Barron’s Gold Mining Index To Double Over The Next Couple Of Years?

Barron’s Gold Mining Index Forecast

The behaviour of gold stocks during this gold bull market is really not that different to the gold bull market of the 70s. It was not until almost the end of the bull market (in 1979) that the gold stocks really started to take-off. Those who think gold stocks will not rise during this bull market will be disappointed, and need to consider the evidence presented here.

Below, is a long term chart (from sharelynx.com) for the Barron’s Gold Mining Index (BGMI):

Barron's Gold Mining Index Analysis

On the chart, I have highlighted two fractals (or patterns), marked 1 to 6, which appear similar. What makes these two fractals so special is the similarity of the circumstances in which they exist.

Both patterns started where the Dow/Gold ratio peaked, as well as where the gold bull markets started.

There was a significant peak in the Dow (1973 and 2007) between point 1 and 2 of both fractals. Both peaks in the Dow came about 7 years after the peak in the Dow/Gold ratio. After point 2, on both fractals, the oil price made a significant peak (1974 and 2008), about 8 years after the peak in the Dow/Gold ratio.

Based on the fractals on the chart, we could still have more than two years before we could get a top in the BGMI, like we had at the end of 1980. That is more than 14 years after the Dow/Gold ratio top (beginning of 1966 to the end of1980 vs the end of 1999 to some time in 2014).

If you compare the two patterns, then it seems we are currently just past point 6, which is similar to the beginning of 1979. The correction since the beginning of 2011 is in the closing stages, and price should advance significantly over the next couple of years. If the patterns continue their similarity, then we should expect the BGMI to reach levels more than double its current peak.

In a previous article, I have illustrated why current levels could be a good time to buy gold stocks (HUI).

For more of this kind of analysis, see my Gold Stocks Fractal Analysis Report ,or subscribe to my premium service .

Warm regards,

Hubert

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Gold Stocks Forecast: Fractal Analysis Of The Barron’s Gold Mining Index

Gold Stocks Forecast: Fractal Analysis Of The Barron’s Gold Mining Index

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my free silver and gold newsletter or premium service. I have also recently completed a Gold Mining Fractal Analysis Report.

Hubert

http://hubertmoolman.wordpress.com

hubert@hgmandassociates.co.za

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Silver Price Forecast And The Shift To Measuring Wealth In Gold Ounces Instead Of Dollars.

Silver Price Forecast:

The debt-based monetary system creates an illusion of wealth. It allows for claims on real goods to significantly exceed the actual amount of real goods. You then have a number of people believing they have wealth, since they have claims (pieces of paper or tokens) showing that they have these real assets, whereas, in reality, if everyone was to claim the real goods, there would not be enough to go around.

The high debt levels, in some way, represent the extent to which there are more claims than the actual underlying real assets.

During the period of credit extension – that has been for at least 80 years – most businesses are set up to take advantage of this system. The system allows for an easier way to increase wealth (illusionary), since only claims on real assets need to be increased, instead of the actual real assets.

As you come to the end of the credit extension cycle, most businesses are dependent on this credit extension, either directly or indirectly. When the debts become too heavy to bear (no one knows the day or the hour, but there are signs), the debt bubble will burst, and over time eliminate all those business opportunities brought about by the debt-based system, as well as the businesses dependent on it.

When this process reverses, there is little opportunity to trade the claim on an asset instead of the actual asset, and also few opportunities to increase the amount of real assets. Furthermore, instead of measuring wealth in terms of claims on real assets (as is now the case), people are more likely to measure wealth in terms of real assets, especially gold.

Today, after a consistent period of credit extension, we have exactly the situation where most businesses are dependent on the debt-based monetary system. I believe we are moving past the point, where any benefit can be achieved from credit extension; therefore, we have the ideal set up for a massive collapse in the world economy.

The increase in the gold price, in real terms, is the clearest signal that it is becoming more and more difficult to increase real wealth (wealth in gold ounces). It will become even more difficult as the economic decline sets in; eliminating businesses very dependent on the debt-based monetary system. Financial institutions like banks would be at the top of this list, but will not be the only ones.

