Hey Gary,Just looking at the cycles in Gold and I'm seeing the possibility that rather than being in a continuation (2nd leg) of a C-Wave that began in April of 09, perhaps that C-wave ended in late 09, and was followed by a D through February '10, and then a new A, B and now first leg of a C-Wave that began on July 28th.Does that cycle view seem valid to you?Mitch
Excellent report tonight G-train. I think I'm finally starting to understand these cycles. :)
Not really. For one the C-wave wasn't large enough and if that move down in Feb. was a D-wave it was the most pitiful D-wave of the entire bull so far.D-waves are supposed to come crashing down to or below the 200 DMA. The also invariably move the Blees rating above 90 and often to 100 (that's one way of spotting a D-wave bottom).No I think this year has just been an extended consolidation after the first leg up in the C-wave last year, driven by a powerful bounce out of the yearly cycle low last December in the dollar.That dollar rally didn't completely halt the C-wave but it did hold it back for the better part of a year. Once the dollar rolls over I'm confident the C-wave will get back to the bussiness of racking up big big gains.
That makes sense. Thanks for the continuing education.
BTW, the knowledge that we are in a bull market has me really enjoying the corrections as observing how they unfold and snap back time and time again has allowed me to add to positions near short and intermediate term bottoms, and then just ride. I also just finished reading Reminiscences again. Its been a couple years, but I love the way Livermore thinks. Compared to 08 and 09 when I made literally hundreds of trades, often several per day, I have made a appx twenty this year, most of them buys in the PM complex. Holding positions from GOld at appx 840 to 1160, when with your nhelp I was lucky enough to add some GDX on July 28 within a couple points of the intermediate bottom. The only problem I have with all this is that the fundamentals driving the Gold bull are really worrisome for our society as the devaluation of the currency threaten the viability of our freedoms. An unfortunate place in the macro cycle. Mitch
Pretty weak volume on both SLV and SLW on the early stages of this "breakout" in silver. Might be something to take notice of if this rally fails.
There is a good chance gold has started down into the next daily cycle low.
Gary and Doc,You are the cycles gurus here. And Gary had alluded to the bull in agriculture as a means for some diversification from PMs. I was wondering if any of you know of where cycles has been applied to agriculture. Or where I can find a good coach for this. Any pointers would be appreciated.About 15% of my portfolio is in agriculture (the rest in PMs) and the largest position is sugar followed by grains. So yesterday when the PMs in my portfolio took a hit, there was a little bit of cushion especially by sugar.Obviously having a framework like cycle theory can increase my confidence in increasing my agriculture position.Thanks.
One would have to have many years of market data for the grains to develop a cycle count for ag. I really doubt you would be able to come up with anything even close to the cycles in gold and you certainly aren't going to be able to fit it into an ABDC wave pattern.Probably the best would be to look at the CRB index which also tends to run in a large 3 year cycle inversely correlated to the dollar.By that metric you could trade the grains by just watching the dollar cycles I suppose.I've never actually tested this though so I'm just guessing. One needs to keep in mind that there are other factors that come into play in the ag sector like weather that don't factor into the PM or even the energy sectors.
Gary, thanks for the tips.
Gary, any insight to time band when you expect gold to bottom? OEX on futures options is Sept 27,may this be a factor also?Frank
Gary, was smart money ahead of the technical traders? was that close enough? Mid 1230s...Aaron
I went over it in last nights report.
I saw that in the report Gary, I was just trying to jump the gun and add some more exposure here.Thanks,Aaron.
I was actually responding to Frank.
Gary: You outlined at what price to buy gold. Do you suggest buying silver or the miners when/if gold hits that target, or should they have different targets?
Nope I would buy at the same time. Especially since I think the general market is in an uptrend.
Kitco is showing that the low was at 1235.70...it's already at 1246 now..wonder if he head down again
Hi Gary, 1236 done has the smart money again bought the dip aggressively, I added half at 1239 can we add other half now or wai for another dip with 1210 stop..regards
This move in gold is eerily like the 1211 bounce...Aaron.
deep V correction..it is hard to believe the correction is finish.
