Yearly chart for gold long term 1968 - 2013 - outside reversal to the downside forming.

Recently I constructed a long term yearly open-high-low-close (OHLC) chart for gold running from 1968 to 2013 using the excellent data available on the Kitco website for London gold Fix prices.

As it shows, 2012 was still an up year but only perhaps due to a low price at the year start being a bit of a fluke. The high for 2012 was $125 lower than for 2011, for instance.

Even accepting 2012 as an up year, 2013 has shown a massive outside reversal to the downside. Perhaps we can compare this to the part of the chart showing 1980 and 1981 when there was a large similar outside reversal.

When I originally constructed the chart in March, it already showed a reversal to the downside in 2013 but when I revised it today, the reversal is much more pronounced given the move to a $1378 low on the London Fix in mid-April.

I am hoping that this is not a higly bearish sign that the bull market is over - but the price needs to come back very strongly later in 2013 to close the year above $1600 to negate this outside reversal to the downside.

In addition, this yearly chart shows 12 years in a row (2001-2012) without a correction on the yearly scale. It actually makes the 1970s run up look tame on this criterion.

Please click chart to enlarge:

Simpler chart of trading range in gold may point to $1277.30 target: Posted 21 April 2013.

Here is another chart that is fairly simple. It looks at the trading range on gold from the Stockcharts.com weekly gold chart at:

http://stockcharts.com/freecharts/gallery.html?s=%24GOLD

Conservatively, the trading range in gold was from $1535 to $1792.70, a range of $257.70. On a breakdown from this horizontal trading channel, the target is simple: $1535.00-$257.70 = $1277.30.

Varying Analyst opinions on gold: Armstrong, Nenner, Acampora, Christian - 21 April 2013.

A listener on Jim Puplava’s Financial Sense Newshour show (20 April 2013, 2^nd segment) commented that Martin Armstrong had said that gold would likely bottom at end of the 1^st quarter of 2013 and would then rally significantly, based on market cycles.

Interestingly, David Gurwitz of Charles Nenner Cycles Research said on Kerry Lutz’ podcast a few weeks ago that the same woulld happen. He was looking for gold to bottom in mid to late April before going, perhaps to some target above 2200. Armstrong’s target was apparently 2500 or so.

Both those opinions underline an imminent bull market in gold after this long correction has bottomed.

However, on Jim Puplava’s show (20 April 2013, 1^st segment), Technician Ralph Acampora who sees a continuing bull market in stocks said, without further comment, that gold was now in a bear market and was heading for significantly lower prices from here.

Jeff Christian of CPM Group, often accused, unjustifiably in my opinion as being a gold bear, was looking for a gold low of $1430 and said on Kerry Lutz’ podcast recently that he was somewhat surprised that the price fell to $1350 – his opinion is that $1350 was very likely to be the bottom of this correction. However, he sees a trading range for another couple of years, followed by a slow grind higher to a new high above $1920, perhaps not until around the year 2020. He cites increased gold production because of the exploration cycle that kicked off during the last 10 years and says that there probably won’t be much of a downturn in production due to these present lower prices. He thus sees the climb in gold as being  gradual and due to continual high retail demand from China, India and the Middle East, as well as continued strong (but probably not increasing from here) central bank buying from China, Russia and other countries (creditor nations).

Chart patterns in gold and silver - H&S / 3 peaks and a domed house - revisited.

Some ideas on charts and targets for gold and silver:

1.
I decided to draw some more lines on old charts from previous posts on this blog and look for the three peaks and a domed house pattern target versus the head and shoulders target (that I put on this gold chart on 12 July 2012) of about $1300 - not that I believed it at the time!

This is what I got for gold: 
$1155 from 3P&DH pattern and
$1300 from the Head & Shoulders.
Compare this with a Fibonacci correction of the entire bull trend :

38.2% : $1283

50.0% : $1087

61.8% : $890.

Note the elegant back test in June 2012 of the Head & Shoulders breakdown at the end of April 2012. The test was passed for the pattern when the price met resistance at $1642.40. Amazing - I should have gone short! However, the price actually reversed and went up nearly to $1800 later in September 2012, so I had assumed that the H&S pattern was caput.

 

 

2.

For silver, the three peaks and a domed house formation began at $12.44 so that would be the target for the whole pattern. Yuk.

 

3.

Reaching $1155 gold and $12.44 silver would give a gold:silver ratio of 1155/12.44 or 93, which would be close to Bob Hoye's old forecast of 100 as a possibility. I think that the Au:Ag ratio got to 84 on the September 2008 crash and actually got to about 93 in the mid-1990s when silver was under $4 per ounce. This would probably, as Bob says, indicate extreme credit distress if it happened.

 

[Here are my old posts with the original triple / quadruple tops marked from August 2011 and discussing the gold breakout and top:

Gold - are we at Point Z already? P&F and daily ch...

Two similar charts - gold and silver a year apart:...

$1650 gold target reached. Congratulations to Jim Sinclair]

 

4.

However, even Jeffrey Christian of CPM Group thinks that gold has bottomed at $1355 a few days ago and will chop sideways for a few years at a higher level before going to new highs. He said on Kerry Lutz podcast that he had expected gold to bottom at $1430. Actually, $1430 was a key resistance level in 2010. See the upper chart, the quadruple top in Nov/Dec 2010.

 

I am open-minded as to the trend. In other words, I don't have a clue. I am willing to admit it. I am just playing with figures to see where they lead.

 

5.

Targets for gold on a Fibonacci-style correction of the whole 11 year bull trend from $253 to $1920 would be:

 

38.2% : $1283

50.0% : $1087

61.8% : $890 (the 21/1/1980 futures high!)

 

I did a back of the envelope chart for this which I hope to scan in soon.

 

The fact that there is a golden ratio relationship between the 1980 high at $890, the 1999 low at $253 and the 2011 high at $1920 means that the top at $1920 SHOULD have been predicted as a Fibonacci price target by someone, BUT IT WAS NOT!!!

 

Evidently, no-one looked to apply technical analysis to the entire gold chart of the last 30 years. Maybe they should have done!

 

Some analysts persist in drawing the Fibonacci correction levels withr espect to the $1920 top and the 2008 low at $680. Ross Clark the great analyst on Howestreet.com is one. He uses 38.2%, 55% (not 50%) and 68.2% correction levels and gets $1450, $1240 and $1155 respectively.

 

I don't really see why one would use the 2008 low at $680, because this correction is much longer than that one and seems to indicate more that is it at a higher level than the 2008 correction which was something of a credit crunch deleveraging fluke and the deepest part of the correction was short-lived.

 

I feel that this present correction is the first cyclical bear in gold in this post 2000 market cycle and should therefore correct the entire bull market from $253 to $1920 instead.

 

 

6.

If gold were to descend to $1155, it would wipe out the entire [positive inflationary/speculative] effect of Fed's QE2/QE3 Quantitative Easing programs.

 

QE2 was announced at $1155 gold and $17.33 silver. Maybe these could therefore the two targets to watch out for, if gold and silver go back 'in phase' with each other. Silver was at that time getting ahead of gold and topped out first. My original comment was that the silver chart was about a year ahead of gold's. Look at where the quadrule top occurred in the charts above. Silver then topped 5 months ahead of gold.

 

Will they bottom at the same time? We should not necessarily assume so, unless they are fully back in phase as they were at the 1980 and 2008 highs (and the late 2008 low) for instance.

 

 

Interesting to re-visit Jon Nadler's interview on Kitco regarding gold in 2013 - posted 18 April 2013

It is indeed interesting to re-visit Jon Nadler's interview on Kitco regarding gold . It can be found here:

 

http://www.mining.com/gloating-all-around-after-nadler-and-kitco-part-ways-12943/

Well, what do you know? He was spot on correct!

There is not so much gloating over his departure now, I can bet.

Not that I liked his commentaries beytween 2010 and 2011. As something of a goldbug, I thought that he was far too bearish in that period and I recall he said in an interview in 2010 that gold would top at $1380. However it went to $1920 in 2011. Even so, I listened to him and read him sometimes, to get a balanced perspective on the market, rather than listening to goldbug rhetoric all the time!

Ironically, now it is back at $1380. There was a lot of congestion and resistance between about $1360 and $1430 between late 2010 and early 2011 before the big runup in silver and then in gold later that year. Now the price has bottomed in this April 2013 crash at $1355 and is struggling to get back above this congestion area if it can.

This was an excellent interview from Nadler. Jeff Christian, the other favourite for slamming by goldbugs, had an excellent interview on a Kerry Lutz podcast this week, on 16 April 2013. He had expected gold to correct and to bottom around $1430 and says it fell further than he thought., He thinks that $1355 is likely to be the bottom but that the price might move sideways for another couple of years and go to a new high sometime near to 2020.

