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According to a famous
trader of the past, W. D. Gann: Time is more
important (in markets), than price; when time is up, price will reverse.��
It has now been 29 months
since gold last reached a new high in its current bull market cycle. The
downtrend lasted 22 months (top to bottom), having bottomed on June 28th 2013
at $1180. Confirmation of the bottom came on Dec 31 when gold briefly touched
$1182, and left behind a double bottom, see chart #3.
There have been two other
corrections that lasted 6 months or more, from top to bottom: In 2006 gold
declined for 6 months, and in 2008 the pullback took 8 months to bottom. Thus a 22 month down-cycle
qualifies under the Gann definition as time is up��.
There have been 4 pullbacks of 16% or more since gold began its current bull
market run in 2002.In 2003 price dropped 16%; in 2006 23%; in 2008 30%
while the correction that began on Sept 7th 2011 and ended June 28th
2013 caused a decline of 38.5%.
This number is close
enough to be a Fibonacci retracement (technically at 38.2%), to have run its
course. For some reason, the higher the price, the deeper is the eventual
pullback. By extrapolating these numbers, the next major correction could
very well cause a 50% price reduction.Possible
numbers could be from a top at $3,850 down to support at $1,925.That scenario
is a few years down the road.
*Charts courtesy
Stockcharts.com unless indicated.
Featured is the weekly
gold chart.Despite the 22 month long decline (from
top to bottom), the bull market is intact.The
short-term double bottom (June to December), is receiving positive
confirmation from the supporting indicators.
This chart courtesy Bloomberg
and the Tocqueville Letter, shows the US Real Interest Rate (TBIL - CPI),
remains negative, even while the CPI understates inflation. Negative real
rates provide energy for a gold price bull market.
Featured is the daily bar
chart for gold bullion.The green arrows point to
identical upside reversals��.The first one came
at $1180 and the second one at $1182 (see green arrows).A double bottom does
not come much better than that!The blue arrow shows
a breakout from a bullish falling wedge.The supporting
indicators are positive, including the all-important
Accumulation/Distribution line at the bottom.A
breakout at the black arrow will confirm the double bottom formation and this
in turn will cause a lot of bears to become bulls.
This chart courtesy @KoosJansen shows the amount of physical gold withdrawn
from the Shanghai Exchange (red bars), compared to the total amount of gold
produced worldwide (yellow background). During a number of months in 2013 the
Chinese bought every ounce that the mines of the world were producing.
This chart courtesy
24hgold.com shows the number of ounces of gold at the COMEX available for
delivery, has dwindled to 416.56 thousand.When this
number nears zero, the COMEX will declare force majeure��,
and a number of traders who thought they owned gold bullion will have to settle
for pieces of paper.
But then, finally, the
masses wake up. They become suddenly aware of the fact that inflation
is a deliberate policy and will go on endlessly. A breakdown occurs. The
Crack- Up-Boom appears. Everybody is anxious to swap their money against
"real" goods, whether he needs them or not, no matter how much
money he has to pay for them. Within a very short time, within a few weeks or
even days, the things which were used as money are no longer used as media of
exchange. They become scrap paper. Nobody wants to give away anything against
them.��
.
Ludwig von Mises.
This chart courtesy
sources listed, shows the percentage of Total US Financial Assets that are
concentrated on Gold at present, as compared to the times when the gold price
peaked.
 
Featured is the daily bar
chart for Royal Gold.It trades on the NASDAQ under
RGLD, and on the TSX under RGL.TO.Many traders and
investors consider this stock to be a bellwether for the gold mining sector.Since carving out a secondary, (ABC) bottom in
December, there have already been a number of upside breakouts.The
supporting indicators are positive.The next
breakout, at the blue arrow, will set up a target at the green arrow.RGL is setting a positive example for the rest of
the gold mining industry.
Featured is the index
that compares silver to gold. The trend has favored silver since August. The
supporting indicators are slowly turning positive again. A breakout at the
blue arrow will set up rally similar to the one that started at the green
arrow. This will be bullish for both metals but especially for gold.
Under capitalism, men
provide for themselves; while under Socialism they are provided for��.
Ludwig von Mises.
This chart courtesy
Zerohedge.com shows the number of people not in the Labor Force has reached
an all-time high of 91.8 million. (Macy's just announced that they are
closing 5 stores and laying off 2,500 workers).If the people who have given up
looking for work were included with the BLS unemployment statistics, the
unemployment rate would be at least 11.5%.FED chief Janet Yellen
has expressed concern for the unemployed in some of her speeches.The
expectation is that she will opt for more QE rather than less, as her way of
solving this problem��.More QE represent more
monetary inflation.Gold and silver will benefit.
Disclaimer:Investing involves risk.Please do your own due diligence.Peter Degraaf is not
responsible for your trading decisions.
Peter Degraaf
has over 50 years of investing experience.He
publishes a daily market letter for his many subscribers.For
a sample copy of a recent issue, send him an E-mail, or visit his website www.pdegraaf.com
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