Hello everyone.
2015 draws to a close, so I thought I'd try to emulate GM Jenkins with a few charts for you. I have found a whizzo new (free) charting site recently, which has enabled me to mess around with some very long term charts.
I'll kick off with a recreation of one of GM's that I know has interested a few of our readers, the ratio of the US 10 year treasury yield and silver, and how this signposts big turning points in the price of gold:
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| Not long now? |
As we can see, the upper trend-line was touched and pierced back in the early summer, and more recently the ratio has moved even further outside of the trend-line. This is not unprecedented, as we saw a similar episode at the bottom of the channel from mid-2011 through to the end of 2013, when gold had its last bubble phase. Whilst the channel doesn't provide a precise timing for turns up or down in the gold price, it does appear to help identify the process of topping and bottoming for the gold price. My feeling is that the gold price has one final plunge ahead very shortly, before the trend reverses for a number of years.
This next two charts show where the gold price might find its support in the next 3-6 months:
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| Andrews Pitchfork starting in 1999 |
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Here is the same pitchfork extended to a recent date:
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| These lines will intersect the gold price sooner or later, and there is also strong lateral support in the $950 to $1,000 range |
Here's another interesting pitchfork chart from way back in the 70s, which proved to be relevant again more recently:
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| Down to the bottom then back to the top again? |
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Everything seems to line up with a move down for gold to around $950 within the next 6 months or so, and I'd guess it will be a sharp move down rather than a drift lower, a classic capitulative finale to a bear market, with weak-handed holders selling in volume. It would then be followed by a relatively swift rebound and the start of a good few years of a strong bull market.
This would coincide with a global recession and the broad markets entering a deep bear market. Here's a quick look at the crash of 1987:
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| Upper and lower trend-lines from the crash of 1987 |
Here's the Dow Jones again with those same trend-lines extended to today's prices:
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| Bubble, what bubble? |
Interesting how those trend-lines seem to come into play decades later isn't it?
We appear to be heading to an imminent major turning point for many asset classes based on these charts.
Good luck.
