Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
If You Don’t Understand Bonds, You Don’t Understand Investing - 25th Aug 19
Gold's Next Move - 25th Aug 19
Fresh Water Crisis Unfolding - 25th Aug 19
Newbie Guide to Currency Pairs in Forex Trading – Review - 25th Aug 19
When A 16-Year-Old Earns $3 Million, You Know It's Not A 'Silly Fad' - 24th Aug 19
The Central Bank Time Machine - 23rd Aug 19
Stock Market August Breakdown Prediction and Analysis - 23rd Aug 19
U.S. To “Drown The World” In Oil - 23rd Aug 19
Modern Monetary Theory Could Destroy America - 23rd Aug 19
Seven Key Words That Explain "Stupidly High" Bond Market Prices - 23rd Aug 19
Is the Fed Too Late Prevent A US Housing Bear Market? - 23rd Aug 19
Manchester Airport FREE Drop Off Area Service at JetParks 1 - Video - 23rd Aug 19
Gold Price Trend Validation - 22nd Aug 19
Economist Lays Out the Next Step to Wonderland for the Fed - 22nd Aug 19
GCSE Exam Results Day Shock! How to Get 9 A*'s Grade 9's in England and Maths - 22nd Aug 19
KEY WEEK FOR US MARKETS, GOLD, AND OIL - Audio Analysis - 22nd Aug 19
USD/JPY, USD/CHF, GBP/USD Currency Pairs to Watch Prior to FOMC Minutes and Jackson Hole - 22nd Aug 19
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
WAYS TO SECURE YOUR FINANCIAL FUTURE - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
GOLD BULL RUN TREND ANALYSIS - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Gold Price Under $1000 Is A Very Real Possibility

Commodities / Gold and Silver 2017 Oct 24, 2017 - 11:32 AM GMT

By: Kelsey_Williams

Commodities

After gold peaked in January 1980 at $850.00 per ounce, it dropped in price by two-thirds (66%) over the next five years. The low in February 1985 was $284.00 per ounce.

At that point it began a strong move upwards over a three-year span peaking at just under $500.00 ($499.75) per ounce in December 1987. That translates to an increase of seventy-six percent.


The advance was solid and well-defined. Those who had been waiting for the price of gold to go back up were confirmed fundamentally and technically. Or so they thought.  With the “clear, technical confirmations” of a “new, bull market in gold” came a deluge of predictions regarding $1,000.00 gold and higher. At the time that would have marked a nearly four-fold increase from its previous  low of $284.00. (That equates similarly to today’s predictions of $4000.00 gold assuming that $1040.00 was the low in December 2015.)

It was not to be. In January 1988, gold began a long an arduous decline which lasted fifteen years. Trading in gold was confined to a range between $300-400.00 per ounce for the next ten years. Then, seemingly as a result of sheer exhaustion, gold broke down through $300.00 per ounce and traded as low as $252.00 per ounce in September 1999. From its temporary peak at $500.00 per ounce to its ultimate low of $252.00 per ounce, gold’s price had dropped fifty percent.

Even after reaching its ultimate low of $252.00 per ounce, gold continued to trade mostly at under $300.00 per ounce for nearly three more years (April 2002).

Let’s see how this compares to more recent history regarding gold.

From its peak in September 2011 at $1895.00 per ounce, gold declined to $1040.00 per ounce over a period of four and one-half year.

Subsequent to that, gold’s price increased by almost thirty percent to $1363.00 per ounce in a period of seven months. Almost fifteen months later, gold has not traded any higher.

Question No. 1: Are we in the midst of a three-year period similar to that which occurred between 1985-88 (with respect to the price of gold)?

Question No. 2: If so, what might we possibly expect going forward?

It is certainly a realistic possibility that the answer to question no. 1 is yes. This is possible even if gold’s price goes higher first.

It seemed a well-known fact that after dropping in price by two-thirds, gold had seen its ultimate low at $284.00 per ounce.  With three successive years of incredibly profitable gains, who would proclaim otherwise? And the technical signals confirmed it.

The situation today is not entirely dissimilar. Whether $1360.00 per ounce is a long-term intermediate/reaction top or not, the prospect for gold to resume a longer-term price decline would not be out of context with its earlier history.

Gold’s initial decline from its peak price in January 1980 lasted for five years and totaled sixty-six percent. Its initial decline from the recent peak in September 2011 lasted for four and one-half years and totaled forty-five percent. Reasonably similar.

Gold’s price increase from its low in February 1985 lasted for three years and totaled seventy-six percent. Its price increase from the recent low in December 2015 has lasted for twenty-two months. At its peak of $1360.00 last summer and again recently this represents an increase of thirty percent. Considerably smaller percentage gains, but not entirely dissimilar when considering the broader picture.

And if gold were to move higher soon it would not negate the possibility of going much lower again and disappointing lots of people.

The additional technical confirmations and increased comfort level that came as gold increased in price from $284.00 to $500.00 between 1985-88 did nothing to stop the subsequent fifteen-year decline to new lows.

If gold were to decline back towards $1000.00 per ounce, how low might it go? What might we expect?

One possibility is that it could trade between $1100.00 and $1300.00 for several years. And then break down below $1000.00. And depending on how quickly it establishes its eventual low point, it might trade for several years under $1000.00. Gold might settle out somewhere just above its previous all-time high in 1980 at $850.00 per ounce. Say $875-$975.00 per ounce.

There are also technical studies that point to a gold price as low as $700.00 per ounce before a resumption of the “eternal” bull market.

Ironically, none of the above is about gold.  It is about the U.S. dollar.

Whatever you think or expect regarding gold, you need to make sure your expectations for the dollar are inversely similar. (see here)

During the entire fifteen year period of gold’s price decline between 1988-2002, the U.S. dollar was gaining in value. When the U.S. dollar peaked in January 2002, gold was priced at $282.00 per ounce (gold had posted its low price of $252.00 a year or two before this but was still trading under $300.00).

At that point, gold and the dollar reversed directions simultaneously. Over the next eleven years, the U.S. dollar gave up nearly thirty percent of its peak value. Gold, meanwhile, gained five hundred and seventy percent in price. That increase seems a bit outsized on the surface, but it is not dissimilar to the outsized declines gold suffered during the previous twenty years while the dollar was gaining in value.

Between September 2011 and January 2016 the U.S. dollar gained significantly and gold’s price declined in similar fashion. The low so far for gold was the $1040.00 per ounce in December 2015.  The peak for the dollar occurred just a few short weeks later in January 2016.

After January 2016, both reversed directions again. The dollar headed lower and gold reversed and went higher. Similar turning points occurred in the summer of 2016 and December 2016.

Which brings us to the present. If gold moves higher from here it will be because of continuing weakness in the U.S. dollar. Conversely, if the U.S. dollar moves higher, it will be reflected in a lower gold price.

(for a scenario about possible gold prices see Gold Price – US$700 Or US$7000?)

By Kelsey Williams

http://www.kelseywilliamsgold.com

Kelsey Williams is a retired financial professional living in Southern Utah.  His website, Kelsey’s Gold Facts, contains self-authored articles written for the purpose of educating others about Gold within an historical context.

© 2017 Copyright Kelsey Williams - 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.


Post Comment

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

6 Critical Money Making Rules