Loading ...Comparison With Golds Last Major Cyclical Upturn
Well, this is all very interesting isn’t it ? Doom and gloom abound in the PM space. The dollar is behaving in a way that it didn’t in the last 2 major cyclical dollar downturns. Is the dollar going to carry on rallying ? is gold going to $1000 or less ? After seeing a chart on Twitter by ‘TheHedgelessHorseman’ I thought I’d have a closer look at the late 90’s/early 00’s. Lets start with a straightforward gold chart…
Pretty straightforward isn’t it ? The last major, cyclical bottoming process took place during the late 1990’s and early 2000’s, so I drew up some charts for gold and the dollar to compare…
History doesn’t necessarily repeat exactly, but it can be a good general guide as to what you can expect. It will take a while longer, but at this stage, I do believe we are still very much on course to complete the bottoming process. This will only be confirmed by a break above the horizontal resistance zone though.
Nice charts!!! Gold needs to trade above recent pivot point 1216 to have some confidence of trend change.
Thanks Bikoo. The upper blue line on my right hand gold chart, could be lowered to touch the 2016 high. That would intersect the curve just about right where we are today ! If that interpretation is correct, an upward breakout should occur almost immediately.
You have a very good eye, Northstar!
Sometimes I wonder if we don’t get too wrapped up in cycles (technical analysis) and forget the fundamental side. In the end, if the fundamentals are not in place then how can the cycles be calling for a bull/bear market? Right now I think we are staring down the road of massive debt deflation, which to my mind means a far higher dollar. I do not see what would fuel a new gold bull market during the tumultuous times coming up.
We are in the calm before the storm. From many perspectives everything is going great, what could possibly upset it? Trump’s tax cut is working its way through the economy, employment is high, stock market is set to take off again, what could possibly go wrong?
Whatever it is I do not see how gold benefits, since the most likely result of all this is contraction, not expansion. Gold generally does not do well in contraction, at least not until its mostly over.
Yes, I know gold went up in the 30’s. But not because of market forces.
Great Charts Northstar.
You always have a unique perspective.
Thanks
Thanks Fully. I remain long term bullish as (when) the 15 year cycle takes hold. This downdraft has lasted considerably longer than I anticipated. The net short position in gold could get much worse and last for a year or more. Emerging market weakness along with a slowdown in China could send commodity prices to new bear market depths. I never discount the possibility of sub $1000 gold and sub $10 silver. I treat it as a very low probability, because of where we are in the cycle.
I like the charts.
The 15ish year cycle is quite compelling but not guaranteed. You mentioned the dollar isn’t apparently behaving in quite the same way this time around. What in particular is different? I’ve got a couple of ideas about that and some have been expressed on this forum already.
I think we really right now have no idea what the dollar is going to do. Its cycle is not so unlike the two previous cycles but it has broken out of a huge wedge in force since 196985 – and that is the big difference.
I think it’s possible the dollar could have entered a secular bull market as opposed to the secular bear that is has been in since 1973 or 1985, pick your date, even 15 August 1971 for goldbugs. I know we shouldn’t look at fundamentals but how are the Euro/Pound/Yen going to redeem themselves from basket case status to put the US dollar index into a bear market? Beats me!
With my bullish gold hat on I am looking at this last 2 years as being like the bottoming process in 1998-2002 but I have serious doubts. The strong upmove in 1999 would be equivalent to the early 2016 impulsive upmove. That would suggest a test of the lows (as in 2001). in 1999-2001, gold put in a higer low in 2001 against a higher high for the US dollar, a big non-confirmation.
Similarly in 2011 at the top of the bull market, gold put in a higher high in 2011 (re: 2008) while the US dollar tested its low and held (put in a higher low in 2011 re: 2008, a big non-confirmation.
This time we already had a rally in gold (2016) against a higher high for the dollar 2016/7 vs 2015, again a non-confirmation but since then gold has started to plumb the lows again, so this might be premature.
At any rate, a retest of the $1045 gold low seems to be in order but not necessarily. The options all seem to be open to me, including a hold here or somewhere above $1124, a hold at $1045, a new low target of $920 (from my own pitchfork charts) and maybe even down to $700-ish (the 20008 low and 2006 high). It’s all on the table right now.
For the dollar, the target is anywhere from about 60 to 160.
Hi Northstar. i notice how really late gold topped on your first chart. The top of 2008 ($1025) fits the cycle but the 2001 top at $1920 is 3 years late in the cycle (or more). However, the dollar bottom would coincide beautifully with the gold top in 208 at $1025.
So I’m wondering if the whole thing is a Dollar cycle with a big D – and gold’s cycle is just a slave to the USD.
Duh, I meant 2011 now 2001:
Hi Northstar. i notice how really late gold topped on your first chart. The top of 2008 ($1025) fits the cycle but the 2011 top at $1920 is 3 years late in the cycle (or more). However, the dollar bottom would coincide beautifully with the gold top in 208 at $1025.
So I’m wondering if the whole thing is a Dollar cycle with a big D – and gold’s cycle is just a slave to the USD.