CHART ALERT: Quiet gold market primed for break-out price move ...

CHART ALERT: Quiet gold market primed for break-out price move ...
Gold Price - A 40 Year Perspective :: The Market Oracle :: Financial ...
Silver to Gold Ratio: 27 Years of Price Data :: The Market Oracle ...
Gold Price In The Post-Nixon Era | Gold Silver Worlds

Posted: 21 May 2014 12:30 PM PDT

The gold market has been uncharacteristically calm this year with the metal hovering either side of $1,300 for the better part of two months.

In a recent research note Edel Tully and Joni Teves, analysts at investment bank UBS, argued that the quiet on the gold market may be a good thing:

"Gold is not on the radar for many, and with broad expectations that prices will be range-bound this year, many investors are opting to stay out of this market," UBS wrote. "That is probably gold's biggest positive right now."

The thinking being that too much attention from speculators and any big economic news would automatically be seen as a negative given current gold market sentiment.

Gold's charts may be telling a different story however.

Tony Henfrey from technical research and investment blog InvesTRAC passed on this price graph to MINING.com showing gold is primed for a big move.

"This is an alert. The gold price has formed a triangle type pattern and is dropping out of it, plus the moving averages have converged with price. This type of action invariably precedes a sharp move."

This is an alert: Gold primed for break-out price move

Source: InvesTRAC

Gold Price - A 40 Year Perspective :: The Market Oracle :: Financial ...

Posted: 20 May 2014 08:59 AM PDT

Commodities / Gold and Silver 2014 May 20, 2014 - 12:59 PM GMT

By: DeviantInvestor

In broad terms, gold was in a bull market during the late 1960s and 70s, a bear market during the 80s and 90s, and back in a bull market since 2001. The important questions are:

Did gold reach a generational peak in 2011 and subsequently turn down for a decade or two?

Did gold reach an intermediate top in 2011 based on QE, dollar weakness, and high demand, correct for 2.5 years, and then begin a rally likely to persist through the end of the decade?

My answer is: Gold peaked in 2011, bottomed in June and December of 2013, and should rally for several, and probably many, years into the future.

Why?

Examine the following graph of weekly gold prices since 1977 and the 144 week simple moving average shown in red. The uptrend since 2001 is clear and pronounced. The correction since 2011 is unmistakable.

Gold and its 144-Week Moving Average Chart

Worthy of note from the spreadsheet (not shown) are:

The peak in January of 1980 was 9.37 standard deviations above the 144 week moving average. The numbers are similar for the 100 week and 40 week moving averages. Clearly gold was in a blow-off bubble in late 1979 and January of 1980.
The peak in August of 2011 was only 2.15 standard deviations above the 144 week moving average. It was an intermediate peak, but not the bubble peak that is likely to manifest within the next decade.
My conclusion is that gold prices were pushed too high in late 2010 and 2011 and have corrected since then. Currently gold is 15% below its 144 week moving average or about 0.6 standard deviations below that average. I don't suggest that gold prices must rally next week or even next month, but prices are very likely to be much higher next year and even higher by the next presidential election in late 2016.

What could push the price of gold LOWER?

Many of the TBTF banks have announced that gold prices will move sideways to down. Take this for what little it is worth.
The Fed and other central banks are fighting the deflationary influences in the economies of the world. Some believe those deflationary forces indicate gold prices will fall further.
Official US government statistics assure us that inflation is very low. Of course anyone who eats, drives a car, has medical bills, pays college tuition, or shops for groceries knows better, but official statistics show minimal inflation and some people think that means gold prices are unlikely to rise.
There are other reasons, but most center about the degree of control the Fed exerts over the economy, the control that the COMEX has over paper gold prices, and the Fed's desire and the government's need to keep gold prices low. Their control, power, and influence are undeniable but are probably overstated. I expect the primary gold bull market will reassert itself, regardless of central bank, government or COMEX interventions.

What will push the price of gold higher?

