Goldtent TA Paradise

The market has spoken…

The more I’ve been looking at this over the last few days, the more it amazes me. It’s almost too perfect.

1 – 2008 – Golds 8 year cycle low embedded in the middle of the 16 year cycle

2 – 2016 – Golds 16 year cycle low

3 – The support/resistance line from recent price action connects back to important support which was established between 2006 and 2008 (on this log chart).

4 – Perfect curved basing support centred above the 16 year cycle low (a repeat of the pattern at the start of the bull market in the early 2000’s).

5 – Resistance line drawn from the topping pattern in 2011 and 2012.

6 – False breakdown flowed by an ‘around the apex’ breakout (rising support in the $1275-$1280 region).

7 – Horizontal resistance.

Just look at those Fib retracement levels ! If that’s not perfection, I don’t know what is – 0.382 Fib retracement equates to $1055. The 0.618 level is just below $1400. A move above $1400 would set up a target somewhere just above $1600, which fits in with some of the other work/methods I’ve been looking at. Also very interesting is the level above that – $2810. Time is the missing piece of this puzzle. I know where the cycles are. I know where price is now, and I know the target areas. It’s just a case of when. If you’re a gold bear, you’d be eyeing that 0.236 Fib level at $848 of course. As you know, I’m not bearish at this point in the cycle, but a break below $1223 and I would throw in the towel.

Possibly the fly in the ointment at the moment for PM bulls. Close examination of some of the indicators suggests DXY has time (just) to put in a final spurt (perhaps to the 103 area). MACD and TRIX  both suggest a ‘zero line crossover’ in December if timings are consistent. The behaviour of the Stocharstic indicator is anomalous. What I mean by that, is having begun its downtrend, it has just shown a bullish cross. This is unlike the previous 2 occasions and cannot be ignored. My take on this is that we are in uncharted territory here. I believe the Dollar is stretched and has responded to some very unusual monetary policy. Others, of course, believe the Dollar Cycle will fail this time. In my view, that’s not the case, but whether this can be extended long enough to break above 100 again is probably going to make the difference between gold breaking out successfully from that lovely rounded base formation (falling no lower than approx. $1265), and the second possibility (shown on my second chart), where gold falls to test the red hot line that CANNOT be broken for a bull market. That would mean the rounded base pattern ‘morphs’ into a flat topped wedge.

The last great bull market move in gold really got going after a confirmed breakout in 2002. Gold went on to multiply by a factor of 6, moving from a little over $300 an ounce to a little over $1900 an ounce. Many miners saw their share prices rise by thousands of percent (the HUI rose by a factor of 10). It’s hard to imagine a repeat, after all, that would mean gold at nearly $10,000. I really don’t know if that’s remotely possible, but the charts will give us advance notice. That’s because we have a timeline – we know when the peaks and troughs of the gold cycle are due, so if we are already near the old highs, with years of bull market to go, we can plan accordingly. Anyway, I digress. First things first – we need that confirmed breakout at around $1355, then $1400 to be certain. How did it look back in 2002, versus today ?

I don’t know about you, but I’m really liking the way this looks. As always – watch that curved, base support. It needs to hold.

We’ve just seen a bullish MACD crossover, and I’ve marked previous gains after such an event. The chart speaks for itself.

Unfortunately I can’t see Rambus thoughts on whether PMs and PM stocks can do well if the global stock market rises. However, here’s a quick glance at the worlds largest gold miner, Barrick and the S&P going back a good number of years. If global stocks rise, and PMs are due to outperform, that’s very good news for us here in the ‘tent’

Applying some geometry to the Dollar chart gave me this. Make of it what you will…

There seems to be a reasonable amount of support in this region – bounced off it nicely. $1250 is my next area of support if we go down

Goldtent friends – Three charts for you today, which help to reinforce where I think we are. I recently posted my downside levels to watch, so now here’s another look at Dollar Index behaviour over the last 50 years or so…

