Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Dow Forecasting Neural Nets, Crossing the Rubicon With Three High Risk Chinese Tech Stocks - 18th Sep 21
If Post-1971 Monetary System Is Bad, Why Isn’t Gold Higher? - 18th Sep 21
Stock Market Shaking Off the Taper Blues - 18th Sep 21
So... This Happened! One Crypto Goes From "Little-Known" -to- "Top 10" in 6 Weeks - 18th Sep 21
Why a Financial Markets "Panic" May Be Just Around the Corner - 18th Sep 21
An Update on the End of College… and a New Way to Profit - 16th Sep 21
What Kind of Support and Services Can Your Accountant Provide? Your Main Questions Answered - 16th Sep 21
Consistent performance makes waste a good place to buy stocks - 16th Sep 21
Dow Stock Market Trend Forecasting Neural Nets Pattern Recognition - 15th Sep 21
Eurozone Impact on Gold: The ECB and the Phantom Taper - 15th Sep 21
Fed To Taper into Weakening Economy - 15th Sep 21
Gold Miners: Last of the Summer Wine - 15th Sep 21
How does product development affect a company’s market value? - 15th Sep 21
Types of Investment Property to Become Familiar with - 15th Sep 21
Is This the "Kiss of Death" for the Stocks Bull Market? - 14th Sep 21
Where Are the Stock Market Fireworks? - 14th Sep 21
Play-To-Earn Cryptocurrency Games Gain More and Is Set to Expand - 14th Sep 21
The CashFX TAP Platform - Catering to Bull Investors and Bear Investors Alike - 14th Sep 21
Why every serious investor should be focused on blockchain technology - 13th Sep 21
SPX Base Projection Reached – End of the Line? - 13th Sep 21
There are diverse ways to finance the purchase of a car - 13th Sep 21
6 Tips For Wise Investment - 13th Sep 21 - Mark_Adan
Gold Price Back Below $1,800! - 10th Sep 21
The Inflation/Deflation debate wears on… - 10th Sep 21
Silver Price seen tracking Copper prices higher - 10th Sep 21
The Pitfalls of Not Using a Solicitor for Your Divorce - 10th Sep 21
Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
This Boom-Bust Cycle in US Home Ownership Should Give Home Shoppers Pause - 9th Sep 21
Stock Market September Smackdown Coming Next? - 9th Sep 21 - Monica_Kingsley
Crazy Crypto Markets How to Buy Bitcoin, Litecoin for Half Market Price and Sell for TRIPLE! - 8th Sep 21
Sun Sea and Sand UK Holidays 2021, Scarborough in VR 180 3D! - 8th Sep 21
Bitcoin BTC Price Detailed Trend Forecast Into End 2021 - 8th Sep 21
Hyper Growth Stocks - This billionaire is now using one of our top strategies - 8th Sep 21
6 common trading mistakes to avoid at all costs - 8th Sep 21
US Dollar Upswing, S&P 500 and Nasdaq Outlook - 7th Sep 21
Dovish Assassins of the USD Index - 7th Sep 21
Weak August Payrolls: Why We Should Care - 7th Sep 21
A Mixed Stock Market - Still - 6th Sep 21
Energy Metals Build Momentum; Silver & Platinum May Follow - 6th Sep 21
What‘s Not to Love About Crypto Market Fireworks - 6th Sep 21
Surging US Home Prices and Gold – What’s the Link? - 6th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold Parabolic Rise Resolution Crash Target

Commodities / Gold and Silver 2010 May 19, 2010 - 10:48 AM GMT

By: Ned_W_Schmidt

Commodities

Best Financial Markets Analysis ArticleA crucial component to many processes is the catalyst. It really has nothing to do with the process, but the presence of the catalyst acts an enabler. Greece may have been one of those catalysts. In terms of the world, Greece has no economic meaning. Greece is way out in the decimals. Economic problems of California are certainly larger. Yet, no one is buying Gold because of the end of the California dream. No one is talking about the dissolution of the U.S. because of the economic collapse of California, Illinois, and New Jersey.


Where Greece is important is in ending the decades of economic damage done by Keynesian dogma. Greece had become one of the great success stories for Keynesianism. The nation lived off of debt, and illusions of wealth. Borrowed money was used to pay government workers and reward pensioners after a few short years of work. Bond markets suddenly discovered that Greece may never be able on its own to repay that debt. Hyman Minsky would have referred to today's governments as Ponzi borrowers. Bond market did as it should with near bankrupt Keynesian economies. It turned off the money.