The Fed and other central banks are "printing money" and this, historically speaking, has always ended badly. Expect more consumer price inflation, declining purchasing power for currencies, and higher gold prices.
The US and Japanese governments are running large budget deficits and borrowing as if the credit to run bloated governments will always be available. The answer of course is that the debts will be paid with newly "printed" money and the cycle of borrow, run a deficit, borrow more, and print will repeat.
The US dollar, and most paper currencies, are backed by nothing more substantial than "full faith and credit" of admittedly insolvent governments.
The US official national debt exceeds $17.5 Trillion, which does not include unfunded liabilities that are perhaps another $100 - 200 Trillion. We all know this debt can never be repaid in dollars that are worth more than a tiny fraction of their current value. Perhaps the debt can never be repaid under any conditions other than hyperinflationary "money printing."
Our warfare/welfare governments are actively pursuing their own agendas and our politicians are encouraging the growth of warfare, welfare, and the size of government. It will be financed with printed dollars, euros, yen etc. The result will be decreased purchasing power of the dollar, euro and yen.
Geopolitical events such as a few wars here and there, more conflicts, perhaps a nuclear accident, a major earthquake, and a monetary system collapse could aggravate an already unstable financial world and accelerate the process of dollar devaluation, rising gold prices, and a shakeup in the use of the dollar as the reserve currency. Individuals and the more solvent nations will protect themselves with hard assets such as gold.
The citizens of China, Russia, and India and their central banks are buying gold in quantity. That demand is unlikely to decrease. The western world has been shipping a massive amount of gold to Asia for the past five years. What will happen to prices when that gold supply is restricted or terminated?
The Fed, central banks, and many governments want and need inflation, not deflation. They are likely to get it, and then blame their self-created inflation on the politically appropriate enemy at the moment, the current war, or some other diversion.
Government expenses are rising exponentially and more rapidly than revenues. Mathematically we know this cannot continue forever. Expect higher gold prices and all paper currencies to devalue against hard assets.

I could go on, but the situation is clear. Gold did NOT blow-off into a bubble high in 2011, all the drivers for continued higher gold prices are still valid, demand is huge, supply will be restricted when the western central banks run out of gold or choose to terminate "leasing" into the market, and government expenses, "money printing" and bond monetization are out of control and accelerating.

Gold prices will climb a wall of worry in the years ahead.

You may be interested in my comments on Silver and 2011 - here.

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2014 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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Silver to Gold Ratio: 27 Years of Price Data :: The Market Oracle ...

Posted: 27 May 2014 05:44 AM PDT

Commodities / Gold and Silver 2014 May 27, 2014 - 06:44 PM GMT

By: DeviantInvestor

Statistically, gold and silver prices closely follow each other. But what is more important is the ratio between silver and gold and the trend of that ratio.

Examine the following chart.

We can see that:

For the past 27 years (after the 1980 bubble and subsequent correction) the ratio has been in a slow up-trend.
The silver peak near $50 in April 2011 clearly stands out as an anomaly.
The silver lows in 2008 and 2013 were at or below the trend lines, as I have drawn them. Silver rallied considerably after the 2003 and 2008 ratio lows. I expect the same will occur after the recent lows in the ratio.
The ratio can explode higher in a few months or languish for years.

My conclusions from this graph are that the silver-to-gold ratio is currently priced at the low end of the range, long-term silver prices are gradually increasing relative to gold, and a price explosion could occur at any time, or perhaps not for several years.

Is there more we can learn from the ratio?

Take the weekly prices for silver and the weekly silver-to-gold ratio and smooth them with a 7 week centered simple moving average. This merely removes some of the "noise" in the graphs. Plot that weekly data since 2002, roughly the beginning of the silver and gold bull markets. Examine that graph.

You can see that silver prices generally follow the ratio. This merely tells us that silver prices move both up and down more rapidly than gold prices but that they generally move together.
The ratio has fallen hard in the past 3 years – back to levels seen in 2009 and 2003, before large rallies in the price of silver.
The silver-to-gold ratio is currently low – about 0.015, the inverse of gold-to-silver ratio of about 66, which is quite high.

Statistics

From January 2002 to May 2014 (12+ years) the statistical correlation between the weekly smoothed silver price and the weekly smoothed ratio was 0.67.
From May 2008 to May 2014 (6 years since the start of the crash) the statistical correlation between the weekly smoothed silver price and the weekly smoothed ratio was 0.87 – quite high.
The mean of the weekly data on the smoothed 100 x silver-to-gold ratio for the past 12 years is 1.71 with a standard deviation of 0.28.
The mean of the weekly data on the smoothed 100 x silver-to-gold ratio since the 2008 start of the crash is 1.75 with a standard deviation of 0.31.
Based on the past 12 years, the ratio is currently 0.78 standard deviations below the mean. Similarly, based on the nearly 6 years since the crash, the ratio is 0.84 standard deviations below the mean.