V,You can add anywhere you want with a stop below $1210.
i didn't even see it hit 1236...and now it's already at 1247..wow just wow
Looks like the pullback just came and went! I must've blinked.Guess will see what happens for the remainder of the session.
As I've been saying gold is at risk of entering a runaway move. I hope it doesn't but we need to be prepared if it does.However I wouldn't give up hope yet for another move down to $1230 maybe early next week.
Alright, off to the cliffs. Talk amonst yourselves today.
Silver is making it very hard for gold to dip, its been incredibly strongAaron.
Hi Gary, The deflationist argue that inflation/hyper inflation in coming months is not possible as the Fed. St. Louis adjusted monetary base shows that the base has been same and not grown since October last year. Infact if it was not for the growth in cash the base would be down which is deflationary.
I was just wondering if really the key to understanding the fundamental case for the gold bull is inflation/deflation.Maybe it is not. My understanding is that it is currency debasement that is the root of this - which is not exactly the same as inflation.E.g. In Zibabwe when Mugabe ordered the printing of money to pay back IMF loans, this lead to hyperinflation in Zimbabwe. The money printed did not go to consumers - but still there was hyperinflation. Now I am not sure about this but did the money supply increase? I think the problem was debasement and loss of confidence.Please correct me if I am mistaken.
Gary,I believe gold may be in a daily cycle decline, but if so, it is not the "next" one but rather the the decline of the cycle out of July. The first daily cycle in an intermediate gold cycle often runs long, sometime over 30 days. We would currently be on Day 31 and therefore should find a low in the next 2-3 days.It is highly unlikely we are seeing the decline of a cycle that began Aug 24. Daily cycles leading into parabolic runs rarely peak that early. Also, with a Day 10 peak, such a cycle would need at least 8 days of decline to reach the timing band. Even if we ended with a truncated cycle... say 15 days... it would be hard for gold to hold the Aug 24 low.The action will clarify these possibilities soon. If we drop for a couple more days and then rocket higher, I don't think it will be debatable that we saw a long cycle out of July. If price somehow manages to meander lower for 5-8 more days without violating the Aug 24 low, I will buy into your interpretation.
The bears just can't keep gold down!
RA: I'm not sure what the distinction is. If the currency is debased it means it takes more of it to buy a basket of goods. That's inflation, no? Whether it goes to consumers or not doesn't seem to me to be the point. If dollars become worth much less as they are debased and no one wants them out of fear, and it then takes $100 to buy a loaf of bread...what's the difference?
Hi DG,I think I muddled up my previous post but your point is exactly what I am trying to make.Much of the argument around inflation (or deflation) assumes that the money goes into the economy via the consumer (i.e. mail them cheques). If the customer spends it then we have inflation, if not it is deflation.But there are so many other ways that we can get hyperinflation without that kind of consumer spending.Does this thinking make sense?
RA-You might like digesting this?http://mises.org/books/Inflation_its_cause_and_cure_haberler.pdfPDF about 91 pages!
Yes, now I see what you mean. I believe that if we have inflation it will be due to lack of faith in the currency and not consumer spending. The consumer is still working on getting his savings rate up to 10% or so and is unlikely to spend (unless he thinks the dollars they have should be traded for goods). I don't know that this will happen, but it is certainly a much more realistic possibility than at any other time in our history. If the sovereign debt crisis gets going again (which seems likely) I don't know who will want currencies as one country after another blows up.
All Inflation Process are caused by an Increase in supply of money!Where the increase derives from is the question!!
For a light read on inflation / deflation, its causes and repercussions, Schiff's "Why an Economy Grows and Why it Crashes" is a good read as well. Presents the issue in simple, easy and most important PRACTIAL terms and not in some Elite Economist mumbo-jumbo. (Again it is a light and practical read)
Daniel,Thanks for the reference but I suspect that by the time I am able to get through it, the gold bull will be over :-)But nevertheless will look at it - quite interesting actually.DG, so my bottom line is look at what the govt does and not consumer credit, or consumer leveraging deleveraging. And the only choices are debase or default for govt up to their eyeballs in debt. Either way, it is good for gold and PMs in general.
Anon 9am, thanks for the Peter Sciff book recommendation.
Yes, but it's not just a question of what the gov't does. Confidence is a strange and mysterious thing. When does a crowd turn into a riot? What's the trigger? Who knows when confidence evaporate. Gov't mismanagement id necessary but not sufficient. I have smart friends who have been warning about a collapse for years. When the crowd turns into an unruly mob and flees the dollar all at once, no one knows. People say things like "Obviously the debt level is unsustainable..." but "when" is the question, and no one can tell. Best to make a plan, be mentally prepared, and wait. Watch the market for key breakdowns and rallies in things that act as a "tell." The first riot in L.A. over food costs or something and I'm moving to the country! I'm already long gold...
Well DG, you paint a pretty grim picture. It may still come true, but I think what will get us out of this mess is a Revolution of a different kind - be it clean, green energy, biotech, desalination of water etc. etc. I have no clue what it will be or "when" it will come, but it is the private sector which will ultimately "bail" us out!
Yes- The private sector--that is of course if our Governemnts policies do not chase all the private entrepreneurs out of the country?
DG,You've got a bunker in the countryside?!But back to confidence, I think the rise in price of gold over the last 10 years tells us that confidence in fiat currencies is slowly (so far) but surely eroding.And if we go get the point where you start running to your bunker, what would we do with our gold mining stocks? Sell them for dollars?
Anon 9:21---I am not at all confident that what I described will come to pass. I just know that if you wait until things happen to start thinking about what to do, you are not going to be emotionally prepared. IF it starts to get weird, I have a bit of a mental plan. I have 90 days of food stored, and a supply of cash, water, etc. Cost me almost nothing, but nice to have.RA: Yes, slowly, so when does it turn panicky? Great question about gold stocks. I thought about pulling all my money out of Etrade last year when they looked so shaky. What's the good of being short if you broker goes broke and your account is frozen for three months? IF it seems to be getting unglues (a big "if") at some point I will sell my GLD, GDXJ, and SIL and buy physical. It won't matter that gold is $2500 an ounce because I'll just be switching one for the other. But honestly, we are entering a new world and I just hope I land on my feet! No one really knows what this all will look like if it does get unhinged. Again, I am not expecting it, but it makes sense to think about it and have a plan.
By the way, I do not have a bunker in the countryside but I have friends with a huge piece of land with homes on it in a somewhat remote area...
at some point I will sell my GLD, GDXJ, and SIL and buy physical. It won't matter that gold is $2500 an ounce ....That is assuming you can get the gold and silver. I would wager that any run on gold will cause physical shortages. If you are talking about being prepared for the future, why not buy gold and silver now while it is easy to get. Later might be too late. :)
Yes, it has occurred to me that there may be a shortage at that point. The reason I don't buy it now is that I don't want $200k in my apartment (I prefer to rent rather than own a home...it's worked out pretty well lately!) If I knew what the hell to do with the stuff that was safe I might. It's also a pain to buy and sell, and I don't know if we are near a crisis. I won't want it during Gary's D-wave. I bet even if there's a shortage you can buy it at some price (10% over the market?) If gold is at $2500 because a crisis is brewing I'm happy to pay up using my profits from the ETF's. It doesn't seem to me that there is any great answer as physical is expensive, a pain, and steal-able. If it starts to get weird I may buy some anyway and bury it somewhere.
Doc,I'm pretty confident we did in fact get a cycle low two weeks ago. What I am concerned about is if gold is about to enter a runawy phase. If that happens it will completely mess up the cycles and we will get strange things happening like dips on day 11 or 12 that look like a cycle low but are too early.The counts will be completely muddied if gold enters a runawy phase. That's why I would prefer it not happen.
How does one know if its a runaway case Gary? Besides looking back later and seeing that it is...Aaron.
Any further fade will give me a sell signal! It's going to be close. I will try and post right after the close. Dow up 42 right now.
Arron,The Sept. 2 report explains runaway moves and how to spot them.
Didn't get it...
