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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

UBS Warns Stock Market “Rolling Over” – “Buy Gold”

Commodities / Gold and Silver 2016 Jan 14, 2016 - 12:51 PM GMT

By: GoldCore

Commodities

UBS has warned that the seven-year cycle in equities is rolling over, we could see a sharp 30% correction in stocks and that as per the headline of their ‘Technical Outlook 2016′, it is time to “buy gold”.


In their just released research note entitled ‘The 7-Year Cycle in Equities Is Rolling Over … Buy Gold!’, analysts Michael Riesner and Marc Müller believe the bear market that has dominated the price of gold since 2011 is nearing a bottom, with the “basis for the next multi-year bull market” now taking hold:

“Gold we expect to move into a major 8-year cycle bottom in 2016, as the basis for a new multi-year bull market.”

“Gold has been trading in a cyclical bear market since 2011. In 2016, we expect gold and gold mines moving into an 8-year cycle bottom as the basis for the next multi-year bull market. Initially, we see gold profiting as a safe haven and as of 2017, gold could profit from the US dollar moving in a major top and starting a bear market.” 

“In contrast to the underlying secular trend in commodities (which has turned bearish) we see gold (which is in our view a currency and not a commodity) still trading in a secular bull market.

Pattern wise we continue to see the 2011/2016 cyclical bear market in the same context as the 1975/1976 bear cycle in gold. Keep in mind, in the mid-70s gold lost 43% of its value from its January 1975 top before another gold bull market started into the January 1980 bubble peak. It is amazing to see that with a loss of 45% from its August 2011 top into the early December 2015 low, the decline in gold has more or less exactly the same proportion as in the mid-70s.

Furthermore, there are still a lot of market commentators who say that the August 2011 top in gold was the top of a bubble. According to the average gains we have seen in historical financial bubbles, the gold bull run from 2001 into 2011 (760%) was far away from any bubble territory.

In the first gold bubble, gold gained 2400%. In the 1903 to 1929 Dow bubble, the Dow Jones Industrial gained 1200%. The 1979-1989 Nikkei bubble came in at around 2000% and the 1980 – 2000 Nasdaq bubble topped out a +3900%.

So if gold moves into a bubble, we would need to see a gold price of minimum $3,300, and in this case we would still talk about a low bubble phenomena such as the 1903 – 1929 Dow Jones bubble!!”

The research and charts are well worth a read and can be accessed here

Precious Metal Prices
14 Jan LBMA Gold Prices: USD 1,090.75, EUR 998.03 and GBP 759.10 per ounce
13 Jan LBMA Gold Prices: USD 1,081.80, EUR 1,000.00 and GBP 749.04 per ounce
12 Jan LBMA Gold Prices: USD 1,094.95, EUR 1,008.76 and GBP 756.92 per ounce
11 Jan LBMA Gold Prices: USD 1,104.70, EUR 1,014.08 and GBP 758.18 per ounce
8 Jan LBMA Gold Prices: USD 1,097.45, EUR 1,009.86 and GBP 750.67 per ounce

This update can be found on the GoldCore blog here.

Mark O'Byrne

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