Sunday, June 20, 2010


We continue to hear pundits describe gold as a bubble. Certainly it will turn into a bubble before this is all over but we are hardly in the bubble stage yet. In order for a bubble to form you need the public to come into an asset class. The public is pretty dim and it can take 15-20 years before they "catch on". It took 18 before they noticed the tech bubble.

Once they do start to "get it" we will have about a year to a year and a half as gold enters the parabolic stage before the bubble pops. See the Nasdaq chart below from late 98 to March of 2000.

At gold's top, half of your neighbors will be buying gold (not selling like they are doing now).

At the top there will be lines outside the the local coin dealer waiting for the next shipment of gold to come in.

At the top 7 of 10 billboards you see driving down the highway will have something to do with precious metals.

At the top the guy standing next to you in the grocery store will tell you how many thousands of dollars he made last month off his gold coins.

At the top everyone will have become convinced the dollar is toilet paper and will only continue to decline until it has become worthless.

At the top the population will believe that we have to go back on a gold standard. By the way, a gold standard never stopped any country from debasing its currency. In ancient Rome they clipped some of the gold out of the coins. Roosevelt confiscated and arbitrarily revalued gold in the 30's. A gold standard will not prevent a government from trying to get something for nothing by debasing the currency.

At the top stocks will be universally hated and gold universally loved. In reality, stocks will at that time, represent true value. Much more so than a shiny metal with virtually no industrial uses.

At the top smart money will eventually come to their senses and realize that true value (profitable companies making the necessities for life on Earth) are being given away for pennies on the dollar to purchase a shiny metal that really has no intrinsic value.

Here is a chart of the Nasdaq followed by a chart of gold. You tell me, does gold look like a bubble yet?

Of course not!

I think we might be getting close to the Nasdaq 1998 level, but gold is hardly in the runaway parabolic stage where it rallies over 100% in a year. Not to mention that none of the other signs I noted above are even remotely present yet.

But no one needs to worry about a bubble just yet. We need to have at least one more serious correction similar to what happened in `08 or in tech stocks in 1998 to wash out bullish sentiment before we can start the final parabolic run into a true bubble top.

If I had to guess I would say that will occur during the next liquidation event which should be due in mid to late 2012 as the stock market collapses down into the third leg of the secular bear market.

That should mark the next four year cycle low and possibly the nominal bottom for the secular bear market in stocks that began in March of 2000. I expect the selling pressure at that climactic event will also drag gold down into the correction that should separate the second phase (what gold has been in since early '06) from the third and final bubble stage. Gold will quickly recover, like it did from the last selling climax, and when it does this is when we will see the public begin to panic into gold.

Then and only then can we start talking about a bubble.

At the moment I think we are about to enter the second leg of an ongoing C-wave advance that began in September of last year. I'm expecting this leg to take gold to the $1400-$1500 level before experiencing a major D-wave correction.

I'll be monitoring the advance on a daily basis to keep subscribers appraised of where gold is in its intermediate cycle. When I think we are getting close to the top of the C-wave I'll warn subscribers to take profits and exit the precious metals market so as not to get caught in a D-wave correction.


  1. Sounds like time to ride this cycle and hold onto our miners. Sell when we hit wave D in the fall? Is this what I am hearing from you?
    The big one will be 2012. Wonder how this jives with the Elliot wave.
    See you as holding my neophyte trader's hand through the bumps and grinds of the market. Good work.

  2. The best place for EW is probably in the trash can. Precther use shock and awe end of the world predictions as marketing tools to lure in subscribers but they really have no basis in reality.

    Heck the guy has massively underperformed a simple buy and hold strategy over the last 15 years. Not exactly the person you want to take advice from if you actually want to make money.

  3. Yes, its true, gold is going much much higher.

    To put it in the stock mkt comparison terms, we are only in 1993/94. Bull started in 82, had some selloffs in 87, 91, recovered and exceeded highs.... people wonder if it can continue. I remember 93, what it felt like forstocks is what it feels like for gold.

    Gold bull started in 01, had 2 big selloffs, now has recovered. If analogy holds, we drift higher for a couple years, have a big selloff a la 1998, then parabola. Probably accelarated in duration....Don't even try to time it though.

  4. Just one big sell-off?

  5. What's with the strange behavior of gold this time around? I mean it keeps hitting new highs, only to retreat. It seems to not have the strength to put in a big upleg.

  6. gold is due for a daily cycle low and it appears it has chosen today to start that correction.

    I went over this in the weekend report. It's actually very important that gold go through these corrections in order to keep sentiment dampened down enough so that the rally can continue.

  7. Toby,

    Gold has been taking between 6 -8 days to cycle down from peak to trough.

    With sentiment not being extremely Bullish for Gold, it stands to reason the the pullback into the daily cycle low should be mild.

    I guess I am surprised to see Gold give up so much in one day. If we have 5 - 6 days to go as Gold cycles down, Dec 3rd's high of 1226 may not stand and Gold could easily retest the 1197 level

    But this riding the Bull -- pony rides just aren't as exciting or rewarding.

  8. The last daily cycle low came in on May 21st at 1167. We would have to break below that to reverse the pattern of higher highs and higher lows.

    I think gold has started into the daily cycle low but I wouldn't bet money on it.

    The dollar marginally broke below it's last cycle low today so the pattern of higher highs and higher lows has been broken. We could still see one more spurt down on the dollar. If it does gold could rocket right back up and put in one more higher high before moving down into the cycle bottom.

  9. As you noted

    "The dollar marginally broke below it's last cycle low today so the pattern of higher highs and higher lows has been broken."

    I guess I am not too surprised to see the dollar rally today. It dropped to just .39 above the rising 50 MA

    That would put, by my count, the daily cycle for the dollar at 47 days.

    Based on the daily count, I could see the dollar rallying here (hopefully for a left translated cycle!)

  10. Every month or so I like to read this guy's bullshit for a good laugh and to see whether any of his "subscribers" have lynched him yet. Remember the equaly flawed analysis and recommendation to short the Dow in March during the bull run? He lost his "subscribers" a small fortune.

    Anyone who follows this guy should ask their shrink to look after their dough until the feeling passes. Also, before you pay for him to help you loose your hard-earned cash check out his real name, it's not Toby Connor is it Gary?

  11. LOL I especially like how he has two totally different pictures of himself on various websites! (at least I've only seen two so far)

  12. You have your facts wrong. I never recommended shorting anything. It's too dangerous, the Fed could start another round of QE at any moment.

    I've just been recommending holding long in the secular gold bull. No trading just sit and twiddle ones thumbs.

    Sounds like you are trying to make stuff up out of the blue my friend.

  13. I can atest to that. I've been holding my positions and have made a ton of money following the G-man.

    "Old Turkey" baby! That's all you need to know.

  14. For a while, Platinum and Palladium were actually out performing gold and then April came.

    Do you see both of them following gold here on out instead of leading the charge?

  15. It does appear gold is going to take the leadership roll from now on.

  16. You have been warned, this ashole has called it wrong again as he has countless times over the past two years, once his "subscribers" are tapped out on one website he changes his name again, starts another one and looks for some fresh marks.

  17. I think we've all made way too much money listening to the G-man for anyone to believer you BS :)

  18. Toby,
    I don't think any of us would mind if you delete this foul mouthed liar.


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