The panic, or crisis if there is one, is that governments across Europe, and the Obama Regime, can not accept the idea of markets disciplining governments. Imagine the panic in halls of government all around the world as politicians ponder governing without borrowed money with which to buy votes. Government debt is nothing more than legitimized vote buying by politicians. That, in fact, is the essence of Keynesian dogma, and it is the real crisis about which politicians are so concerned.

Like all great economic crises, this one too will probably be a disappointment. Economic world will not end, though the economic fantasy land of Keynesianism may indeed wilt. That, however, will be on the back side of the crisis. Today we seem to still be on the front side of the crisis. Crises, like all hills, mole or real, have a front side and a back side. Front side is all emotional and panic filled. On the front side are created outrageous forecasts in order to spur web site traffic. From the viewpoint of Gold investors, Greek crisis has added to parabolic rise evident in the chart below.

All parabolic market moves end with severe disappointment. Makes no difference if the asset is internet stocks or fertilizer. Parabolic rises inevitably fail because they are unnatural. Imagine throwing a ball into the air. Gravity slowly gains control. Momentum of the ball declines till the ball starts to fall. In a parabolic rise, momentum increases as the asset price rises. Parabolic rises defy financial gravity. And yes, I know this time is different. This time has been different how many times in my life?

Parabolic structures have three components. First, is the unnatural rise, driven by emotions rather than the head. As Gold investing has become mainstream, it has become more subject to emotions. Greek crisis and expectations of an imminent collapse of the EU are indicative of such an emotional state. Investors are buying Gold, not because of the merits of owning Gold, but because they "know" the price of Gold is going up. Australian investors are not buying Gold because of imminent collapse of the EU, but because the price of Gold is going up.

Second component is the grand disappointment stage. It manifests itself with the "deer in the head light" expression on the faces of speculators as they check the morning price indications. Instead of being richer each day with retirement calculated to the day, they wait for the margin call. Screams of manipulation will ring loudly, like the death screams of some hideous monster of the night.

Final component is a long lateral trading period where the asset is transferred from weak hands to strong hands. That period is also indicated in the above chart by the box. It is in this period where investors make purchases that will be most rewarding in the future. That lateral pattern is probably the most powerful of technical market patterns. Wise investors buy during such patterns. When an asset exits a lateral pattern such as being described, the subsequent move is usually quite dramatic.

Well, that lays out the structure and resolution of parabolic patterns. Several important matters have been thus far ignored. Does the Greek crisis signal an imminent end to Gold's parabolic rise? If not, what will? How low will$Gold fall during the disappointment phase? How long will the lateral pattern last in terms of time? At what price will Jon Nadler become publicly bullish on $Gold?

With the Gold market in over heated status, investors may want to consider precious metal alternatives. One of those is Rhodium, a truly rare metal. Price of Rh relative to Au may be more attractive at the present time. We have initiated a Rhodium research effort. Note that it is infancy. You may read our initial musings on Rh at: www.valueviewgoldreport.com/files/Rhodium_18_May_2010.pdf

By Ned W Schmidt CFA, CEBS

Copyright © 2010 Ned W. Schmidt - All Rights Reserved

GOLD THOUGHTS come from Ned W. Schmidt,CFA,CEBS, publisher of The Value View Gold Report , monthly, and Trading Thoughts , weekly. To receive copies of recent reports, go to www.valueviewgoldreport.com

Ned W Schmidt Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

dincer
19 May 10, 17:16
Gold parabolic rise

Gold has 7-8 year cycles if you track it back since 1970s. Gold has entered a new cycle in November 2008. So I think the parabolic advance since 1999 is misleading, it consists of data of previous cycle. US Government expected gold to fall at least 50% in Fall 2008 panic, but it lost only 30%. Then started a new advance.

Here are some data. When FDR revalued gold to $35/ounce in January 1934 the M2 money supply is 32,2 billion. As of April 2010 M2 money supply is 8,6 trillion. Total gold mined throughout the history of mankind is 50,000 metric tonnes in 1934. Today it is 165,000 tonnes. Money supply increased 267 times, whereas gold increased 3.3 times. To put it simple, $2,800/ounce may be a fair price today.

I don't think gold is in a bubble, because there is no upside government intervention. Gold will enter a mania phase, and this mania phase will end not by overvaluation or overinvestment but by prohibition of private ownership in gold. A fake "social revolution" and "a new world order" will follow. But it is impossible for any man to create a perfect and isolated society, it will be a desperate attempt to force people live in a vacuum.


Post Comment

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