Usually your instincts are pretty good Gary, and gold is a nasty beast, always choosing the most difficult path for its riders. Now which do you think would be easier a run away move with a risky exit at the C-top, or nice systematic cycles approach?As per DG’s timing question…I think the signs will come out of the interest rates wanting to go higher. I also think the second sign will be when the Fed pulls out all its stops to keep rates low, maybe with the help of other central banks. Time I believe is relative to how long the market can be managed. The bigger the wallet the longer the time can last. We have major worldwide issues in the USD, and believe that if it were not for its reserve status that the US would already be Zimbabwe. I don’t believe the USD can keep its reign as a reserve currency, nor do I believe another national currency can do it either. That being said, I think a slow demise of the USD may be a better fit to what may come. This is contrary to a point that I made before, but I think if the world knows how bad the USD is a coordinated demise is probably the only solution out there to avoid world panic. For this reason, at this point in time and subject to change, I don’t think a shock of hyperinflaiton will occur. To avoid a USD collapse shock, I think the USD will be floated down in agreement from all central banks. This gives the opportunity for inflation to seep into our system, while deflationist can keep buying those bonds convinced the CPI is the most accurate tool in the world. This would also be consistent with gold’s constant attitude of being a nasty beast for trading. Slowly increase, while the layperson has no idea that it just went to $3000, nor do they care. Have a good week-end all.
One point on inflation...seeping in inflation relative to hyperinflation. Still high levels of real inflation though.
It actually isn't terribly hard to spot a runaway top but you have to be fast to exit because they can crash suddenly.I really hope we don't get into one of those.
So I guess hourly SMT's may be in order and your gold bug meter might really be a great tool.Anyways looking forward to the week-end report.
Gary-Any significance to the HUI forming a weekly swing high?
I doubt it. If it was on week 20 then I would start preparing for a dop into an intermediate cycle correction. But on week 6 it is probably just the normal daily wiggles.
From the Feb. lows, $HUI formed two weekly swing highs before making it's ultimate high, after all.
Gary,What makes you confident that gold saw daily cycle low couple of weeks back other than being in timing band? Do you have RSI or any other indicator in addition to timing band to look for daily cycle low?
Because we are now outside the timing band for the cycle low. If gold was going to drop one more time it should have already done so.Granted a cycle can extend but there is no way to tell if a cycle has extended until we are way past it.If there had been no obvious corrective move yet then I would say yes this is an extended cycle. But we did have a very obvious corrective move two weeks ago. So we have to assume that was a daily cycle low.
Keys: I agree about interest rates, and the fed pulling out all stops. Given everything the Fed has done if rates start going up it means things are out of control. My timing question was more to make the point that we can't know ahead of time. People say" Any day now..." but until the markets indicate a problem that's just guess work. Keeping alert to market tells with a plan in mind seems best to me.
Hi Gary,The deflationist argue that inflation/hyper inflation in coming months is not possible as the Fed. St. Louis adjusted monetary base shows that the base has been same and not grown since October last year. Infact if it was not for the growth in cash the base would be down which is deflationary.
Yes I've heard all those arguments but if the dollar drops below 80 and then works into a yearly and 3 year cycle low like I think it will, especially if it moves to new lows then I can assure you we are going to have an inflation problem.Now one can believe what they want but the history is pretty compelling. The dollar has been movign in this cycle like clockwork for 30 years. I'm guessing it will continue to do so.
I can see 3 year cycle and 1 year cycle. But aren't they supposed to have theyr lower point at the same moment?
Yes the 3 year cycle low next spring or summer would also correspond to the yearly cycle low next year.
Gary,You also said you expected the yearly cycle low at the end of this year to coincide with the intermediate cycle low.This means that the next yearly cycle will begin sometime end of this year and last till Mar-Jun next year? Isn't this less than 12 months?
Yes it is. The largest cycle will dominate the smaller cycles so if a yearly cycle has to shorten in order for the 3 year cycle to complete it usually will.That's what I expect to happen this time.
