Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Further Clues Reveal Gold’s Weakness - 26th Nov 20
Fun Things to Do this Christmas - 26th Nov 20
Industries that Require Secure Messaging Apps - 26th Nov 20
Dow Stock Market Trend Analysis - 25th Nov 20
Amazon Black Friday Dell 32 Inch S3220DGF VA Curved Screen Gaming Monitor Bargain Deal! - 25th Nov 20
Biden the Silver Bull - 25th Nov 20
Inflation Warning to the Fed: Be Careful What You Wish For - 25th Nov 20
Financial Stocks Sector ETF Shows Unique Island Setup – What Next? - 25th Nov 20
Herd Immunity or Herd Insolvency: Which Will Affect Gold More? - 25th Nov 20
Stock Market SEASONAL TREND and ELECTION CYCLE - 24th Nov 20
Amazon Black Friday - Karcher K7 FC Pressure Washer Assembly and 1st Use - Is it Any Good? - 24th Nov 20
I Dislike Shallow People And Shallow Market Pullbacks - 24th Nov 20
Small Traders vs. Large Traders vs. Commercials: Who Is Right Most Often? - 24th Nov 20
10 Reasons You Should Trade With a Regulated Broker In UK - 24th Nov 20
Stock Market Elliott Wave Analysis - 23rd Nov 20
Evolution of the Fed - 23rd Nov 20
Gold and Silver Now and Then - A Comparison - 23rd Nov 20
Nasdaq NQ Has Stalled Above a 1.382 Fibonacci Expansion Range Three Times - 23rd Nov 20
Learn How To Trade Forex Successfully - 23rd Nov 20
Market 2020 vs 2016 and 2012 - 22nd Nov 20
Gold & Silver - Adapting Dynamic Learning Shows Possible Upside Price Rally - 22nd Nov 20
Stock Market Short-term Correction - 22nd Nov 20
Stock Market SPY/SPX Island Setups Warn Of A Potential Reversal In This Uptrend - 21st Nov 20
Why Budgies Make Great Pets for Kids - 21st Nov 20
How To Find The Best Dry Dog Food For Your Furry Best Friend?  - 21st Nov 20
The Key to a Successful LGBT Relationship is Matching by Preferences - 21st Nov 20
Stock Market Dow Long-term Trend Analysis - 20th Nov 20
Margin: How Stock Market Investors Are "Reaching for the Stars" - 20th Nov 20
World’s Largest Free-Trade Pact Inspiration for Global Economic Recovery - 20th Nov 20
Dating Sites Break all the Stereotypes About Distance - 20th Nov 20
THE STOCK MARKET BIG PICTURE - Video - 19th Nov 20
Reasons why Bitcoin is Treading at it's Highest Level Since 2017 and a Warning - 19th Nov 20
Media Celebrates after Trump’s Pro-Gold Fed Nominee Gets Blocked - 19th Nov 20
DJIA Short-term Stock Market Technical Trend Analysis - 19th Nov 20
Demoncracy Ushers in the Flu World Order How to Survive and Profit From What Is Coming - 19th Nov 20
US Bond Market: "When Investors Should Worry" - 18th Nov 20
Gold Remains the Best Pandemic Insurance - 18th Nov 20
GPU Fan Not Spinning FIX - How to Easily Extend the Life of Your Gaming PC System - 18th Nov 20
Dow Jones E-Mini Futures Tag 30k Twice – Setting Up Stock Market Double Top - 18th Nov 20
Edge Computing Is Leading the Next Great Tech Revolution - 18th Nov 20
This Chart Signals When Gold Stocks Will Explode - 17th Nov 20
Gold Price Momentous ally From 2000 Compared To SPY Stock Market and Nasdaq - 17th Nov 20
Creating Marketing Campaigns Using the Freedom of Information Act - 17th Nov 20
ILLEGITIMATE PRESIDENT - 17th Nov 20
Stock Market Uptrend in Process - 17th Nov 20
How My Friend Made $128,000 Investing in Stocks Without Knowing It - 16th Nov 20
Free-spending Biden and/or continued Fed stimulus will hike Gold prices - 16th Nov 20
Top Cheap Budgie Toys - Every Budgie Owner Should Have These Safe Bird Toys! - 16th Nov 20
Line Up For Your Jab to get your Covaids Freedom Pass and a 5% Work From Home Tax - 16th Nov 20
You May Have Overlooked These “Sleeper” Precious Metals - 16th Nov 20
Demystifying interesting facts about online Casinos - 16th Nov 20
What's Ahead for the Gold Market? - 15th Nov 20
Gold’s Momentous Rally From 2000 Compared To Stock Market SPY & QQQ - 15th Nov 20
Overclockers UK Quality of Custom Gaming System Build - OEM Windows Sticker? - 15th Nov 20
UK GCSE Exams 2021 CANCELLED! Grades Based on Mock Exams and Teacher Assessments - 15th Nov 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Gold, A Cyclical Recipe for Disaster

Commodities / Gold & Silver 2009 Nov 24, 2009 - 04:28 PM GMT

By: Bob_Clark

Commodities

Best Financial Markets Analysis ArticleIs Gold cyclical? Is a bullish consensus in which 97% of gold traders are bullish justified? Will my theory of relativity work on the barbarous relic? Lets take a look.


