Wednesday, May 19, 2010


I know this is hard to do, especially when one is weathering draw downs. And of course a liberal dose of gloating from the bears during these times doesn't help either. But let's not get sidetracked by the little things and let's face it, the haters are going to show up every time gold corrects. We really should be used to that by now. They've been doing it for 10 years.

The cold hard reality is that gold is still in a secular bull market and the naysayers are having to ply their trade from ever higher levels.

So let's take a look at what's really happening shall we.

The single most important point everyone should keep in mind is the breakout above the 1980 high of $850. If it wasn't for a once in a generation stock and credit market collapse I don't think gold would have ever dropped back below that level. Even so the move was very brief and has now been tested at the last B-wave bottom.

Folks I seriously doubt the world will ever see sub $850 gold again. Just like we've never seen sub $250 gold after the breakout in the 70's. So anyone forecasting $700 gold just doesn't understand how bull markets work. It just ain't gonna happen.

Next came the breakout above the last C-wave high at $1025.

That breakout was also tested during the February yearly cycle low. I doubt we will see gold back below $1000 for the remainder of this bull market.

Now gold is trying to breakout and hold above the next big resistance level of $1200. The initial break in December was repulsed. Now we have a second break that is in the process of testing the breakout.

Now I have no idea whether this breakout will be the one that holds or whether gold will have to consolidate a bit more. But sooner or later gold is going to break above this level and never look back.

I think we probably have enough time left in the current intermediate cycle for it to happen soon, but if not, I'm confident it will happen and I'm on board and ready for the ride when it does.

My suggestion is when you start to get sidetracked by the daily wiggles or the intermittent draw downs you come back and look at these charts and stay focused on what really matters.


  1. So your analysis is simply based upon price action of its 1980 high and you charge for your analysis. Geez I need to start my own blog. It could drop 35% - 50% and still be in a bull market. As a gold bull, this is what I am expecting. It is called a wave 2 pullback in EW.

  2. I heard (but haven't seen) that Bob Prechter is predicting a big decline in Gold - any thoughts on his analysis compared to yours?

  3. As long as we're name dropping, predictions are....nice but if you want to be a winner in the gold market instead of a weiner check out Stewart Thomson at
    He teaches you how to buy weakness and sell (into)strength and has no problem calling gold..."the world's lowest risk investment. Gold has the lowest risk and perhaps the most reward".
    He writes a weekly article over at too.
    Check him out!!

  4. Scott: "I heard (but haven't seen) that Bob Prechter is predicting a big decline in Gold - any thoughts on his analysis compared to yours?"

    LOL - Hasn't Prechter been bearish on gold since $400? I suppose he will be right sooner or later - but he's been dead wrong for most of the bull market...


  6. Louis and Scott, Bob has predicted a severe drop in equities, which is starting to come true right now. He did have an opinion about gold in his "EW Principles '85 edition calling for a peak in gold at about 772. That was a qualified opinion, not a technical analysis. In his latest May Theory newsletter, available to subscribers only, he mentions gold saying that it would likely follow the drop in the market, as would most all commodities in a deflationary spiral. If so, the author of this newsletter is incorrect, and gold WILL fall below 1000, I would say to test the 850 level, a complete wave 2 in preparation for a dramatic wave 3.

  7. I have been following P. Radomski on precious metals for about a year and a half and he has been right on every twist and turn in the gold market. This guy knows how to hit it on the nail. Check out

  8. If only every person in the world would follow all the rules that you gave... I think that everyone should come and visit your website
    Seiko Mens Watches

  9. TOBY: Could this be the correction you talked about earlier in the year? Then we are headed into the third leg?

    SHULA: I have read dozens of reports by P. Radomski. They all say "it could go up, it could go down, or it could go sideways". But he says it through endless twists and turns, so of course he's going to "hit the nail". Serious

  10. Predictions of what is going to happen tomorrow in the market are everywhere and free.

    Those few who charge for their predictions and are still in business 25+ years later. Priceless.

    Do throw a spear at me but Prechter has been 100% spot on since I signed up two weeks ago including the curent PM pullback. He predicts silver will go below $15.44 on this down trend, this Elliot wave. So there you go everyone can grade him now if it comes to pass or not over the coming weeks.

    I just read the last two weeks of predictions. 85% wrong so far and 100% wrong on this downturn BUT if the market reverses and goes to new highs in the next two weeks then everyone can judge them correct.

    OK put your spears away; just makeing some fun comments to lighten everyone's load.

  11. Actually Precther has been predicting a top since 950 and his long term record has underperformed a simple buy and hold strategy for the S&P.

    As far as I can tell EW is a great system to predict the past but that's about it.

  12. Well Toby this is going to be an interesting time for predictions. I myself; I am just a poor shlep looking for crystal balls. As many as I can find. I read a variety of opinions and then form my own.

    I am new to your blog but I see here that you recently, mid April predicted

    "We are now on the verge of a surge (maybe a huge spike) in inflation."

    ..whereas Prechtor is predicting general widespread deflation first with simultaneous selective inflation [the dollar is being trashed in value] then to be followed eventually by mega inflation.

    So there is something worth putting in the blog.....what happens over the coming months. Should be interesting. Or is that a huge understatement. I will be watching and learning. Thanks for the blogspace Toby.

  13. Just in case you haven't noticed yet, no one will ever successfully predict the future over any significant length of time.

    Most analysts tend to gravitate toward perma-bull or perma-bear positions. Then they beat the drum until the market goes their way.

    All those newbies looking for the holy grail then erroneously assume this guy knows something that no one else does.

    In fact it nothing more than a stopped clock telling the right time twice a day.

    I'm not going to get timing correct any more often than anyone else so I don't try. All I want to do is ride the secular gold bull market until it's finished. To do that I don't need to time the market I just need to have patience.

    So my suggestion is if you want to make long term cash you can try to bounce back and forth from hot guru to hot guru always chasing the market. Usually that just ends up as a stalemate or losses if one is foolish enough to use leverage.

    The easy and almost sure fire way to make the big money and more imprtantly keep it is to just buy into a secular bull and hold on.

    Of course easy is a relative term as one will have to weather stiff draw downs from time to time. But if you can do that you will come out the other end with a mountain of cash.

  14. Now you have me curious Toby and beforehand I wish to apologize if I am covering territory which is a well beaten path on this blog.

    Your reference to easiest path etc. is to 'buy into a secular bull market and ride it to more money'. I am not trying to be obstinant truly, my question.

    I ask because you referenced it not because I believe in counterclaiming anything.

    Are you saying there is a bull market going on right now and if so what is that timeframe; starting date at the least if ongoing?

    Thanks in advance.

  15. Gold and precious metals are the only asset class that still remain in long term secular bull markets and have been sine 2001.

    The governments monetary policy of attempting to print presperity is the fundmental driver of this bull market and I don't see that policy changing anytime soon.

    As a matter of fact if the stock market continues to deflate I expect monetary policy will will be relaxed even more aggressively.

  16. One needs to study the history of Gold. Its never been worth nothing. Paper notes are only as good as the one who has written them. Could be that we have lost our way in America. Gold should not be counted in dollars but should be held to keep one's wealth.

  17. Is there going to be a mini crash? I don't know, but so far it is not looking too good. We are due a bounce, but if SPX cannot break the resistance around 1080 this week then we do have weekly and monthly sell signals. And that is not good; then we could easily see a mini crash. Next MAJOR support on SPX is around below 900 and it could easily drop there in a week.
    And this could easily take gold and especially PM stocks with it?

  18. Didn't exactly play out that way did it?


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