The shift from measuring wealth in terms of paper claims (dollars) to gold ounces, and the limited means to increase gold ounces, will change the business and investment world significantly, and will create a massive rush into those opportunities that increase gold ounces. The shift is already evident, with some countries possibly trading oil for gold.

Currently, in my opinion, silver bullion and gold miners present some of the best opportunities to increase the amount of real wealth as measured in gold ounces.

Both, silver bullion and gold miners are still trading lower or at its 1980 high, and also at relatively historic lows against gold. Silver offers the best opportunity, at the moment, since it offers less risk than shares in gold miners. However, as the gold/silver ratio falls (which is expected), gold miners will become more and more attractive.

Silver Chart Update:

Below, is a 6 year silver chart:

Silver is making its intention to pass the $50 level clear. It is continuing in a pattern similar to gold did, before it cleared its 1980 high (see here). The next important obstacle is to get out of the flag (at about $35 currently). If it continues the pattern that gold made, then it will blast past $50.

For more guidance on silver and gold miners, I have prepared a Long-term Silver Fractal Report ,as well as a Gold Mining Fractal Analysis Report. You are also welcome to consider subscribing to my free newsletter (enter email on side-bar).

Warm regards and God bless,

Hubert

hubert@hgmandassociates.co.za

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

HUI $ Gold Stocks Forecast: Gold Stocks To Rally Like During The Great Depression And Early 70s

 

Note that there is more detailed analysis (including fractal analysis) in the Gold Mining Fractal Analysis Report.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my free silver and gold newsletter or premium service. I have also recently completed a fractal analysis report for gold and silver .

Warm regards and God bless,

Hubert

Gold Stocks To Rally Like During The Great Depression And Early 70s

Below, is an extract of my Gold Mining Fractal Analysis Report.

“He answered and said unto them, When it is evening, ye say, It will be fair weather: for the sky is red. And in the morning, It will be foul weather to day: for the sky is red and lowering.”- Jesus Christ

During the Great Depression, at a certain point, gold stocks started a massive rally. While most things were going down in price, gold stocks made significant gains, becoming one of the best performing sectors during that time.

It was no coincidence that gold stocks performed as well as they did. Like all goods, gold stocks will thrive under the ideal conditions. During the Great Depression, those ideal conditions were present.

The purpose of this editorial is to look at what those conditions were, and identify a pattern that was present before and during those rallies. If we are able to identify those circumstances and pattern, we could look to see if they are present today, or in the future, in order to know when to expect a massive gold stocks rally. – end of extract.

I then go on to identify those ideal circumstances and patterns that were present before and during the great gold stocks rally. The conditions today are very similar to then, and is an ideal set-up for a most spectacular gold stocks rally over the coming months. Here, I would like to illustrate, by way of a chart, how the conditions were similar.

The gold stock rally of the 1930s coincided with major economic decline, as well as a significant increase in the real price of gold.  Below, is a chart (from planbeconomics.com) of the long-term Gold/Oil ratio:

On the chart I have highlighted a peculiar pattern that exists just before the gold stocks rallies of the Great Depression and the early 70s. The pattern is basically:

1. The peak in the stock market (DOW) and Dow/Gold ratio – point p
2. Gold rallies significantly from about after 1 – point g
3. After a significant bottom in the Gold/Oil ratio and after that ratio has been rising for quite some time.

Note that the yellow lines in the chart represent the point where the gold stocks really took off (broke out)

Currently, conditions are setting up in a similar manner to the Great Depression and the early 70s. We have a significant bottom in the long-term Gold/Oil ratio, we have had a peak of the Dow and the Dow/Gold ratio (in 1999) and we have had a gold rally that started after 1999, and is about to accelerate. We are also at a point where major economic decline can be expected (see my previous video), similar to the decline during the Great Depression.

So, it appears that we have conditions that are ideal for gold stocks to finally take the lead in this bull market.