First let me explain my theory of relativity, basically it is based on the premise that there are multiple cycles in effect all the time and each cycle is subservient to the next larger cycle. This makes it possible to know where we are now and where we will go over time. In the thirty four year chart below you see two cycles, the big one (marked by red lines) is an 8 year cycle (*) and it is incredibly reliable, even the highs came in every eight years.

The other is our old friend the 1 year cycle (Brown dots). Notice that when the price rose above or fell below its previous 1 year extreme, it signaled a change of trend as the 8 year cycle turned.

There are only two times in 34 years that there was hair on the cyclical lollipop. In 1982 and again in 1999 there was confusion caused when a break of a previous year's high was a false signal. I have highlighted those bars in red. Notice that the 1999 rally also led to the question of a possible shift in the 8 year cycle, it is barely noticeable as your eye and brain scan 34 years of data in a split second, but it caused a lot of confusion at the time. In fact it caused many analysts to miss the bottom last year. In shorter term cycles you see that happen more often, I call them compression turns. Still, two times in such a long span of time is not bad, in fact that is tradeable relativity!

I have also marked in a tentative, very large cycle which I labeled as a 24 year cycle because we know it is a minimum of 24 years in duration, it could be larger. Notice that after the low in 1976 we did not break below a previous eight year low for 20 years, until 1997. Just as with the 1 year cycle, we can assume a larger trend than the 8 year cycle is in play and dominating the 8 year.

Returning to the 8 year for a moment notice how consistent the tops were, coming in 3 years after the lows and 8 years from the previous highs, that is rarely seen at cycle highs. Then in 2004 when the next high was due, everything changed. We poked our nose above the previous 8 year high (?), there was a nod of the head to the expected top, then bam, the gate slammed open and the bull was out of the chute.  

1   

In the above chart I have changed the lines to blue as we began the new bull run, although it took several years to be confirmed. The relatively normal translation of the 8 year cycle was no more. Something bigger was pushing gold higher. In 2006 again there were expectation of a possible top because of how late we were in the 8 year, after all gold had never gone up so late into a cycle top before. Wrong again, the 1 year cycle never got touched and gold bolted to its ultimate late translation top in 2008. From there it clunked, shaking out many bulls as they either lost their nerve or were sold out on margin calls. 

So what now?

Lets start with translation, it is the term used in wave analysis to define where the peak occurs relative to the cycle's duration. We see that the 2001 low came after two previous 8 years lows were broken. At that point the sum of all cycles larger than 8 years was down. Since then everything has changed. (See lower chart)

As you see the 2008 top was very late. Late translation of the 8 year cycle usually is an indication that the sum of all cycles larger than 8 years are moving strongly higher. We can assume from this that at that  2001 low, the cycle we are calling the 24 year turned up and is now 9 years along in its up phase.

The 24 year should not top out until 2012. Now look at the 8 year cycle, it has broken above its old 8 year high, confirming the up move is on track. Given normal translation, it also should not top out until 1012!   The next thing we need to do is define what the 1 year is doing, we don't want it blindsiding us with a sudden clunk.

Here it gets fuzzy, there is no clearly defined low to make a call on. Also there is a very strong seasonal cycle in gold that makes its lows in the summer and tops out in the February to March time frame, it also has to be factored in. What I have done is tentatively peg it as the low in late October, but I also realize it could come in anytime now as well. I also know that the fat boys are extremely short gold futures. So I guard our positions with stop loss orders and won't be surprised by a sudden melt down. If it has not been made yet, it has to be soon, before the end of the year. The new year should see more new highs into at least March.

2 

To conclude, the picture looks bright for the metals, I did not put in targets, but $1800 is one of proprietary objectives that seems easily attainable in the next 3 years of this cycle and possibly much higher. Shorter term we will see profit taking around $1300, it is the head and shoulders target everyone is watching. We will definitely attain that in the next 1 year up leg, which may have already started.   

One last thing, in my heading, gold, a cyclical recipe for disaster. I was not referring to gold, but to the world we live in. We have seen incompetence, corruption and white collar organized crime bring the most powerful country on earth to is knees in one generation. Gold is telling us it is not over, it may just be getting started.  At this time I would like to wish all a safe, happy Thanksgiving....

Bob Clark is a professional trader with over twenty years experience, he also provides real time online trading instruction, publishes a daily email trading advisory and maintains a web blog at www.winningtradingtactics.blogspot.com  his email is linesbot@gmail.com.

© 2009 Copyright Bob Clark - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Macia Mao
27 Nov 09, 14:38
It's Thanksgiving Weekend.

Hi people, it is Thanksgiving Day! I'm happy with my extra day off, and I am planning to doing something fun that'll probably involve a moto trip and seeing something new in Plainfield I haven't seen yet.

You write something new at Thanksgiving?


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules