Then – July 6th, 2014 – and now, as usual;

It is not quite there yet but nevertheless getting very close, just 7 points away! At the rate that it is dropping we could be there any day. We could go beyond 60, perhaps something like 45 or so but in the BIG PICTURE gold stocks are at a level where they might actually are becoming a buy for the first time in a long time. It stands to reason that if the stock market turns as a result of QE etc. being stopped, gold might paradoxically turn at roughly the same time. Here is the big picture again;

With the exception of 2001 and 2002 , gold stocks have not been this low for a very long time. Moreover the C of the “flat” has done the requisite 5 waves (even though one could argue that we are only completing 3). In any event a rebound to about 110 ( the top of the triangle) is very probable. That could easily mean a doubling of bad gold stocks like ABX, shown below on a longer scale;

The 5th wave does not yet appear to be complete but somewhere here between C$13 and $5 this stock is going to be a buy of a lifetime (27 years). If wave 5 equals wave 1, a normal relationship when wave 3 is extended, the perfect target would be about $10 or so. Keep an eye on the Swiss referendum as that may provide a boost to gold/ gold stocks if passed at the end of next month.

Individual gold stocks have not always followed the same path, ABX and G are down but FN was, until recently still up, so we will use the XAU. As per the June blog we targeted the XAU to go to about 60 (it was at 104 at the time). There is at this point no reason to change that outlook. The triangle on which this prediction is based is pretty clear. Having said that it is also fairly clear that this sector as a whole has been crushed and it stands to reason that, using the hopelessly incorrect Keynesian view of economics, gold stocks should do well as other stocks sink. So there may be individual gold stocks that are approaching a good buy level, but generally this is not yet the case. Here is the big picture once again;

At a level slightly above 60 this index will start making a new low, which is to be expected if it is a C wave. Also the triangle measurement will be reached and time wise the upcoming low may occur right under the apex. We will stay with 60.

Obviously gold stocks are cheaper than then were at any time in the past 10 years but they are also more expensive than ever in the 1000 years before 2004.

Here is that triangle again in the XAU. All the legs within the triangle should be three-wave structures and there should be 5 of them. With one exception, wave e, they all definitely are. e may not be over yet as it can still go higher provided it does not exceed the height of the c leg. The “mouth”of this triangle suggests a target at about 60 (or even lower). EWavers, the purists that is, take umbrage with using other technical indicators, it pollutes and distracts the thinking. I do not see why one would not use additional indicators if they simple corroborate the EW analysis. In this case the MACD has been dropping for nearly a year and the RSI is clearly overbought having been above the 70% line only once before in the previous 3 years (all I can get on ScharpCharts). By the time we get to 60, if indeed we do, gold stocks will have lost about 75% of their peak values and should then be a screaming buy at least for a very solid bounce. The XAU contains 13 gold stocks, mostly the big ones like ABX, Goldcorp Kinross etc. so what applies to this group of stocks does not necessarily apply to all gold stocks.  For examples, DGC, Detour Gold, no doubt, already made its low as we pointed out months ago.

It is taking it’s time but is following the script. We have had a few near disasters, another war in the Crimean area of the Ukraine,  the complete undoing of the good work in Iraq by Bush and Cheney and the potential of a total conflagration in the area, a few territorial skirmishes between China and it’s neighbours, the ongoing civil war in Syria and the breaking of ranks by Fed. president Bullard, GDP revised to a negative 2.9% and so on. Nothing seems to matter all that much and if it does, counter forces come into action the same day to neutralize the effect. This should all change soon as the RSI in the chart is already very high.  The big picture path might look like this once the world starts to realize that central bankers are not omnipotent.

Once the low is in it should be followed by a terrific bounce. If a new high will be made years down the road remains to be seen. Some believe a 5th wave will do just that and others would view this bounce as a B-wave to be followed by a new low. At this time I have no idea and for the next little while it does not matter much..