Goldtent TA Paradise

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

It’s interesting to ponder the Dollar. Will it go up ? Will it go down ? It’s true that a rapidly falling Dollar can assist the ‘apparent’ increase in Golds value BUT it’s way more complicated than that. If the Dollar was heading towards a cycle peak, it MIGHT prevent gold from taking off in a big way. That’s about all we need to know, because in every other situation gold rises and falls regardless of what the Dollar is doing. PM’s frequently couldn’t give a rats ass what the Dollar is doing, so we really don’t need to worry so much. Take a look at this if you’re not sure…

Perhaps I got carried away 🙂 The big picture…

The following charts would of course be negated if/when any of the support lines are broken to the downside. Following the Feds clear policy error(s), I think the odds are weighted in favour of a PM bull market gathering steam. I’ve been saying for some time now that nothing is proven until we break through the $1350-$1400 region. A little more consolidation beneath that level won’t do any harm at all. I drew the silver chart with a similar rounded base to gold and wondered why it seemed so much longer in time before it might reach completion and breakout. However, the ‘basing’ seems to have been ’tilted’. the curve fits perfectly if you tilt it, and then it matches very well with the declining resistance forming the breakout level. I’ve included both of my silver charts below. For gold the important breakout level seems to be through horizontal resistance, whilst for silver, it’s through a declining, angled resistance line. It’ll be interesting to see how gold stock react – they have a hell of a lot of catching up to do. Here are the charts…

I’ve posted a chart in the past that shows clearly gold can go up or down when interest rates are rising. It can go up or down when rates are falling. It’s less about the direction rates are going and more about expectations. If rates are rising, and everyone is confident that it’s a good thing and it’s going to achieve its aim – perfect, what’s the problem ? If rates are rising as some sort of panic measure, that’s different. How about where we find ourselves today ? As a reminder, this is what we were told to expect less than 12 months ago…

A path beyond 3%. Many have been warning for a very long time that it can’t happen for one simple reason. DEBT. It doesn’t matter until it does. Well, we’re there now – IT DOES MATTER. All of a sudden, just like that, everyone knows it. We’ve reached the point where rates can rise no more. The US would collapse under its own debt burdon. So there you have it. The Emperor has no clothes, The Fed has no bullets. The Dollar will suffer badly as a result, and gold will fly (the miners will mean-revert). All my own views of course, and you may disagree, but I suggest the facts speak for themselves.

This chart remains very bullish, and suggests the miners could be preparing for a large move…

Time to consolidate above support ?

Summed up by the World Currency Unit…

Visualising 3 possible scenarios. Fiddled around with the moving average. MA(20) on this monthly chart seems to fit pretty well, acting as support and resistance at key points. Anyway, you can see the nice breakouts on the way up (through the black resistance lines). The cyclical lows are clear and very obvious. The next one is due in 2023. Three options (obvious really). How do we move into the 2023 low ? Option 1 – This 6 year base does what it’s meant to as the Dollar index finally roll over, giving the added ‘push’ to get us up and through that crucial $1400. If that happens, I think we’ll climb to between $1550 and $1650 (maybe a little more) before correcting into 2023. Option 2 – Sideways, rangebound, tedious. Option 3 – The base and support fail, leading top a waterfall decline and new lows as we go into 2023.

I’ve posted many charts to support Option 1, but I have to acknowledge the alternatives. My assessment is Option 1 – 80%, Option 2 – 10%, Option 3 – 10%. The odds will change if/when we see that $1350-$1400 region breakout, or support failure (which is in the $1240-$1260 region and rising each week). There is also rising (VITAL) support from 2001, which is closer to $1200.

We need to see how it closes out the week of course, but we might be seeing the first signs of a more significant move. That support line is the one to watch though. We’re pretty much sitting on it right now. The close on Friday will make things much clearer.

Well, maybe that would be a bit extreme, but I just thought I’d explain why I don’t think it’s anything to worry about.

For those of you who don’t think the Dollar Cycle is likely to repeat, this won’t help. However, this is my explanation. Look at 1988 on the chart above. Here it is zoomed in…

Now lets compare that with where we are today…

Remarkable similarities, I think you’ll agree, but here’s the thing. Just as gold looked ready to make a bullish launch in 1988, it flopped, and fell 50% in 10 years. That’s 10 long years of losses for anyone who held on. Why ? Cycles. They all run alongside each other, intricately connected. Supply/demand plays a part, but large fluctuations in the currency index will play a huge part, especially if it were to rise by 50% for example. Which brings us to the Dollar Index. Cutting to the chase – where were we in the Dollar Cycle in 1988 and where are we now ?

Two chart patterns – 1980’s and today. Both look very similar. Both look bullish. One couldn’t achieve it’s potential, the other can.

or both patterns fail and we probably will fall below $1000

Since the gold standard was removed, and things re-adjusted in the 1970’s, it’s very clear to see what has happened. There is probably no need to make it any more complicated. Just 2 charts is all you need.

Another interesting one scraped from Twitter.

Dollar declining channel, cyclical channel breakout, sine-wave cycle representation, significant target area drawn from the cyclical lows. Quite a busy, messy chart by my standards, but it does suggest a Dollar low in 2024 somewhere in the mid 60’s. Thoughts ?

Take a look at the chart below and tell me why the general stock market and gold can’t rise together…

During the most exciting run up in gold prices, peaking at over $1900 an ounce what was the stock market doing ? So it seems a rising stock market is what we need !