Looking at this there are a whole host of things that jump out at me from a scientific/pattern point of view. Firstly the cycles themselves. The two complete cycles since this paradigm (post gold standard) began have displayed perfect wavelength repetition. The period of time from low to low was duplicated beautifully. Secondly, the amplitude (peak to trough, shown by the vertical red arrows) is steadily declining – we are in a 50 year bear market. Next, the target area for a final low and new cycle beginning (red rectangles) are equal in size, shape and positioning. Turning to the TRIX (which I find very useful, as it combines trend and momentum), we can make some very useful factual statements. Number 1 – During each of the 3 cycles, the early ‘bull’ phase was characterised by TRIX moving from -40 or less through zero (shown by red up arrows and orange circles). Number 2 – ‘bear’ market confirmation in each cycle comes when TRIX falls from above 40 and passes through zero. So what is going on right now ? We appear to have fallen from above 40 and bounced at the zero line. The black arrows show where TRIX has ‘wobbled’ close to the zero line. The important point for me here, is that it doesn’t mean a change of trend. In the past when this happened, the TRIX resumed its previous path, which in this case will be down, thus giving final confirmation of the bear trend, targeting the third red box which covers the period 2023 to 2026.

So if the Dollar is displaying a decay of it’s price range and therefore a decay of energy, where is that energy going ?  Lets take a look at the largest gold miner in the world and plot its share price on a chart with the Dollar Index…

Great Scott ! – the Dollar is displaying a decreasing amplitude (energy) and Barrick is doing the exact opposite – the distance between each low and following high is increasing. For anyone with a science background, that’s entirely unsurprising. It’s exactly what you would expect if there is an exponential component to Dollar ‘devaluation’. I used Barrick because it goes back further than HUI etc, but a mining index would be the same. The million (or multi-trillion) Dollar question here is why ? What is it that’s causing the Dollar to follow an ever downward path ? The index is showing the Dollars relative worth compared to a basket of currencies from its main trading partners. It peaked just above 160 in its first cycle, just above 120 in its second cycle, and just above 100 this time. I know some here believe the cycle will fail here and we won’t head into that low between 2023 and 2026 – instead breaking upwards and making new highs. I beg to differ. It goes back to that fundamental question – why is the Dollar losing its grip, and is there something that will reverse a 50+ year trend of Dollar decay ? I believe the wheels that were set in motion in the early 1970’s will continue and ultimately lead to the Dollars demise as world reserve currency. Probably not for many, many years yet, but once a trend like this is in motion, the momentum is huge and usually irreversible. It keeps going until a ‘tipping point’ is reached – that when a new paradigm begins. It’s not a particularly ‘scientific’ concept – it’s just another way of saying ‘birth, growth, vitality, maturity, decay, demise, death, rebirth…’

…here are some downside levels to watch.

I strongly suspect that $1255-$1260 will hold (maybe a quick spike below that). The first chart even gives a possible target time for a breakout, because the moving average crosses the curved ‘bowl’ support line in 2-3 weeks time (depending how you draw it). Could that be a ‘target’ we need to hit and bounce off ? Very important is that ‘red hot’ line on my last 2 charts, just above $1200 – it’s clearly of vital importance. It’s been pivotal to price action for nearly 20 years. A break below that would be a disaster in my view. I say that, not because I’m expecting it (I’m not), but because an enquiring mind considers every possibility, no matter how small, and prepares accordingly.

… and you can’t go too far wrong.  It’s when you start to look at views and opinions that things start to go wrong. As a scientist, it’s only the facts that I believe. Anything else is debatable, especially when it comes to trying to predict the future. My career in weather forecasting has taught me that. So how does that apply to the PM markets ? Well, actually, there is a very strong correlation. Many things in the natural world have a cycle. Cycles usually change in a slow and predictable way over time. They can slowly extend or shorten, or indeed tend to become more or less energetic. In scientific terms, the amplitude and wavelengths of the cycles can vary. I hope you’re still with me. That works unless/until there is a paradigm shift. What’s that ? if there is a sudden (often unforeseen) shock to the system, then your ‘predictability’ goes out of the window until a new pattern, or cycle emerges from the apparent chaos. In my field of expertise, this is what happens during an Ice Age or rapid global heating event. Eventually the Earths feedback systems (oceans and ice sheets) play their role in locking up or releasing heat energy, thus returning a balance of energy.