Do the charts for these gold stocks agree?

Below, is a chart of the HUI (finance.yahoo.com):

HUI Analysis

The HUI appears to have bottomed, and is currently embarking on a massive rally. The yellow line should be good support, should price fall back again. Buying close to the yellow line would also be a good long-term entry point. Please note that the green drawn line is just for illustration purpose, it is not meant to show exactly how the chart will play-out.

Fractal Analysis of the HUI – only for Premium Subscribers.

A scenario for the HUI, which is very likely, is that the HUI follows the example of silver’s rally from the $19 level to $49. I think this is very likely, since it seems that the HUI is now in a very similar situation to where silver was in August 2010.

Note that there is more detailed analysis (including fractal analysis) in the Gold Mining Fractal Analysis Report.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my free silver and gold newsletter or premium service. I have also recently completed a fractal analysis report for gold and silver .

Warm regards and God bless,

Hubert

http://hubertmoolman.wordpress.com/

hubert@hgmandassociates.co.za

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Is A Gold Parabolic Blow-off Long Due?

Gold Forecast 2012

The last three major bull markets of the Dow were followed by a bull market in gold. This is no coincidence, since these massive bull markets have been mostly driven by the huge expansion of the money supply. When this expansion of credit is exhausted, the confidence in all things (like stocks) inflated by this expansion of credit fails, causing a massive rush to gold.

There are many similarities between the period around the current bull market in gold, the period around the 70s bull market in gold and that of the Great Depression. The main difference between the period of the 70s versus those of the Great Depression and the current period is the fact that debt levels relative to GDP were much lower in the 70s.

Total US Debt as a percentage of GDP was at about 299% at its peak in the 30s, and at about 369% in 2009, versus a level of just lower than 160% during the 70s. In my opinion, this is probably one of the main reasons why the crisis of the 70s did not lead to a full-scale depression like in the 30s.

Below, is a chart by which I illustrate the similarities between the current period and that of the Great Depression:

original charts by gold-eagle.com and from finance.yahoo.com

The top chart, of the above graphic, features the Dow from 1924 to 1935. During the 20’s the Dow rallied significantly, mainly because of the expansion of the money supply. The Dow finally topped in 1929, at the time when debt levels were at all-time highs, with the Dow gold ratio also peaking. At the same time, Total US Debt as a percentage of GDP started spiking significantly, until it peaked in 1933. At about the same time when the stock market peaked, the demand for gold started increasing, putting pressure on the US gold reserves and eventually forcing Government to increase the price of gold. The real price of gold had been increasing steadily since 1929, until it started to accelerate at about 1932.

The bottom chart, of the above graphic, features the Dow from 1987 to 2011. The pattern of events is similar to that of before and after the 1929 Dow peak. The Dow rallied significantly during the 80s and 90s, mainly driven by the expansion of the money supply. The Dow eventually topped in 1999, at the time when debt levels were at all-time highs, with the Dow gold ratio also peaking. At the same time, Total US Debt as a percentage of GDP also started spiking significantly. At about the same time when the stock market peaked, the demand for gold started increasing, pushing the price progressively higher.

The above should make it clear that there is a relationship between the expansion of the money supply, bull markets in stocks and bull markets in gold. It is my believe that the extent of the bull market in gold is mainly determined by the extent to which credit was expanded in the years prior to the gold bull market, and the extent to which it led to an increase in things like stock values.

Based on my research, I believe we are now at a period which is similar to the end of 1932, with the worst years of the Depression, like during 1933 and 1934, almost upon us. This period will likely be longer than that of the Great Depression, bringing significant economic decline and a lower standard of living.

Gold should significantly increase the speed of its rise since 1999/2001, starting this month, December 2011, just like it did in 1932/33 (increase in gold’s real price), after increasing steadily since 1929. Just like during 1933 and 1934, gold stocks are likely to be the best performing assets, over the coming years.

