Monday, August 1, 2011


Let's face it, gold bulls have had it pretty easy the last 2 1/2 years. During that time QE1 and QE2 drove a gigantic rally out of the 2008 eight year cycle low.

Folks, at some point a move like that has to enter a lengthy consolidation.

With quantitative easing coming to an end (and QE3 not politically feasible at the moment), the economy likely rolling over into recession, and the dollar possibly setting up for a powerful rally out of the three year cycle low, I think the next deflationary period is now upon us.

The last two deflationary episodes forced a severe (2008) and a moderate (2010) correction in gold.

I do think demand is strong enough in the gold market that gold should hold most of its gains. However, I suspect it's going to be a lot harder to make money during the next year and a half as I expect that gold will be locked in a volatile trading range as it consolidates that gargantuan rally.


  1. Yeah right, like somebody's gonna run to dollar for safety.
    You keep forgetting that dollar is no longer considered to be a safe haven.
    Therefore, don't expect any rally on part of the dollar.
    Just consolidation before it resumes it's path to NULL.
    Gold will hover around 1550-1600 for a while before it resumes travel to 2000$ mark.

  2. Toby, I was glad to see someone else also sees a possible up coming rally in the USD. The last few weeks it looks just like 2008. Back To The Future maybe? Also the gold boat is really titled to one side these days.

  3. i agree, repeat of 2008. except gold wont fall nearly as much. ~1450 as the floor. silver is the tough call.

  4. ps. silver is falling roughly in line with nasdaq chart in year 2000. 5000 to 3000 to 4000. just divide by 100 for silver. if the trend continues, it would predict deflationary collapse starting in october, taking silver down to 20s.

  5. Forget about it. Price is always right and it's 1645$ at this moment.
    To rely on cycle theory alone is as dangerous as to rely on technical analysis alone.
    This is all about sovereign crisis and no cycle or momentum indicator will interfere with reality.
    Anybody ignoring what's happening in the world today will stand to lose lots of money.
    Top calling in gold is probably most popular and most dangerous of all disciplines.
    As long as i see lots of top callers in media and blogosphere i am certain that top in gold is far,far away.

  6. Not trying to call a top. Just saying it late in the daily cycle. Sentiment is extremely bullish, Miners and silver are diverging and gold is stretched a long way above the 200 DMA.

    At this pace it will burn out quickly. It needs to correct or this run will be over soon.

  7. All spreads are collapsing... Count down to Aug 9th and the resumption of QE to infinity. The TBTF's are screaming at the Bernank as we speak.. Gold to the moon.

  8. Ladies and gentlemen,
    i give you 1660$

  9. QE3 is just around the corner. Guaranteed!

  10. Seems unlikely as the first two did nothing for the economy.

    I think we have to have people screaming, save me, save me before it's politically feasible to run another QE.

  11. Gary,saying that, because first two QE's didn't do anything for the economy, you don't expect QE 3 is rather naive.
    Don't you understand there is no other alternative?
    It's either print or die

  12. Charts are good to look at and compare with the last few years but things are not the same as the last few years, they are getting worst and will continue worst. We are entering the 1930's again.
    QE3? I think so. Every dime they can get, they will get it and that puts us in debt more. I've learned to use my own judgement but I look at everything for information.

  13. Long article but interesting story to read.

  14. Why would anybody try and time gold? This country has record debt with zero growth and a government looking to continue pillaging the producers to provide entitlements to the parasites. Nearly all major world currencies are in a Kenysian money printing trap looking to avoid default. Until these scenarios change gold will continue to go up. If you want to invest in gold just buy it on weekness and never sell until the above mentioned conditions chnage. Thats it! Timing gold isn't worth the risk of not having skin on the game...

  15. gold is due for a minor wave 2 correction of intermediate 3. I expect at least a 38% retrace of wave 1, which started near 700. Bottom line is, I think it doesn't make sense to buy now, unless you are using a strategy of averaging in once a month or something like that, wherein it all evens out in the long run.

  16. Gideon, I'm sure gold is going to correct soon, and when it does I'll buy sense in selling what I have to time an intermediate correction? Too many forces at work that could throw off your analysis...the global political landscape and magnitude of fiat pumping being the biggest driver. Just keep buying on weakness. That's the only anaysis you need to know.


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