Based on the ratio data and the statistics, we can conclude that:

The ratio is low and in the zone of the 27 year trend-line where we can reasonably expect the ratio to turn up.
Silver prices increase and decrease with both the silver-to-gold ratio and gold prices, only more rapidly than gold.
The ratio is well below (about 0.8 std. dev.) the last 6 and 12 year means and is likely to turn up. Hence the price of silver is very likely to rally in the next few months or so.

Fundamentals

Gold demand is strong – ask China, Russia and India. Western central banks have "leased" some, or perhaps most, of their gold. The German gold stored at the NY Fed was not returned – possibly because it is no longer in the vaults. See Julian Phillips' analysis on that topic. If most of the central banks' gold is gone ("leased" into the market), demand will soon overwhelm the supply of real, physical gold. The High-Frequency Traders can suppress the paper market, but not forever.

It is a reasonable bet that gold, about 40% below its 2011 high and facing large demand and dwindling supply, will rally in price over the next few years. Silver prices will follow gold prices but rally farther and faster from their currently low and oversold condition.

Was the above analysis a conclusive proof that gold and silver prices must rally? Obviously not!

But it strongly suggests:

Silver has been correcting for over three years. It could rally at any time.
Silver prices are currently LOW compared to gold prices – the ratio is at the low end of its 27 year trend channel and likely to rise.
Silver prices fall faster and rally more rapidly than gold prices. When the price of silver finally takes off it will push the ratio much higher – perhaps to 0.03 or 0.04 – the equivalent of a gold-to-silver ratio of 33 to 25.
Many other indications (not shown here) also suggest silver is too low, over-sold, and ready to rally. The same is true for gold.

Investor demand for silver and gold bars and coins is strong and increasing. I think silver and gold prices will be higher by the end of 2014 and much higher by the next US presidential election.

The pieces of paper we mistakenly call money will become less valuable in the years ahead. Take this opportunity to convert some paper currency to physical silver while the High Frequency Traders and central bankers are gifting us with artificially low silver and gold prices.

You might also find value in:

Silver Was Not in a Bubble in 2011!

Silver in the Dead Zone of Disinterest

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

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Gold Price In The Post-Nixon Era | Gold Silver Worlds

Posted: 20 May 2014 11:37 AM PDT

Gold bull market: during the late 1960s and 70s

Gold bear market: during the 80s and 90s

Gold bull market: since 2001

Now we need to know:

Did gold reach a generational peak in 2011 and subsequently turn down?

Did gold reach an intermediate top in 2011, correct for 2.5 years, and then begin a rally likely to persist through the end of the decade?

My answer: Gold peaked in 2011, bottomed in June and December of 2013, and should rally for at least several years, and probably until the end of the decade.

Why?

gold price from 1977 till 2014

The spreadsheet (not shown) indicates:

The peak in January of 1980 was 9.37 standard deviations above the 144 week moving average. The numbers are similar for the 100 week and 40 week moving averages. Clearly gold was in a blow-off bubble in late 1979 and January of 1980.

The peak in August of 2011 was only 2.15 standard deviations above the 144 week moving average. It was an intermediate peak, but NOT a bull market ending bubble peak that is likely to manifest within the next decade.

My conclusion is that gold prices were pushed too high in late 2010 and 2011 and have corrected since then. Currently gold is 15% BELOW (about 0.6 standard deviations) its 144 week moving average. Gold prices are very likely to be much higher next year and even higher by the next US presidential election in late 2016.

Gold did NOT blow-off into a bubble high in 2011, all the drivers for higher gold prices are still valid, international demand is strong, supply will be reduced when the western central banks run out of gold or terminate "leasing" into the market, and US, EU and Japanese government expenses, "money printing" and bond monetization are out of control and accelerating.

Gold prices will climb a wall of worry in the years ahead.

GE Christenson | The Deviant Investor

CHART ALERT: Quiet gold market primed for break-out price move ...

<b>CHART</b> ALERT: Quiet <b>gold</b> market primed for break-out <b>price</b> move <b>...</b>

Why?

What could push the price of gold LOWER?

What will push the price of gold higher?

Statistics

Fundamentals

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