Best of the Week
Most Popular
1.London House Prices Bubble, Debt Slavery, Crimea 2.0 - Russia Ukraine Annexation - Nadeem_Walayat
2. Gold And Silver – 2014 Coud Be A Yawner; Be Prepared For A Surprise - Michael_Noonan
3.Sheffield, Rotherham Roma Benefits Plague, Ch5 Documentary Gypsies on Benefits & Proud - Nadeem_Walayat
4.Glaring Q.E. Failure Spotted - Money Velocity Is Falling Rapidly - Jim_Willie_CB
5.Don't Miss the Boat on Big Biotech Catalysts: Keith Markey - Keith Markey
6.Gold Prices 2014: Do What Goldman Does, Not What It Says - David Zeiler
7.Bitcoin Price Strong Appreciation to Be Followed by Declines? - Mike_McAra
8.Gold Preparing to Launch as U.S. Dollar Drops to Key Support - Jason_Hamlin
9.Doctor Doom on the Fiat Money Empire Coming Financial Crisis - Andrew_McKillop
10.The Real Purpose Of QE - It’s Not Employment - Darryl_R_Schoon
Last 72 Hrs
America has Become a Police State - 19th Apr 14
Elite Herd Psychology And War By Default - 19th Apr 14
E.U. Officially Adopts the Bank Depositors Bail-In - 19th Apr 14
Goldman Sachs Is Highly Motivated To Low-Ball Gold Price - 19th Apr 14
Save MtGox - Bitcoin Important Implications of Going Down - 19th Apr 14
Stock Market SPX Topping Valuations - 19th Apr 14
Tesco Profits Panic! Back to Back £5 Off £40 Shop Voucher Promotions - 18th Apr 14
The Obama Game - Is Putin Being Lured Into a Trap? - 18th Apr 14
The Growing Threat to Capitalism - 18th Apr 14
Build Biotech Wealth on Solid Platforms - 18th Apr 14
Has Solar Power Finally Arrived? - 18th Apr 14
Bank Depositor Bail-Ins and Real Assets vs Liability-Based Assets - 18th Apr 14
10 Ways to Screw up Your Retirement - 17th Apr 14
One of Harry Dent’s Three Keys to Market Prediction is Cycles - 17th Apr 14
Obamacare Proof Stocks - 17th Apr 14
Gold, Silver And The Mining Sector: Prepare For A Severe Fall - 17th Apr 14
Hidden Australian Life Sciences Bio-tech Growth Stocks - 17th Apr 14
Disrupting Big Data Status Quo - 17th Apr 14
What the Stock Market Bears Have Been Waiting for... - 17th Apr 14
Copper Is Pathological and Suffers from SAD, but It Has Value - 17th Apr 14
Old World Order New World Order, Chaos And Change - 17th Apr 14
Even The US Government Will Abandon the U.S. Dollar - 17th Apr 14
Gold - Coming Super Bubble - 17th Apr 14
Glaring Q.E. Failure Spotted - Money Velocity Is Falling Rapidly - 16th Apr 14
High-Frequency Insider Trading - 16th Apr 14
Gold Prices 2014: Do What Goldman Does, Not What It Says - 16th Apr 14
These CEOs Will Make Investors Rich - 16th Apr 14
Climate Change, Central Banking And The Faustian Bargain - 16th Apr 14
Every Central Bank for Itself - 16th Apr 14
Social Security, U.S. Treasury Stealing Every Last Penny From Americans - 16th Apr 14
Ukraine Falling to Economic Warfare and Its Own Missteps - 16th Apr 14
Silver and Gold Miners Still Disappoint - 16th Apr 14
Silver, Gold, and What Could Go Wrong - 15th Apr 14
How I Intend to Survive the Meltdown of America - 15th Apr 14
France Wakes Up To The Multicultural Multi-Threat - 15th Apr 14
The Real Purpose Of QE - It’s Not Employment - 15th Apr 14
Peak Coal - 15th Apr 14
Flash Crash, Rigged Markets - What’s the Frequency Zenith? - 15th Apr 14
Forecasting U.S. GDP Growth: A Look at WSJ Economists’ Collective Crystal Ball - 15th Apr 14
Stock Market - Is Something Nasty About to Happen? - 15th Apr 14
How to Trade Your Way To Freedom - 15th Apr 14
Understanding (and Ignoring) the Media Bandwagon Against Gold - 15th Apr 14
When Stock Market Bubble Crashes, Take Refuge in Gold Stocks - 15th Apr 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Deja Vu 1980?

Commodities / Gold and Silver 2011 Sep 14, 2011 - 01:48 AM GMT

By: Willem_Weytjens

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleHave you ever experienced a "Deja Vu" feeling? Well, if you have never experienced one, maybe after reading this post you will.

Let's start with a technical chart of Gold. These days, gold is holding up strongly, and is only $80 below its all-time high.


If this continues, we might consolidate for a couple of weeks, to work off the overbought condition of the MACD indicator.

Chart: Prorealtime

Now have a look at the following Chart:

Chart: Prorealtime

The chart above is the gold price in 1970, right before it more than doubled 2 months later.

Don't they look very similar? To show you, I will now place one chart on top of the other one:

Chart: Prorealtime

Well, since Gold is acting very much like in the seventies, let's see what happened after... Based on this chart, Gold could consolidate until mid-late October, and then Double again in the weeks/months following.

As of late, the shares of mining companies have been lagging the Gold price Big time!

However, as we can see in the chart below, the mining shares (represented by the Barron's Gold Mining Index) follow the gold price nicely over time. It looks like the Mining companies are breaking out of a multi-decade long consolidation pattern:

When we measure the BGMI (Barron's Gold Mining Index) in Gold, we can plot the outperformance or underperformance of Gold stocks compared to Physical Gold. A falling ratio means Gold stocks Underperform Gold, or equivalently, Gold outperforms Gold stocks.

Notice that the gold stocks were also underperforming gold before the top of 1980!

The following chart is the same chart as above, but now with some support and resistance lines.

However, the most interesting observation is that as gold peaked in 1980, the Mining Stocks first retreated along with Gold, but then doubled in the months that followed, while gold did not make a new high until 2008!

What will happen to Silver if Gold doubles over the next couple of months?

If history is any guide, silver will also rally substantially.

At the top of 1980, on January 21st, ONE ounce of Silver was 4.79% of the price of ONE ounce of Gold. Right now it is only 2.28% of the price of Gold. So if Gold is about to double from here, Silver should at least double as well, and if we would get back to the high of 1980 (Silver Price as a % of the Gold Price), Silver could potentially more than QUADRUPLE from here...

***** You can now try out our services during 5 days for only $5. That is only $1 per day! For more information, please visit the following Link: $5 Trial *****

For more analyses and trading updates, please visit www.profitimes.com

Willem Weytjens

www.profitimes.com

© 2011 Copyright Willem Weytjens - 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.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

R Vogel
14 Sep 11, 06:37
No Comparison

If one likes to compare 1980 with now, one must plot the US Federal Fund Rates direct under the gold price chart. Then you'll realize that these are two different animals!


Post Comment

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

Free Report - Financial Markets 2014