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Just trying to get the jest of Red Labels’ post a bit back. The end of 2014 was the turning point and can I can see how gold/dollar crossed and now a new ball game. $1200 gold at $1 us. basepoint for the math. Logic then 1200/94 gives us 1276 gold today which makes sense as they are into a new obverse universe. Therefore in order for gold to be declared a bull these 2 have to cross powers which is roughly the red line at around 90 cents. This puts us at 1333 ish for gold to be declared bullish for a start. I think I have it correct, if not let me know RL.
The theory – Bretton Woods never ended. The value the CB’s put on Gold just changes over time and they use this for currency stabilization and allows them to print money. There have only been two Gold Bull Markets ie where the CB’s had to increase the value of gold gradually over a 10 year period. The 70’s and the 2000’s. IMO CB’s due not bid up the value of Gold the public does – really the underlying basis of the theory.
Lets start with the 70’s. Gold started at $35 and reached a peg of $300 in 1981. (The $300 is my theoretical value the CB’s agreed to). The market Gold price was therefore overbought by roughly $500 and it took 20 years for Gold to fall back down to this value $300 (it even became oversold by $25 in 2000 to $275). The only reason the CB’s have to increase the value of Gold was/is Physical demand caused by Inflation ie. currency debasement when the public runs for cover.
The next Bull was 2001 and it ran till 2011. Gold value started at $300 and increased to $1200. Gold peaked in the market was $1900 ie. overbought by $700. That is where we are at today fighting thru the $700 overbought condition of 2011 similar to what happened in the 80’s.
The CB’s gradually increase the value of Gold only during a Bull so the formula holds true. Why? The banks are in the business of keeping there perspective currencies stable that’s what the G7 and G20 are all about. The CB’s policies are all mutually agreed upon and they work together for there common agenda. There are many ways to achieve this Bonds, Interest rates, FED & ECB chatter, good ol smackdown, etc.
The Formula Spot Gold = CB’s Gold Value/(USD Index/100)
I don’t concern myself with the exact values from the 70’s I am more interested in using the formula for current conditions. I graph the results of the formula daily or sometimes mid day just to see where the market is trending and compare that to the trend of the USD and the Euro. If you can nail the trend in the currencies you can predict Spot Gold. Theory CB’s Gold Value for the formula currently is $1200. ($USD = 120 Gold = $1000) ($USD = 100 Gold = $1200) ($USD = 80 Gold =$1500).
The theory Gold is Money. Trading Gold is a currency trade. Trading PM stocks is a derivative of that currency trade.
Markets get overbought/oversold ie. Sept 6, 2017 the Spot Gold market was overbought by $34.
As in the past the value CB’s place on Gold can and does change. Changes usually occur when the USD falls below a specific value.
Just my theory
Wow….Fantastic…. Out of the Box thinking Red Label
Thank you for sharing this Theory
Please post this on the main Board….then we can set it in a prominent place on the sidebar.
This sounds very plausible the way you present it.
A Believable “Conspiracy Theory” 🙂
This is just excellent . So The CBs directly intervene in the Price of gold ….until the public overwhelms them and they retreat to the next level to defend it ??
You are familiar with this horror of a chart I sometimes present ?
https://stockcharts.com/h-sc/ui?s=%24GOLD&p=M&yr=50&mn=0&dy=0&id=p04601710113&a=506755187
Too answer your question above. If the formula doesn’t break there is no Gold Bull all that is being witnessed is a currency play. But currency plays get overbought/oversold. Sideways market between $1000 and $1500 all depending on the US Dollar Index until physical buying from the public breaks the formula. Physical selling would break the formula also…..
It’s just a currency trade until it’s not then it’s a Panic trade.
Thanks Highroller for precipitating red Labels Theory