It appears to be much the same with global financial markets. I think we’re probably all familiar with the business cycle (a quick ‘Google’ will help if you’re not). Here are some examples of cyclical behaviour…

Sunspots, payroll, sales, real-estate, business cycle, heartrate and atmospheric CO2. The list goes on, but you get the idea. As a side-note, the last graph (atmospheric CO2) is somewhat contentious – it goes back almost a million years, using derived data from fossilised living matter to extract CO2 data. Many argue that the Earth warming and cooling is a natural process. It is. It’s also true that if you go back further in time the Earth had much higher CO2 (and other greenhouse gas) levels its atmosphere. Modern man didn’t have to contend with it though. The concern is that we may cause a ‘paradigm shift’. In this instance it could happen very quickly (100 years or less), giving us very little time to prepare. Anyway, that’s a whole different discussion. Back to PMs and sticking to facts…

The US Dollar has ‘floated freely’ in relation to gold price since the 1970’s and within a few years, things settled down, and the ‘heartbeat’ of this new paradigm established itself. Because the price of goods and services (in US Dollars) has continually risen over time, you would expect a graph of any commodity price to show 2 things. Number 1 – a trend from bottom left to top right. Number 2 – a discernible ‘heartbeat’ – what we all refer to as it’s cycle. In the financial space, this is a natural result of supply/demand and investment fluctuations. Here’s a look at gold…

Theory seems to work fine then.

How about the Dollar itself ?

Exactly as you would expect with any FIAT currency. They are all losing purchasing power (see Dollar v Oil, Dollar v Gold etc) and trending towards precisely ZERO. The index shows relative performance v a basket of other currencies of course. The Dollars dominance is in decline (as with every reserve currency ever). The Dollars dominant position is demonstrably reducing. Lower lows and lower highs since the 1970’s means that unless we see a higher high (above 120) then the pattern continues, and the Dollar becomes less and less relevant on a global stage. How likely is 120+ with the Dollar heading into a cycle low in 2023/24 ? The Dollar cannot escape being worth ZERO. It’s simple mathematics. If you think otherwise, show me a long term graph of a FIAT currency which is gaining purchasing power.

The Gold/oil ratio chart was interesting, but it tells you nothing about what the price of gold/oil is about to do. oil has gone up a lot, down a lot or nowhere a lot in the past when gold has moved very little. Here’s a gold chart, with some notes pointing out oils more notable moves…

Here’s a long term chart of oil price. Like gold it is trending bottom left to top right (towards infinity) at the same time the Dollar is trending top left to bottom right (i.e. towards ZERO)

These are all facts (please comment and prove me wrong if you disagree – I’m always happy to accept a well proven point). Here’s something that isn’t a fact. The UK may be edging towards a much softer Brexit, with some form of customs union, a new ‘peoples vote’ and possibly even, no Brexit at all. All of these are likely to be very Euro positive. That would put downward pressure on the Dollar at a time when it’s moving towards a major cyclical low. Unless there is a paradigm shift, these patterns and cycles will continue. My game plan remains the same – watch that $1250 support area, and wait for the $1350 to $1400 region to be broken. Nothing is proven until then. Good luck all

https://www.zerohedge.com/news/2019-03-30/de-dollarization-accelerates-central-banks-dump-dollar-q4-buy-yuan

Maybe, just maybe. Euro zone problems priced in/Dollar problems not priced in ?

Beneath the surface, all is not well. The indicators are all fading, and have been for a long time now…

So the Index is rising and the indicators are showing declining strength and momentum. So what ? why should that matter ? Let’s have a look at the last cyclical Dollar top in 2001/2002…

Negative divergence is an early warning. Put this together with CHF/USD chart arriving at its cyclical low right on the very long term support line, Gold/Silver ratio chart at a rare level of over 85 and the upcoming completion of the ‘gold bowl’ basing pattern. What do you see as the most likely outcome ?

More evidence from the technical indicators. 2002 v 2019…

If we’re on the verge of a breakout in the PM sector, it would be useful to compare where we are now with how things shaped up at the start of the last big PM bull market in the early 2000’s. Are there any similarities ?

You might remember a little while ago, I put up a chart which highlighted what I thought would be an extremely bullish sign/pattern. It looks like it might be in play now, and it’s going to get the bears excited. I think my original target in the $1240 area is still on. As time has gone by, the support has increased closer to $1250. My chart below shows the rounded base giving support around $1250 and that black resistance line forming. A wedge causing price to coil below such a hugely important area of overhead resistance is very, very bullish BUT that support has to hold. Two lines in the sand – $1250 and $1365 (although I won’t breathe easy until we break the psychologically important $1400 barrier)., That’s it. That’s all that matters now.

Uptrend channel intact. Support held. Indicators looking good.