On the other hand, here are some tongue-oin-cheek links to my previous blog posts on Jon Nadler, who was looking for gold top top at $1380 in 2010. Strangely, gold is now back down to that level, wiping out nearly the entire positive effect of QE2+QE3:

http://1000gold.blogspot.co.uk/2010/10/941-magic-number-for-gold-for-jon.html
and this one:
http://1000gold.blogspot.com/2010/09/jon-nadler-dragged-out-for-bearish.html

[The wiping out of the QE2/QE3 positive effect on gold would be complete if gold were to descend to $1155 and complete the target of my 3 peaks and a domed house pattern!]

It is possible that the US dollar index is in a bullish trend mostly due to pretty hopeless other currencies (Euro, Yen, Pound) and such an uptrend, if typical for the period 1970-2008 would last for about 8 years, from 2008 to 2016 fir instance. So maybe gold will trrade sideways to down until 2016. I hope not, but I feel that this correction in gold has been so much more bearish than the one in 2008, because the backdrop then was a massive crash and deleveraging in most markets and the banking system. This time, gold is crashing just after stock market has made new highs. The Dow has massively outperformed gold in 2011-2013, unlike in 2008 when it underperformed.

I still can't make up my mind whether the crash in gold to $1355 where it is obviously very oversold is a selling climax to be followed by a great big rally or if it is the first major leg down in a longer bear market (hopefully a cyclical bear not a secular bear).

Fundamentally, currency failures and the hopeless state of government finances in the Western world and Japan should be very bullish for gold indeed, as should the terrible state of the banking system with so much insolvency and corruption. However, for how long will central banks of emerging countries keep holding up the gold market as the leveraged speculators exit it? And will we see a couple more years of rising gold production before this lower price plays out in the cancellation of a lot of new mining projects, the bankrupting of many junior exploration companies and a fall in gold and / or silver supply to the market?
 

Big daily moves in gold in the past - posted 18 April 2013.

In response to Frank Underhill’s interview on howestreet.com last weekend where he said that the current downmove ingold is unprecedented, I differed in my opinion, based on my recollections of similar large moves in 2006 and 2008. I posted this reply to him, after doing a bit of research on the kitco.com website’s excellent historical gold data and charts.

The Frank Underhill interview is here:
http://talkdigitalnetwork.com/2013/04/gold-sinks-like-a-brick/comment-page-1/#comment-4472

and here is my reply:

Yes Frank, we hare having a bloodbath in gold right now; it’s about $1400 as I write and the low in this move so far was about $1355. However, here are some examples from Kitco daily charts of big falls and big gains in the past (usually near tops or bottoms):

Large gold drops and gains in the past during this bull market, just in the period 2006-2008:

20 April 2006, gold down $40 from 645 to 605 (-6%)
15 May 2006, gold down $44 from 720 to 676 (-6% – 720 was the interim top)
24 May 2006, gold down $35 form 670 to 635 (-5.5%)
13 June 2006, gold down $50 from $600 to $550 (-8% in 1 day and $605 to $540 in 1.5 days -$65 or -11%)
19 March 2008, gold down $80 from 1000 to 920 (-8%)
17 September 2008, gold up $90 from 780 to 870 (+11.5%) in New York session alone or
17 September 2008, gold up $110 from 780 to 890 over whole day (+14%)
13 October 2008, gold down $100 from 930 to 830 (-11% in 11 hours – or -$110 to 820 in 1.5 days (-12%).
21 November 2008, gold up $54 from 748 to 802 (+6.7% – but up $81 from 748 to 829 or +10.8% in 1.5 trading days).

So I don’t think it is unprecedented.

Three Peaks and a Domed House pattern for gold - and old chart revisited.

In 2012, I posted a chart showing what I took to be a bearish pattern on gold with a potential target of $1300.

http://1000gold.blogspot.co.uk/2012/07/two-bullish-charts-try-these-for-size.html

For some time, I had also wondered whether the peaks in gold in late 2010 and the big top in gold in September 2011 might make up a "3 peaks and a domed house" bearish chart pattern. I modified the old chart from 2012 and show it here:

The target for the 3 peaks and domed house pattern would be the start of the move, perhaps $1155 but a revisit to the bottom at $1307 after the 3 peaks pattern from late 2010 might be a start.

Some links for this pattern in general:

http://thepatternsite.com/3peaksdome.html

http://www.ritholtz.com/blog/2012/11/three-peaks-and-a-domed-house-revisited/