Posted: 03 Sep 2014 10:40 AM PDT

Gold persistently rallied from 2001 to August 2011. Since then it has fallen rather hard, down nearly 40% at one point, but it currently looks ready to rally for the balance of this decade.

WHY SHOULD WE EXPECT THAT GOLD WILL RALLY?

The answer, in my opinion, can be found in my gold pricing model that has accurately replicated AVERAGE gold prices after the noise of politics, news, high frequency trading, and day to day "management" have been removed by smoothing.

WHY DO WE NEED A GOLD PRICING MODEL?

Most of us do not know if a current market price is "low," about right, or "high." A few of the difficulties are:

Major "Too-Big-To-Fail" banks are promoting paper, not gold, so they consistently issue bearish reports on the prospects for gold.

Rising gold prices are viewed by many as the "canary in the coal mine" regarding loss of faith in the currency and as an early warning sign of consumer price inflation. Hence the "powers that be" want gold prices suppressed.

Many well-known gold experts disagree about future prices – so much that some can't even agree as to whether gold prices will be higher or lower in three years.

It has been well documented that a massive quantity of gold has been shipped east to China, Russia, and India from the west in the past decade. It probably benefits both Western and Asian countries, in the short term, to encourage lower gold prices. This phase of selling western gold and shipping it east may be nearly finished.

Much of the official gold may have been "leased" or sold and many vaults, such as the Bank of England, NY Federal Reserve, and Fort Knox may be partially or nearly empty. With no transparency regarding gold in official vaults it is difficult to say conclusively what gold remains. But acknowledgement that central bank gold is "missing" could drive prices much higher.

More radical individuals believe gold prices can and will "go to the moon" any day. Similarly, others believe $250 per ounce is coming soon. Who and what should we believe regarding rational and defensible projections for the price of gold?

My empirical model (as detailed in my new book) accurately calculated all major trends in smoothed gold prices since 1971 based on several macro-economic variables. This model is, I believe, a good tool for projecting future prices.

MODEL RESULTS

The calculated Equilibrium Gold Price (EGP) had a statistical correlation of 0.98 with the smoothed gold price from 1971 – 2013.
The model was both simple and robust. It worked effectively, on average, during gold bull and bear markets, stock bull and bear markets, blow-off tops and crashes, volatile oil prices, Y2K and 9-11, QE, Operation Twist, ZIRP, various hot and cold wars, occasional peace, gold leasing, gold manipulations, and high frequency trading distortions in many markets.
In August of 2011 gold was priced about 30% ABOVE the EGP.
In contrast, the December of 2013 gold price was about 26% BELOW the EGP.

GRAPH NOTES

Smoothed gold prices (smoothed with two moving averages) are shown in a "gold" color. This is a long-term valuation model, not a trading model.
Calculated equilibrium gold prices (EGP) are shown in green.
The long-term trend from 1971 – 1981 was up, from 1981 – 2001 the trend was down, and from 2001 to 2012 the trend was up. (Actual gold market high price was August 2011.)
Nixon closed the "gold window" in 1971, removed any semblance of gold backing for the dollar, and thereby enabled the creation of significantly more dollars into circulation. The various measures of "money" supply, official national debt, Dow Index, price of gold, many commodities, and most other prices increased exponentially between 1971 and 2013.

FUTURE PRICES FOR GOLD per the EGP Model

Assumptions:

Macro-economic variables continue to increase and decrease as they have for the past 42 years.
The U.S. economy continues along its typical path with government expenses growing more rapidly than revenues, as they have for decades. National debt rises inevitably.
Congress continues its multi-decade habit of borrowing and spending, talking about change, and changing little. The Fed supports the stock and bond markets and continues "liquidity injections" as it deems appropriate to benefit major banks and the financial and political elite.
Monetary, political, and fiscal policies will NOT be materially different from what they have been during the past 42 years.
The U.S. will NOT be subjected to global nuclear war, Weimar hyperinflation, or an economic collapse, while we will continue to be subjected to the same Keynesian economic nonsense that has created many of our current "challenges."

Given the above assumptions, a reasonable projection for the EGP (a "fair" price for gold) in 2017 is $2,400 – $2,900. Remembering that market prices can spike significantly above or crash below the EGP for many months, we are likely to see a spike high above $3,500 in 2016-2018. Extraordinary events such as a global war, dollar melt-down, or an economic crash and the resultant massive increase in QE from global central banks could push gold prices higher and sooner.

