GOLD

GOLD again

Hamilton

gold july 22 2015

The triangle idea is a little off because, as we pointed out, wave b (here shown as a) is fairly clearly a five wave move which disqualifies the already awkward looking triangle. More in line with the stocks, see for instance ABX would be the diagonal or wedge concept. There each of the five waves, both up and down should be 3’s. This could be the last, or 5th wave of such a structure. Equality, not an essential feature of this type of wedge, would suggest a low at around 1065-75 . This would be very close to the 50% and would allow for one more drop that I think is required to finish this leg down. Gold is already down about $15 which might indicate that we are in a minute 4th wave triangle.

GOLD, Aug. Future

Hamilton

gold july 21 2015

This is the August future contract on the CME. We are just thinking aloud so do not take this too seriously!

There could be a triangle here. All waves within the triangle should be three’s.  a , c and e most certainly are; b and d lack clarity but they could be. Assume it is one than the “mouth” which is $240 wide projects a target of about 1200-240= $960 or roughly 4 lines lower than we are presently.

The high was at 1923 (spot) and the low in 2001 was 251, so gold travelled about $1672. Half of that is $836 on top of $251 equals $1087. You get the same result if you deduct $836 from $1923, if that works better for you. That is where we are now. 61.8% retracement would be 61.8×1672=$1033 From the top of 1923-1033=$890  I cannot verify these numbers but it appears that we might be going into the direction of a 62% retracement.

The $1000 even would be an acceptable compromise to both bull and bears. Time will tell.

Alchemy, and we thought it impossible! Copper, Gold.

Hamilton

Here are two charts from InfoMine, same scale, same timeframe , more or less, and so on. On the left Copper and on the right Gold.

copper jan 13 2015Gold jan 13 2015

With the exception of the spike down in 2008 for copper the two charts are very similar. Both have their lows in or around 2001+ and both peak in 2011+. Moreover both manage an amplitude of about 9-times. The most recent, multi-year correction takes back roughly 3 out of 8 lines which equates to about 38%, normally a Fibonacci minimum. We can only speculate why the exception of 2008 occurred, perhaps copper as a base metal is more sensitive to economic growth which seemed to disappear during the initial phases of the great recession. Or perhaps gold was more sensitive to the expansionary monetary experiments of the Worlds central banks. Whatever the cause it is clear that the difference was short lived and that for the most part the two metals behave like twins, have an extremely high correlation (at least for this time period!), and are essentially interchangeable as if alchemy actually works. Those that delight in conspiracy theories  might want to delve deeper into what the Chinese have been up to.

For our purposes all this is important only in that if you can predict one, you can predict the other. Here are then  – 29, Oct., 2012 – and now charts;

copper dec 2012copper 13 oct 2015

That was a bulls eye even if it took a year and a half longer. Nevertheless we do not think the count at the time was correct. For the triangle to be a 4th wave it is too big. A 5th wave may have started earlier and taken the form of a wedge. This would then complete wave A or 1 down at toady’s low. Perhaps a better characterization would be a double zig-zag with the triangle in the middle as the X-wave. We are not entirely sure as other variations are possible but the main thing is that we got to $2.70 per pound, the initial target. At the very least we would expect a pause of some duration at this stage, more or less. So if that is the case with copper, why not with gold?

Gold, the stuff, Greenspan, the Fed. etc.etc.

Hamilton

gold nov 1 2014

This is a chart from www.aboutinflation.com. It shows the gold price from the time convertibility still existed ( abolished in 1971!) to last year, both in inflation-adjusted and nominal terms. You can see that in 1980 gold (and silver) were great inflation hedges as the red line moved well above the blue line. Not so much recently when the two moved , more or less, in tandem proving once again that Fisher was right with his MV=PT. You can create as much money as you want, but if the velocity adjusts downward there is no effect. Which, of course, also leads to the inevitable conclusion that the gold standard must have a lot going for it, as both Greenspan and Bernanke vigorously argued as adolescent economists. It was Keynes who realised that the gold standard limited the ability of governments to fool their constituents and therefore apposed the standard. In stead “faith” entered the equation, that is faith in the neutrality of the CB. With that who needs a standard?

     Just a few days ago, in case you missed it, Greenspan weighed in on these matters and, without batting an eye pronounced  that QE was a failure. And, that the Fed could not extricate itself from this mess without causing a lot of pain. And “I never said the Fed. was independent”. And he also said that   gold is a good place to put money these days given its value as a currency outside of the policies conducted by governments. 

The end of CB omnipotence perhaps or simple a case of an emperor without any clothes , or at least a change of clothes ?????