Gary,Interesting, I am learning a few things here.I have seen the 3yr, intermediate and daily cycles for the USD.But I do not seem to find the yearly cycle for the USD in the Terminology doc or anyhwere else. I must have missed it. Could you point me to it if you have documented in somewhere?Many thanks.
I don't think I have the yearly cycle documented in the terminology doc. Generally speaking it normally lasts about 12 months or two intermediate cycles, but if the 3 year cycle overrides it can shorten to only one intermediate cycle (which is what I expect to happen next year).
Went to order some online goods, and they jacked up the price of the product by 20%, and then they jacked up the price of shipping by 40%....Hyper inflation, this is my first glimpse of it. its nuts.Zstock7So $1200 times 40% = 1680 ( 5 year) target for gold, if these rate hikes start happening in every sector.
Oh man, shorts are in BIG trouble! Half the battle to riches is avoiding land mines along the way.Great report, G-Rock.
Gary,You said "It actually isn't terribly hard to spot a runaway top but you have to be fast to exit because they can crash suddenly."How would you spot the runaway top?
Look at what Goldman has to say about QE2 and weak USD...http://ftalphaville.ft.com/blog/2010/09/09/338446/goldman-anticipates-qe2-dollar-weakness/It parallels Gary's views.Given that this is from Goldman, I am not sure if this is good or bad for PMs :-)
If it becomes apparent that gold has entered a runaway move I will go over exit strategies at some point later down the road when we get closer to a top.
But Fast Money just said sell all PMs. :)
Gold has had an almost straight run up from the bottom. There is a possibility this may turn into a runaway move. But it seems obvious the market is going to take profits as the top was tested. So if one is leveraged it's probably a good idea to take down the leverage and book some profits. Then just wait and see if the highs are broken and if the HUI breaks out of the triangle.When it does put your leverage back on immediately, don't wat around for a pullback after the break out, just get in.But until that happens there's nothing wrong with lightening up on positions a bit, especially if one is leveraged.
RA, thanks for the excellent link. wow. another trillion in QE2. Short term strength in the USD, and long term weakness. To quote. In a context of USD weakness, we focus on the EUR, JPY, Commodity currencies and the CNY
Gary,If we enter a runaway move instead of the two-legged scenario you had previously considered likely would this change your projected targets for the HUI (850ish) or gold (1600+)?Thanks,Steven
Gary,Another question is where do you see real estate going over the medium-term? Do you think the bounce out of the yearly and three year cycle will bring down asset prices such as real estate and see another leg down?Thanks,Steven
Runaway moves are unpredictable. There is no way to know how long they can rise. So to answer your question...I have no idea.In regards to housing. There is still more donwside before housing hits bottom. This was one of the largest bubbles ever. Bubbles don't reflate so don't expect housing prices to come back to 05/06 levels anytime in the next 20-30 years unless we happen to enter a hyperinflationary event. Even then housing is never going to back to the real values it reached at the top of the bubble. Certainly not in any of our lifetimes.
While the CPI numbers for the US have been rather tame, look at China!http://www.nytimes.com/2010/09/12/business/global/12yuan.html?_r=1&partner=rss&emc=rssThe other country with higher inflation is India.The Chinese looked to the property market to hedge against inflation but with the tighening govt measures towards the property market over there, you have to wonder where the Chinese will put their money instead (hint: its metallic and yellow). Ditto India.
Gary,You've mentioned that we would need another macro event like oil running higher to trigger another bear mkt? What about commercial real estate? The banks have yet to feel the pain from this yet. But it is starting to look like banks will feel the pinch as landlords are defaulting on loans.Joe
Joe,The credit markets aren't going to cause another bear market. The Fed will just buy commercial loans and monetize commercial debt just like they took all the toxic loans off the banks balance sheets.Suffice it to say we aren't going to make the same mistake twice. The problem will come as an unintended consequence of trying to keep commecial loans from causing a problem and it will come as a currency crisis caused by printing too much money.
GaryWhat do u think about rare earth? James Dines newsletter was a early bull in gold and now in rare earth. Some of his picks have gone vertical.
The only problem is I don't know how to spot a top in this sector. I know what to look for at a C-wave top so I'm going to stick with gold and silver.
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