My book ("Gold Value and Gold Prices From 1971 – 2021") describes my gold price projection model in detail, and discusses many other topics such as QE, counter-party risk, gold cycles, price projections from other writers, price bubbles, ratios to the Dow and silver, and when to sell gold. My book is now available at my retail site and at Amazon in paperback and eBook.

Other Reading:

Gold Silver Worlds Jim Rickards: Target Gold Price
Casey Research 23 Reasons to Be Bullish on Gold
Eric Sprott Do Western Central Banks Have Any Gold Left?

Gary Christenson | NEW: Check Gary Christenson's brand new book site at GEChristenson.com

Silver and <b>Gold Prices</b> Have Both Reached Their Line in the Sand

Posted: 02 Sep 2014 06:10 PM PDT

2-Sep-14	Price	Change	% Change
Gold Price, $/oz	1,263.70	-22.10	-1.72%
Silver Price, $/oz	19.07	-0.33	-1.69%
Gold/Silver Ratio	66.263	-0.022	-0.03%
Silver/Gold Ratio	0.0151	0.0000	0.03%
Platinum Price	1,410.40	-16.30	-1.14%
Palladium Price	882.60	-26.05	-2.87%
S&P 500	2,002.28	-1.09	-0.05%
Dow	17,067.56	-30.89	-0.18%
Dow in GOLD $s	279.19	4.30	1.57%
Dow in GOLD oz	13.51	0.21	1.57%
Dow in SILVER oz	894.95	13.49	1.53%
US Dollar Index	83.01	0.29	0.35%

3 Day Gold Price Chart

30 Day Gold Price Chart

3 Day Silver Price Chart

30 Day Silver Price Chart

Oh, my! The GOLD PRICE lost 22.10 (1.72%) today to end at $1,263.70 while silver lost 32.7 cents (1.69%) to 1907.10.

Whether these are one-day spikes or not we shall see tomorrow. Gold's close takes it under the uptrend line from the December low, but on the other hand merely to the lower line of the current trading channel.

For a long time I've had marked on my gold chart a potential upside down head and shoulders formation. If there's anything to that, gold today is completing the bottom of the right shoulder. Bottom of the left came at $1,268.40.

Course, all that's pie in the sky if gold keeps falling tomorrow. You can see what I'm looking at here:

The SILVER PRICE closed down on that downtrend line from the August 2013 low. If it breaks that line, it's 1860c. See chart:

Silver and GOLD PRICES have both reached their line in the sand. If they fall much further, gravity will take hold and pull gold toward $1,200 and silver toward 1860c.

Markets hit me over the head with a club today. Might as well take the licking.

Silver and gold both plunged while the US dollar index, gainsaying my expectation, rose. Let's see how this mess sorts out.

US dollar index has been highly overbought off and on since July, and persistently so for the last two weeks, yet it rose 29 basis points today (0.34%) to 83.01. That might be the last thrust to this leg up, but that's not too likely. Overbought can always get overboughter, and the dollar index faces little resistance between 83.50 and 84.15. One suspects that fear is driving European money into the dollar, now that the Europeans have joined Obama in sticking their tongues out at Russia.

The Euro barely moved today, down 0.02% to $1.3133 but still looks sick as a dog that's been eating bad meat. It was the Yen that fell over the cliff. Yen has been contained since last February by 96 cents/Y100 on the range bottom, and 99-ish on the top. Today it closed at 95.16, down 0.96%, leaving behind a gap from 96.08 to 95.3, and falling to its lowest price since 2008. And as the US dollar is overbought, so is the yen oversold.

I keep fussing with that overbought oversold business for this reason: those conditions can last a while, but when they move to seldom seen levels, they are powerfully arguing for a change of direction, even if only temporary to swing the price pendulum back to the other side.

Ten year treasury note yield today rose 3.24% to 2.419%, and closed above its 20 day moving average. It make a big gap up, which probably means that investors are buying in anticipation of the Fed raising interest rates soon. 10 year yield needs to close over 2.500% to change its trend, however.

Stocks dipped today, back to support. Dow's low today touched the uptrend line from the March 2009 low. That's the big one, the line that defines the trend.

Dow lost 30.89 (0.18%) to 17,067.56. S&P peeled off a tiny 1.09 (0.05%) to wind up at 2,002.28. Volume rose with today's drops. I continue to await the inevitable plunge, and I am learning patience.

