FSU Editorial: "Quick Look Report #44" by Stephen Rinehart 04/17/2007

QUICK LOOK REPORT #44
by Dr. Stephen Rinehart
April 17, 2007

Background:

Quick Look Report #44 updates the daily prediction for daily price of gold. Quick Look Report #15 (in Dec 2005) made a monthly gold prediction which identified the 86-month cycle in gold as the most significant driver in the long-term gold prices. It was predicting a strong upward move in gold for late 2006 and 2007. Gold continues its upward march with some volatility (which will become wild in 2008/2009) and continues to be an excellent inflation hedge as long as M3 exceeds 8% (currently M3 probably exceeds 10%+ and many foreign countries are debasing their fiat currencies at rates of 13% or higher). .

The seven primary daily cycles in the price of Gold are: 273, 357, 496, 676, 812, 1860 and 3145. 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). We continue to believe that the real rally in gold would launch off the coming bottom of the 86-month cycle (which may have shifted to April 2007 or the cycle is about 90-months). In other words, we have not seen anything yet as compared to what’s coming in the next fifteen years in Gold prices. If all 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 (currently centering on 2014) marking a real Stage III in Gold (as the USD/GDP collapses into the night). Interesting is the cycle at 3141 days (mathematical Pi x 1000) as gold seems to have a “pi-numerology” associated with its cycles.

Chart 1 shows the prior August 2004 prediction in Gold (see Quick Look Report #15 from Dec 2005 and a prediction from Aug 2004 in Magnificent Seven Series). The largest cycle in this prediction is an 86-month cycle or the proverbial seven-year cycle. This cycle was predicted to be approaching a bottom in late 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 remained nicely intact thru much of 2006. 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 mid-to-late 2007.

Chart 2 shows the match between the current cycles and actual daily closing prices in Gold from 2006 thru April 2007. The current cycles fit the actual data with plus or minus 4% (tends to slight under or over predict).

Chart 3 shows the current 86-month cycle and its predicted path thru 2011. This is still the largest cycle in actual daily closing prices in Gold from 1969. The cycle has bottomed (as of April 2007) and should lead a major rally in gold prices over the next four years. The maximum acceleration of this cycle would occur about mid-2008 and would provide a solid base for a strong continued surge in the price of gold.

Chart 4 shows the 86-month cycle from 1969. It is very predictable and this type of pattern could be a consequence of a major economic policy or action being taken by the world central banks in conjunction with interest rate moves and “liquidity” moves in M3 as well as the timing of derivative plays.

Chart 5 shows the predicted gold waveform for 2007 give the current cycles. It suggests the start of a major coming upside move (between May and July 2007). This move may already have started and could accelerate into late summer 2007 with continuing weakness in the USD.

Summary:

China (and other Asian countries) may start rapidly divesting itself of USD in favor of hard assets such oil, gas, grains and precious metals as the cycle timing is perfect to execute this move. In effect, the play would be for China to “buy-up” the major resource companies of Canada (including oil and gas trusts) as well as resources in Australia/Africa and lock-in world grain supplies for the future. This could become a free-for-all by 2009/2010 in energy, precious metals and grains. China can also reverse engineer the West’s combat weapon systems for pennies on the dollar – expect a very militant China after 2011 and becoming very aggressive after 2018. China has huge problems to address in the migration of its population.
Gold’s cycles are lining up for a major upside move (nice move for 2008) which may go on for years. There is a real possibility of a sharp coming upside moves in gold (as well as Silver) thru 2008 but also expect wild volatility.
A huge upward wave in gold could still materialize in 2012-2014 timeframe as two major long-term cycles converge together at a time when the USD/GDP will be in major decline.
A real peak in gold prices could occur in 2018 as the Secular Bear winds down and new world currency is introduced. Gold could make a run at $1000 an ounce by late 2008/2009 with a try at $2000 an ounce by late 2011 if the current slope holds (i.e., the rate of M3 continues over 11% per annum). Gold Bugs may now own the playing field (bottom in for 86-month cycle) and as soon as the public recognizes gold (late 2009?); the real fun starts in PM stocks.
Silver companies who are developing resources in the range of 100-million ounces have tremendous coming leverage with gold’s upside cycles. Witness the ongoing runs in stocks like SSRI but even small silver stocks such as Endeavor are moving nicely. Do your own diligence but some of these puppies could be the buy of a lifetime. What are we going to do when three billion Asians each want to buy an ounce of silver? Better to buy it now – no longer any reason to wait.

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.