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Thoughts on the Gold Market
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TomAdmin
Admin 		# Posted: 20 May 2008 21:02 - Edited by: TomAdmin
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Hello Roland,

Great to hear from you! I was thinking the other week that I need to send you an email.. but glad you did..

I read your thoughts on the Gold Market and I have been watching it fairly closely the last few weeks. But this might be the first time we have different opinions on its direction..

You know I still do think occasionally about that 50% correction that occurred in the mid 1970's and I keep pushing myself to see if I can figure out when we will reach that point in our current run...

The analysis has been cloudy to say the least.. but what I have concluded with a reasonable degree of certainty is that we are not ready for or have not reached that major intermediate peak yet..

Believe it or not, but my initial thinking is that we will not reach that first intermediate peak until 2011 and possibly as late as October 26th 2011.

My thinking is based on a few long term charts of both the Gold Price and the XAU and also the Mayan calendar believe it or not.

Look at the chart of the XAU below this post and I am sure you are familiar with it.. but what I really love about this long term chart that goes back to 1983 are that it teaches me a few simple concepts.. Number one, that the XAU mining index has only relatively recently (late 2007) broken through a 25 year trading range successfully and is now consolidating above that range. In fact one can argue that the entire structure of the XAU since early 1994 up to August 2007 was a MASSIVE head and shoulders bottom formation.

My point in bringing up the XAU is that from a trading perspective it tells me that despite all the progress the XAU has made over the last 7 years, it STILL is relatively early in its uptrend when you take the advance into context of this large pattern formation and fairly recent break of a 25 year trading range.. I recently traded a stock that was just breaking above the neckline of a large reverse head and shoulders pattern.. and that was my entry point and I felt it had great odds for a good advance..

So again my main point is that based on the overall structure, the XAU is still relatively early in its uptrend path. The fact that it has successfully broken north from such a significant resistance is also a major sign of things to come. I just cannot see the XAU breaking down below support now. Also notable is the recent rally which will create a month of May closing price bar by the end of next 2 weeks. It almost looks like it could turn into a bullish engulfing price bar and bode extremely promising for the following month.. or it could retrench a bit and just create some more sideways cause.

My other point is based on the quarterly and monthly RSI value on the Gold Price Chart. I cant post that chart yet as I need to fix my long term chart but will try to post that one in a couple days. What I see there is that monthly RSI has just entered the above 70 power zone again.

Quarterly RSI has hit 90 which should probably be considered a major peak.. however in my experience the first max reading on RSI is never the top.. there is a retrenchment and then a secondary peak on RSI which in bull markets usually coincides with a higher price value.. so it could very well be that price will take out the 1000 52 week high before this year is over...

The topping pattern on a quarterly basis in the mid 70's had this interesting RSI signature.. and it clues me in that the current level we are at in gold price is not final top yet...

The final clue for me which would really confirm my forecast is the USA broad market. Currently monthly MACD for broad market is in bearish mode and I expect it to stay that way this summer. Perhaps a bit more of a LOW VOLUME rally in broad market until late summer.. but then come September October, a major collapse for broad market, with DJIA breaking BELOW CRUCIAL year 2000 level support. If that happens, then it implies that DJIA will return to 7000 level. That leg down, if it materializes will light some major rocket fuel for the gold mining shares and I expect them to trade inverse (UP) to the broad market (DOWN) during that phase.

So anyway those are my thoughts.. be careful being short the gold market!

I could definitely be wrong, and this correction could become much more involved and complex... but for now I am still giving benefit of the doubt to the bulls especially based on XAU structure.

Cheers,
Tom

P.S. As far as the Mayan calendar, I think it may help play a little role as far as timing. The Mayans developed a 'Universal Calendar' based on the entire universe that goes back 16.7 billion years but which ends on Oct. 26, 2011. This time period matches the mid 2011 Marty Armstrong major cycle turning point, so to me there is a strong correlation to that being the first major peak in Gold and perhaps MAJOR fearful panic low in the broad market.

To understand the Mayan calendar, see this video:

http://video.google.com/videoplay?docid=-8689261981090121097&q=mayan+calendar+comes+n orth&ei=v40zSJn1BZGIrQL-j6T_Ag&hl=en

XAU Gold and Silver Index
XAU Gold and Silver Index


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TomAdmin
Admin 		# Posted: 20 May 2008 21:18
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Oh I forgot to mention Roland, what indicators were you looking at that tells you we are at THE top ?? Maybe I am missing something in my analysis...

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TomAdmin
Admin 		# Posted: 28 May 2008 19:04
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Here is my latest thinking about the gold price. I can see more now what the bearish case may be. But for now I lean mostly towards the bullish side in the belief we hold 850 similar to the way platinum did.

I think what may be unusual about this gold price correction is that most of it may be sideways, instead of hard down. The sideways would help relieve overbought indicators. I am saying sideways because I am giving the benefit of the doubt to the uptrend and bull trend.

But clearly a break or severe break below 850 would more or less invalidate this analysis.

Here is the chart were I compare platinum retest of 1980 support to gold retest of 1980 support.

Given nature of gold price ascent (parabola), I feel that the next leg will be the most vertical and persistant price rise in the gold bull market (ie. panic buying upwards). Exactly when that next leg materializes remains to be seen. Stay tuned...

gold and platinum
gold and platinum


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JBabs
# Posted: 17 Aug 2009 19:39
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Does anyone think the recent retreat of public health care will lessen the burdon on the dollar due to the massive relief from our government tax dollars having to pay the bill and increase the dollar value or just bridge the giant cliff we are headed for? How will it interact with gold value? Tom if I understood you correctly in a recent post you said not everyone bullish on the dollar is bearish on gold. How can that be with the inverse relations between Gold vs. Dollar due to hedging inflation? What points am I( the common person) missing?

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TomAdmin
Admin 		# Posted: 18 Aug 2009 17:35
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Hi JBabs,

Well I don't think you are missing any points. You are correct in your thinking. I can't speak as to whether a specific government policy initiative is going to change the direction of the dollar.

If anything the heavy hitters who can change the direction of the dollar are the Chinese government. So far they have been shy to make any big moves against the currency. But if one day they decide enough is enough, then that will have more effect than any USA government policy.

I think what I said was that there are only 3% dollar bulls according to Bob Prechter. That could potentially be bearish for gold because it might mean that the US Dollar has bottomed sentiment wise.

The problem with interpreting the US Dollar and gold relationship is that it is not perfect. The inverse relationship does match over longer periods of time but sometimes the weekly and daily swings are insignificant.

In fact I would not be surprised to see the gold price break above 1000, and THEN let a US dollar rally begin. But it is indeed hard to predict.

I believe eventually the gold price will get to 3000 to 5000 per ounce. But the hard part is figuring out when the mid term massive 50% correction will occur that serves as support for it to be able to get that high. There has to be a mid point correction at some time. It is tricky figuring out the time frame of that correction. It is quite possible it could begin when the gold price is at 2200 an ounce.

I just did a post on the seasonal weakness of the US Dollar that kicks in right now and into mid October. So we will have to see if it plays out that way.

Ultimately I see the US dollar going much much lower because the USA is going to have to print more and more money to meet new and current obligations. And I have a hard time believing that they will raise taxes because the public will revolt. So if they cant raise taxes then they will have to print more money.

Marc Faber the legendary economist said that it is all but guaranteed that we will eventually get hyper inflation. I hate to use the world guaranteed, but he did, and he has made some great calls over the years.

Hey you are not a common person, you sound like an expert to me!

Regards,
Tom

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