Is silvers under-performance versus gold another indicator that we’re about to embark on a sustained new PM bull market ? There was a similar (but shorter-lived) situation in 2001, just before silver jumped 50% and embarked on it’s 8 year bull market.

I’ve prepared two charts for you. In my view, together, they point the way for the near to medium term in the PM markets. Some may be worried that we may be in a position a bit like the 1990’s where we fail to breakout of this apparent ‘basing pattern’ in gold. We could drift sideways to down for the next 10 years like we did right through the ’90’s. I understand that, and I’ve posted many charts showing where we are in the grand scheme of things when it comes to the gold and Dollar cycles. For this breakout to have a greater chance of success, we need to have the cyclical ‘wind’ at our backs. Happily we do. We’re in the ‘up’ part of the gold supercycle, and the down phase of the Dollar supercycle. If you don’t buy into cycle theory, there are other places to look for clues. One is the CHF/USD ratio which is in a rising channel (because the USD index has been in a falling sequence of lower highs and lower lows since the 1970’s), and another is the much talked about Silver/Gold ratio.

I have to say the evidence is overwhelmingly suggesting that we are at a significant low in the PM space. First, the CHF/USD chart. Gold is completing its base at the precise time the CHF/USD ratio has hit its support line. Time and price on this ratio say that the next move is up. That is very bullish for PMs as you can see in the chart…

Now the SGR chart. I posted it yesterday, but I’ve presented it differently here, with some points on it to note…

The main point for me is that we are in a rare position, up in the ‘hot zone’. We don’t tend to remain there for long, and we have a clear support line to watch. At points 1, 2 and 3 (especially 1 and 2), once that support is broken silver plays a very rapid game of catch up, rising faster in percentage terms than gold. A to B resulted in a 14% rise in gold and an 18% rise in silver, but in 2 years that turned into a 63% rise in gold and an 87% rise in silver. From C to D gold rose over 160%, but silver gained around 300%. E to F  gold rose around 30%, with silver gaining 32% (that difference would’ve accelerated if the trend hadn’t been reversed). The reversal at F and move up to G has been the result of Fed ‘smoke and mirrors’. The trouble now is that they have been exposed. Their march to over 3% interest rates cannot happen. I think many of us knew that, but now there’s no doubt and the rate hike cycle is finished. That will turn these charts at these inflection points. The cycles knew it was coming and the above charts have confirmed it.

The Uranium sector has been smashed to oblivion post Fukushima. If buying low and selling high is your thing, this has to be worth considering, especially once the breakout is complete. I have no idea what the upside target is, but, when this sector takes off, it literally explodes by hundreds/thousands of percent. It’s barely moved and I’ve doubled my investment. Risky but potentially life changing.

Apart from the period immediately after coming off the gold standard (when the range was smaller), buying PMs, and especially Silver, when the GSR is high has resulted in at least a double in Silver price. The situation now says PM BULL very loudly. If history is a guide, we can expect a minimum of $30 Silver in a couple of years.

Carrying on from Fullys look at things from a Canadian perspective, here’s the updates from Australia, Europe and the (not so) United Kingdom

What if I told you there’s a trade that can give 300-500% returns in a 5-6 year time frame. The trade hasn’t failed in almost 50 years. The trigger to place the trade occurs a little over 6% of the time, so 94% of the time, we’re not in a position to place the trade. Today we are in that 6% timeframe. There has been around 3 years of time since 1971 where we are in a position like we are today. 3 years out of 48, hence just over 6%. I’m talking about the Gold:Silver ratio of course. More specifically the number of times its been above 82.5 – It’s above 85 right now. Could it go higher ? Yes, of course, but that doesn’t matter. The point is that it will fall much lower as we head into 2023. Gold will do well, but, as you can see from the figures in the chart below, exposure to Silver (and especially the small number of quality silver producers) will multiply your gains. I’ve included an image of the ratio going back to the start of our modern monetary era (post gold standard).

Both silver and gold continue to have their uses (industrial/commercial/jewellery). I see no fundamental reason why the GSR ‘range’ should alter dramatically in the next 10 years (current supercycle), therefore I believe it’s reasonable to expect the ratio to turn down imminently, with silver out-performing gold. As always, these are my own views, and you should always do your own due diligence.

Yep, just as I thought – yet another indicator saying that the PM markets are positioned to break UP, not down.

The gold chart displays some beautiful mathematical properties