Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US Presidential Election Year Stock Market Seasonal Trend - 29th Nov 24
Who controls the past controls the future: who controls the present controls the past - 29th Nov 24
Gold After Trump Wins - 29th Nov 24
The AI Stocks, Housing, Inflation and Bitcoin Crypto Mega-trends - 27th Nov 24
Gold Price Ahead of the Thanksgiving Weekend - 27th Nov 24
Bitcoin Gravy Train Trend Forecast to June 2025 - 24th Nov 24
Stocks, Bitcoin and Crypto Markets Breaking Bad on Donald Trump Pump - 21st Nov 24
Gold Price To Re-Test $2,700 - 21st Nov 24
Stock Market Sentiment Speaks: This Is My Strong Warning To You - 21st Nov 24
Financial Crisis 2025 - This is Going to Shock People! - 21st Nov 24
Dubai Deluge - AI Tech Stocks Earnings Correction Opportunities - 18th Nov 24
Why President Trump Has NO Real Power - Deep State Military Industrial Complex - 8th Nov 24
Social Grant Increases and Serge Belamant Amid South Africa's New Political Landscape - 8th Nov 24
Is Forex Worth It? - 8th Nov 24
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

GOLD Deja Vous?

Commodities / Gold and Silver 2012 Jul 09, 2012 - 03:45 PM GMT

By: Tony_Caldaro

Commodities

Best Financial Markets Analysis ArticleThanks to the FED’s recent addition of the London PM fix data, April 1968 to date, we have uncovered an unmistakeable repetitive pattern in Gold. The chart below displays the price data for the entire period.


First a little history. After World War II the Brenton Woods system was established whereby all currencies were valued in terms of USDs, and the USD was on a Gold standard priced at $35/oz. This made all currencies indirectly linked to the Gold standard. Heading into 1968 the USA started to have a difficult time maintaining the price of Gold at $35/oz. In March 1968, the USA abandoned its Gold intervention policy and allowed it to trade freely in the secondary market. The data in the above chart begins the following month.

The initial reaction to this two tier Gold pricing system was a rally to $44 by 1969. Then Gold declined back down to $35 by 1970. In January, 1970 the Gold price began to rise again. By August, 1971 the price of Gold had risen back to $44, and the USA abandoned the Gold standard altogether. This launched the 1970-1980 bull market. Notice the 1968-1970 double bottom, then the 10 year 1970-1980 bull market.

After the January, 1980 blowoff top in Gold a 19 year bear market followed. In 1999 the price of Gold hit its low at $253. Then after a rally to $326 it retested that low again in 2001. What followed, as we have all observed, was a 10 year bull market into the 2011 high. Notice this bull market pattern, in time, is identical to the previous bull market: a 2 year double bottom followed by a 10 year bull market.

The major difference between the two bull markets is obviously price. During the 12 year (1968-1980) bull market cycle the price of Gold rose from $35 to $850 using the London PM fix data. Prior to this bull market there were decades of pented up demand. In fact, US citizens were not allowed to directly own Gold until late 1974. The 1970′s was also a period of high inflation, directly devaluing the purchasing power of all currencies. Gold, considered a safe haven against currency devaluation and now legal to own, soared. The last stage of the bull market was quite spectacular.

Notice during the last year of that bull market Gold soared from just above $200 to $850. Also notice the nearly $100 gap up over the holidays in late 1979 into the blowoff top in January, 1980. Gold had gone parabolic to end that bull market. When parabolic tops end, as we all can remember from the dotcom bubble, the collapse in percentage terms is just as sudden. But putting that aside look at the decline in actual USD’s.

The initial drop from $850, about $350, retraced about 50% of the bull market’s last year advance. Then a failed rally attempt to reestablish the bull market, about $200, retraced about 2/3′s of that decline. After that the bear market took hold and prices gradually declined to around $300 by 1982. Now let’s review the current price activity in the Gold market.

During this bull market we at first had a demand driven commodity boom, 2001-2008, as emerging market countries grew putting a strain on supply. Gold rose to just over $1000 during this phase. When the commodity boom ended all commodity prices collapsed, as the deflationary impact of this Secular cycle took hold. Keep in mind Gold only experiences real bull markets during Secular cycles.

During the collapse in late 2008 Central Banks started what is termed Quantitative Easing programs. They essentially were increasing the money supply at a rapid rate to offset the deflationary pressures. Gold, considered a safe haven against currency devaluation, rallied. The second QE program in the US, QE 2, ended in June, 2011. Gold corrected then rallied again on speculation of a QE 3 program. When the FED announced Operation Twist in mid-September 2011 Gold had topped and was already correcting.

Notice the initial drop from $1895, about $350, retraced about 50% of the 2011 advance. Then a rally attempt to reestablish the bull market, about $250, retraced about 2/3′s of that decline. Now Gold has been gradually declining towards those lows again. Just like it did in 1981, the year after the 1980 bull market high.

One would have to admit the similiarities between both bull markets are quite striking. Despite the difference between the inflationary pressures of the 1970′s, and the deflationary pressures of the 2000′s. Now, even the decline after their respective peaks are also looking similar. When one takes into account that most of the commodities peaked in price during the 2008-2011 time period. And, now appear to be in ongoing bears markets. We will have to consider that Gold is currently in a bear market, unless it can exceed its 2011 high to extend it. Gold charts, in Comex terms, are provided in the following link: http://stockcharts.com/public/1269446/tenpp/9. The FED’s London PM fix data: http://research.stlouisfed.org/fred2/series/GOLDPMGBD228NLBM.

CHARTS: http://stockcharts.com/...

http://caldaroew.spaces.live.com

After about 40 years of investing in the markets one learns that the markets are constantly changing, not only in price, but in what drives the markets. In the 1960s, the Nifty Fifty were the leaders of the stock market. In the 1970s, stock selection using Technical Analysis was important, as the market stayed with a trading range for the entire decade. In the 1980s, the market finally broke out of it doldrums, as the DOW broke through 1100 in 1982, and launched the greatest bull market on record. 

Sharing is an important aspect of a life. Over 100 people have joined our group, from all walks of life, covering twenty three countries across the globe. It's been the most fun I have ever had in the market. Sharing uncommon knowledge, with investors. In hope of aiding them in finding their financial independence.

Copyright © 2012 Tony Caldaro - 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.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Buruni
09 Jul 12, 16:18
Typo

Sir,

In French language "deja vous" translates to "You already". Maybe you meant "Deja vu" for "Seen already; seen before".


Post Comment

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