in Jan 1980 (translation: We are not yet in a Stage II rally yet much less seeing the start of the big wave(s) up).

Chart 5 shows a possible predicted price trend in gold from Oct 2006 thru 2010. The turn points are based in part on the recent analysis of the HUI Index and USD Index. It is possible that gold prices make a major turn before Jan 2008 (perhaps by April/May 2007), in this case the predicted curve would shift to the left. If gold prices turn later than Jan 2008, the curve would shift to the right. The storyline in gold has to play together with the movements of other major indices in a symphony. (It all starts with that single “shrill A”) Thus, we still need to see what is predicted with the ten-year bond yields thru 2010 to see if the supports the coming price rise in gold. As the USD Index loses the war from Oct 2009 into Dec 2012, the price of gold (and silver!) will begin to reflect the reality of what is happening to the US Dollar and US economy but for many it will be late in the afternoon. As for gold, the night is still young and full of promise.

Bottom Line:

One of the key findings of this study is the existence of four large and long-term daily cycles which appear to govern the long duration behavior of the gold price. Based on the current amplitudes of these large daily cycles (which go back decades in gold prices), it is like the price of gold is in a “time warp” which places its current cycles at the same point as they were in the “early 1970s”.

2. The reality (as regards the major daily cycles in gold prices for decades) is “not much is really happening yet in gold prices”. The volatility we have witnessed thus far in gold prices is like a windy day for surfing compared to the coming wave front of a Cat 5 Hurricane making landfall (beyond 2012). We have not seen anything yet as if these gold price cycles continue to grow as they did previously in the late 1970s (maybe a big IF).

3. We have not witnessed the “real coming corrections in gold as well as the large coming gold price increases from a failed fiat currency”. The secret wave in gold may be the 676-day cycle which is just now starting to show a little life and cycle growth. This would suggest that gold is going to be very volatile (on an increasing trend line) for possibly the next 2500+ trading days!?

4. While the world Central/Bullion Banks are currently playing with gold prices and “adjusting sales tonnage”, the limited volatility that we have witnessed in gold prices recently is more like a tune-up of the coupled-financial system dynamic response to “stepwise inputs” for the coming “End Days of the USD Index”. All most be in order and finely tuned when the time comes to switch out of the USD Index and into golden sea shells (would that be 11.11.11 or 12.12.12.?). Ditto for recently running certain components of the DJIA prior to mid-term elections to look like “an all-time high” but what happens after the elections? What is the matter – is the NYSE to big to run for your printing presses?

Remarks: There are no “unstable cycles” currently present in the daily price of gold and it looks like one of the more solid commodity indices until late 2017. I am left with the overall impression that nothing of any real substance has yet taken place in gold (cycle) prices as compared with the coming 2500+ trading days which are dead ahead. There is a major confrontation (with wild volatility) headed for the USD Index in the period from late 2009 thru early 2012 - possibly setting up a nice rally in gold prices just in time for the “2012 Gold Olympics” (and beyond). What happens when China reverse engineers our key military weapon systems in the next decade? Remember, Central Banks love gold because it has been around for thousands of years. Not even Solomon in all his glory was worth as much as has been printed from controlling “old printing press #1600”. Coffee break is over; everybody except Congress should go back to slowly buying silver and gold or whatever. Maybe the big picture is slowly coming into focus – or not. In the end, it is either fiat or gold – somebody is lying. So do gasoline prices stay at $2.50+ a gallon after Dec 15^th? Was Amaranth Hedge Fund a set-up and some institution walked away with billions?

CONTACT INFORMATION
Dr. Stephen Rinehart
Lynn Haven, FL USA
Email

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.