Best of the Week
Most Popular
1.The Brexit War! EU Fearing Collapse Set to Stoke Scottish Independence Proxy War - Nadeem_Walayat
2.London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - Nadeem_Walayat
3.The BrExit War, Game Theory Strategy for What UK Should Do to Win - Nadeem_Walayat
4.Goldman Sachs Backing A Copper Boom In 2017 - OilPrice_Com
5.Trump to Fire 50 US Cruise Missiles To Erase Syrian Chemical Attack Air Base, China Next? - Nadeem_Walayat
6.US Stock Market Consolidation Time - Rambus_Chartology
7.Stock Market Investors Stupid is as Stupid Goes - James_Quinn
8.Gold in Fed Interest Rate Hike Cycles- Zeal_LLC
9.The BrExit War - Britain Intelligence Super Power Covert War With the EU - Nadeem_Walayat
10.Marc Faber: Euro to Strengthen, Dollar to Weaken, Gold and Emerging Markets to Outperform - MoneyMetals
Last 7 days
Earth Overshoot Day - Human Population Growth - 28th Apr 17
Misunderstanding GDXJ: Why It’s Actually Great News For Junior Miners - 28th Apr 17
What Makes Bitcoin Casinos So Remarkable? - 28th Apr 17
Financial Markets Improvised Explosives - 27th Apr 17
More Stock Market Short-Term Uncertainty As Stocks Get Close To Record High - 27th Apr 17
Elliott Wave Theory: Is Elliott’s Theory Enough? - 27th Apr 17
Billionaire Investor Paul Tudor Jones Says Stock Market Valuation Is “Terrifying” And He Is Right - 26th Apr 17
The Great BrExit Divides - Britain, USA and France - 26th Apr 17
10 Facts That Show Our Taxes Are Worse Than You Thought - 26th Apr 17
What Trump’s Next 100 Days Will Look Like - 26th Apr 17
G20: SURPASSING THE 2nd GLOBAL STEEL CRISIS - 26th Apr 17
What A War With North Korea Would Look Like - 25th Apr 17
Pensions Are On The Way Out But Retirement Funds Are Not Working Either - 25th Apr 17
Frank Holmes : Gold Could Hit $1,500 in 2017 Amid Imbalances & Weak Supply - 25th Apr 17
3 Reasons Why “Spring Forward, Fall Back” Also Applies To Gold - 25th Apr 17
SPX may be Aiming at the Cycle Top Resistance - 25th Apr 17
Walmart Stock Extending Higher - Elliott Wave Trend Forecast - 25th Apr 17
Google Panics and KILLS YouTube to Appease Mainstream Media and Corporate Advertisers - 25th Apr 17
Gold Price Is 1% Shy of Ripping Higher - 25th Apr 17
Exchange-Traded Funds Make Decisions Easy - 25th Apr 17
Trump Is Among The Institutionally Weakest National Leaders In The World - 25th Apr 17
3 Maps That Explain the Geopolitics of Nuclear Weapons - 25th Apr 17
Risk on Stock Market French Election Euphoria - 24th Apr 17
Fear Campaign Against Americans Continues Nuclear Attack Drills in New York City - 24th Apr 17
Is the Stock Market Bounce Over? - 24th Apr 17
This Could Be One Of the Biggest Winners Of The Electric Car Boom - 24th Apr 17
Le Pen Shifts Political Landscape- The Rise of New French Gaullism  - 24th Apr 17
IMF Says Austerity Is Over - Surplus or Stimulus - 24th Apr 17
EURUSD at a Critical Point in Wave Structure - 23rd Apr 17
Stock Market Grand Super Cycle Overview While SPX Correction Continues - 23rd Apr 17
Robert Prechter Talks About Elliott Waves and His New Book - 23rd Apr 17
Le Pen, Melenchon French Election Stock, Bond and Euro Markets Crash - 22nd Apr 17
Why You Are Not An Investor - 22nd Apr 17
Gold Price Upleg Momentum Building - 22nd Apr 17
Why Now Gold and Silver Precious Metals? - 22nd Apr 17
4 Maps That Signal Central Asia Is at Risk of War - 22nd Apr 17
5 Key Steps For A Comfortable Retirement From Former Wall Street Trader - 22nd Apr 17
Can Marine Le Pen Win? French Presidential Election Forecast 2017 - 21st Apr 17
Why Stock Market Investors May Soon Be In For A Rude Awakening - 21st Apr 17
Median US Household’s Wealth Has Declined by 40% Since 2007 - 21st Apr 17
Silver, Platinum and Palladium as Investments – Research Shows Diversification Benefit - 21st Apr 17
U.S. Stock Market and Gold, Post Tomahawks and MOAB - 21st Apr 17
An In Depth Look at the Precious Metals Complex - 20th Apr 17
The Real Story of China’s Strong First-Quarter Growth - 20th Apr 17
3 Types Of Life-Changing Crisis That Make You Wish You Had Some Gold - 20th Apr 17
The Truth is a Dangerous Thing - 20th Apr 17
2 Choke Points That Threaten Oil Trade Between Persian Gulf And East Asia - 20th Apr 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

Gold Price in 2016

Commodities / Gold and Silver 2016 Jan 15, 2016 - 05:10 PM GMT

By: DeviantInvestor

Commodities

We all know that gold prices in US dollars have been in a downtrend for about 4.5 years.