Dow in metals reached the hour of decision today. Dow in gold closed up 1.51% at 13.48 oz (G$278.66). That is dead on the downtrend line from the December 2013 high at 13.80 oz (G$285.27 gold dollars). This catches your eye more firmly when you note that all the trading this year, all of it, has been bounded in an even sided triangle between that downtrend line I just mentioned and the uptrend line from the June 2013 low. See the chart:

Clearly the even-sided triangle foretells a break, but sayeth naught of which direction. Unless the Dow in Gold means to extend this rally and climb above the old high, it must turn down at once.

Dow in silver closed today up 1.51% at 889.63 oz (S$1,150.23 silver dollars). That's mighty close to a double top with the June high at 892.99 oz (S$1,154.57). What makes this troublesome to parse is this: Dow in silver spent 12 months tracing out a rising wedge, a pattern that presages a downward resolution. In June it resolved downward indeed, out of the wedge, but now has climbed again almost to that last peak -- to make a double top? Lo, how overbought it is! See the chart:

Several months ago I worked out a maximum target for the Dow in Silver at 912 ounces (S$1,179.15) That would be about where the top line of that wedge now stands.

Aurum et argentum comparenda sunt -- -- Gold and silver must be bought.

- Franklin Sanders, The Moneychanger
The-MoneyChanger.com

© 2014, The Moneychanger. May not be republished in any form, including electronically, without our express permission. To avoid confusion, please remember that the comments above have a very short time horizon. Always invest with the primary trend. Gold's primary trend is up, targeting at least $3,130.00; silver's primary is up targeting 16:1 gold/silver ratio or $195.66; stocks' primary trend is down, targeting Dow under 2,900 and worth only one ounce of gold or 18 ounces of silver. or 18 ounces of silver. US $ and US$-denominated assets, primary trend down; real estate bubble has burst, primary trend down.

WARNING AND DISCLAIMER. Be advised and warned:

Do NOT use these commentaries to trade futures contracts. I don't intend them for that or write them with that short term trading outlook. I write them for long-term investors in physical metals. Take them as entertainment, but not as a timing service for futures.

NOR do I recommend investing in gold or silver Exchange Trade Funds (ETFs). Those are NOT physical metal and I fear one day one or another may go up in smoke. Unless you can breathe smoke, stay away. Call me paranoid, but the surviving rabbit is wary of traps.

NOR do I recommend trading futures options or other leveraged paper gold and silver products. These are not for the inexperienced.

NOR do I recommend buying gold and silver on margin or with debt.

What DO I recommend? Physical gold and silver coins and bars in your own hands.

One final warning: NEVER insert a 747 Jumbo Jet up your nose.

The case for a September <b>gold price</b> surge | MINING.com

Posted: 01 Sep 2014 12:50 PM PDT

July, August and September are typically gold's strongest performing months.

But gold dropped 2.7% in July, and barely managed a gain in August.

Gold futures inched higher on Monday as investors sought safe-haven assets amid increased tensions between Ukraine and Russia, after fighting intensified over the weekend.

Gold for December delivery rose slightly to $1,288 on Monday and historically holding gold going into September reaps investors a more than 3% return.

In this video Bloomberg's John Dawson explains that the September move up comes as buying from Asia – particularly due to upcoming festivals in India – increases.

That pushes up premiums paid for gold. On the Shanghai Gold Exchange premiums improved to above $7 an ounce last week, but that's still a long way away from the $37 surcharge when gold was trading around $1,200 last year.

While gold traders in India are now asking for $13 an ounce over the London price, premiums inside the country rose to a whopping $170 an ounce a year ago at the height of the country's gold import restrictions and ahead of the all-important festival and wedding season.

Not everyone is convinced that this year the gold price will follow the same pattern in September.

A recent note from investment bank analysts at UBS argues September 2014 may turn out to be a particularly weak period for the gold price:

"Barring a move to $1200, physical demand from China is likely to remain quite subdued in the months ahead. This means that gold is lacking physical support from its biggest physical market, implying that the seasonality trade for September – gold's best performing month historically – is unlikely to follow its long-term trend."

Image by Edson Walker

Gold Model Projects Prices From 1971 to 2021 | Gold Silver Worlds

<b>Gold</b> Model Projects <b>Prices</b> From 1971 to 2021 | <b>Gold</b> Silver Worlds

WHY SHOULD WE EXPECT THAT GOLD WILL RALLY?

WHY DO WE NEED A GOLD PRICING MODEL?

MODEL RESULTS

GRAPH NOTES

FUTURE PRICES FOR GOLD per the EGP Model

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