I like to look back and learn from the past. It’s hugely important when it comes to trying to predict future weather and climate. It goes back to that old adage – history doesn’t repeat, but it often rhymes. We’ve broken through the key $1360-$1400 level and appear to be pausing here and creating a bullish chart pattern, ready for the next advance. We’ve been in a similar position many times before, but perhaps the most comparable and recent occasion was when we were breaking out into the major bull run from 2000 to 2011. During 2002/2003 gold climbed a ‘ladder’ out of it’s years long basing pattern (just as we appear to be doing now). The ‘ladder’ took us up approximately 15% before we fell off and were caught by a new ‘bowl’ basing formation, which launched us into the next stage of the bull run. What if something similar were to take place this time ? How might it play out ? The cycles guys will probably hate this because I’m just putting forward a ‘general idea’ without trying to line up the weekly/monthly cycles properly. I’m afraid it’s just my style – I’m not at all concerned about the precision of short timescale moves. I just want to try and capture the overall ‘direction of travel’. So please forgive me. I fully accept the validity of cycle analysis, it just frustrates me (except on the much longer timeframes of course).

So this was 2002/2003…

There are many other (perfectly valid) ways of looking at this price action and visualising it. This is just my own ‘conceptual model’ – how I like to view and analyse it.

If things were to pan out in a similar way this time around, this is how it might look…

When giving a forecast (weather or financial), you need to have at least one conceptual model, at least one outline of how you think things may develop. You then need to constantly review, adjust and, if necessary, develop new models. View it as a bit of fun if you like. It’s one of many possible future outcomes, but, crucially, it is based on lessons from history, which often rhymes…

 

Edit – support on our ‘ladder’ is around $1400. Silver appears ready to surge higher. BUT, and it is a big but, todays US payroll figures are likely to be a deciding factor. A significant miss may be needed to take us higher. I have no way of knowing what the figures will be of course – the charts above seem to be suggestive of a big move up, and therefore a payroll miss. If not, we’ll probably fall off the ladder 😉