We all know that gold prices rise, on average, as the underlying currency declines in value.  Gold in the US was priced under $21 per ounce when the Federal Reserve was established.  Since then the dollar has been devalued and gold has increased in price by a factor of about 50.

It is the same story around the world, whether you evaluate in terms of British pounds, euros, rubles, yen, or any other debt based fiat paper currency.


So what are gold prices today and what will they be in the next two years?

  1. As I write gold is priced at about $1,100, down over 40% from its all-time high but more than $50 above recent lows.
  2. Gold prices – paper gold prices established on COMEX – are oversold weekly and monthly. The next big move is likely higher.  See charts below.
  3. Global debt exceeds $200 Trillion. Central banks will borrow currencies into existence to support overspending by their governments, devalue their currencies, and do whatever they believe is necessary to support a wobbly financial system.  Expect more devaluations and higher gold prices in fiat currencies.

The vertical purple lines on the monthly chart are spaced about every 7.5 years, approximately marking lows in 1985, 1993, 2001, 2008, and 2015.  Gold prices are currently in the zone for an expected cyclic bottom.  In our central bank managed financial system, we should NOT rely upon cycles, but we should not ignore them either.

  • Cycles indicate gold prices are in the time zone for a low.
  • The purple ovals at the bottom of the monthly chart on the TDI indicator show that monthly gold prices are oversold and due for a bounce.
  • The light green ovals at the bottom of the weekly chart on the TDI indicator shows that weekly gold prices are oversold and due for a bounce.

Other Considerations:

  • After multiple promises about “no boots on the ground” the US now has boots on the ground in Iraq, Syria, and over 100 other locations. A large military is expensive and must be supported by debt, deficits, taxes, and promises.  Expect more dollar devaluation.
  • US government expenses are out of control – currently around $4 Trillion per year – and going higher. Revenues lag expenses.  Expect more debt, deficits, promises and dollar devaluation.
  • The US stock market is rolling over in its 7+ year cycle. The recession and stock market losses will hurt the economy and US government revenues.  Expect more debt, deficits, promises and dollar devaluation.
  • “Regression to the mean” suggests gold will correct higher and the S&P will correct lower. The correction in both is in process.
  • China, India, and Russia are trading dollars and bonds for gold. They want physical gold, not paper promises such as COMEX gold contracts.  They know the truth – gold thrives, paper dies.
  • Global banks have created and profited from the creation of about a $1,000 Trillion in derivatives. This has been good for bank profits and bonuses, BUT  …  what could go wrong?  Is your bank at risk?  Your pension fund?  Will physical gold and silver even be available to buy when it becomes devastatingly clear in 2016 – 2017 that we need it as insurance and as a store of value to protect from devaluing fiat currencies?

Gold Valuation Model:

Harry Dent thinks gold prices may drop to $250.  In a hyperinflation, gold prices could easily exceed $10,000.  What should we believe?  My solution was to create a valuation (not a timing model) model for gold prices, which I published over a year ago.  Since 1971, using moving-average smoothed prices, the valuation model had a 98% statistical correlation with actual smoothed gold prices.  The model tells us that a “fair” value for gold in 2015 is $1,200 – $1,300.  Gold prices on COMEX are too low today.

The model is based on US national debt (massive and exponentially increasing), the S&P 500 Index (rolling over) and the price of crude oil (bottoming – I think).  The model indicates gold prices should be valued much higher in the next several years — UNLESS you think national debt will flat-line or decrease, the S&P 500 will rally much higher, and crude oil prices will stay at currently depressed levels for several more years.

CONCLUSIONS:

  • Gold prices are in the time zone for a 7 year bottom. Buy for insurance.
  • Gold prices are oversold on a weekly and monthly basis and indicate higher prices are likely. Buy for insurance.
  • The financial world is more unstable and dangerous each day. War is escalating globally.  Economies are rolling over into recession.  Derivatives …. much could go wrong.  Buy gold for insurance.
  • Central banks will devalue their currencies as certainly as the sun will rise and politicians will make promises they do not intend to keep. Buy gold for insurance.
  • My gold valuation model indicates gold prices are too low.
  • Gold (and silver) are insurance to protect from devaluing currencies, central bank manipulations, deficit spending, massive unpayable debt, and politicians pushing their countries into expanded wars. We need such insurance.

Gold thrives, paper dies!

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

My books are available on Amazon and at gechristenson.com

© 2016 Copyright Deviant Investor - 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.

Deviant Investor Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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

Catching a Falling Financial Knife