I have created the following charts to illustrate how the bull markets in gold could be related to that of stocks:

The above chart features the Dow from 1942 to 1966, and gold from 1966 to 1980. The starting and final points for both bull markets were chosen, since they represent the significant turnaround points, based on the Dow/gold ratio.

After a 24 year bull market in the Dow, and a 10.8 fold increase from top to bottom, gold started a bull market which lasted 14 years, with a 24.8 fold increase from top to bottom. Notice how different the bull market in gold developed compared to that of the Dow.

The Dow had a fairly steady rise throughout its entire bull market, whereas the gold price rose violently towards the end of the entire bull market, with a parabolic blow-off top. Also, notice that the gold price increased much faster than the Dow (14 years vs 24 years), as well as to a greater extent (24.8 years vs 10.8 years).

The above chart features the Dow from 1980 to 1999, and gold from 1999 to November 2011. The starting and final points for both bull markets were chosen, since they represent the significant turnaround points, based on the Dow/gold ratio.

The latest Dow bull market was 20 years long, increasing the Dow about 16.3 fold. Will gold have a more significant increase compared to its 24.8 fold increase, due to the fact that the Dow’s increase was more than its previous bull market increase? If gold only matches its 1970s bull market increase, it could go to $6 200 ($250*24.8). Will the gold bull market have a similar parabolic blow-off like it did at the end of the 70s?

Notice that the gold bull market is already 12 years old. The 1970s gold bull market was about 58.3% the duration of the Dow’s bull market before that. At 12 years, the current gold bull market is already 60% the duration of the last Dow bull market.

Could this mean that the gold bull market is over? Or, Could it mean that this gold bull market is not just related to the 1980 – 1999 Dow bull market, but the entire Dow bull market since silver and gold was demonetized? The end of a huge cycle. If this (the latter) is the case, then could it mean that the Gold bull market could still last for many more years, with gold going to extreme highs or even not being available for sale in Dollars? Or/and, could this further support the possibility that a parabolic blow-off is due almost immediately?

For possible answers to these questions and more, as well as analysis of gold, silver and gold stocks, you are welcome to subscribe to my premium or free service (subscribe on the side bar by entering email address), or more detailed analysis of gold consider my Gold Fractal Analysis Report.

Warm regards and God bless,

Hubert

http://hubertmoolman.wordpress.com/

hubert@hgmandassociates.co.za

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Gold Stocks Forecast – Why Gold Stocks And Why Now – Must Read!

Gold Stocks look set to rise significantly over the coming months. The current economic conditions are ideal for a gold stocks rally. This video deals with the similarity between current economic conditions and that during the Great Depression, and why these conditions should fuel a gold miner rally. It also covers technical analysis of the HUI and JSE Gold Index. See my Gold Mining Special Report for more detailed and usable information. The video follows below:

How To Choose Gold Stocks During This Rally

The current economic conditions are, in substance, very similar to that of the Great Depression. I have recently highlighted some of these similarities in a video presentation . The pattern that is being followed, suggests that the next big event, will be an acceleration of the increase in the price of gold, as well as a significant rally in gold stocks, despite economic decline.

During the Great Depression, there was a significant decline in economic activity. This economic decline was a key driver of a higher real price of gold. That is, that the price of gold increased significantly compared to that of other commodities. This created favourable conditions for gold mines, and boosted their profits significantly.

The current debt-crisis should continue to put pressure on economic activity world-wide. Future production and consumption are being held ransom, by the huge debt obligations (whether debts get settled or defaulted on). During such conditions, the monetary demand for gold increases while the demand for commodities is badly affected.

Despite pressure on the demand for other commodities, their price should still increase (due to monetary inflation); it is just that the price of gold should increase faster. This is essentially why the real price of gold increases.

Gold appears ready to make the $2000 level its new home. Below, is a gold chart, which I featured in my 6 October gold update to my premium subscribers:

The drop in price, at the end of September, was just a re-test of the upward sloping resistance line. According to my fractal analysis, the crossing of this line starts a new phase in the gold bull market, where prices are expected to trade in a more bullish channel. This period is similar to that of August/September 1979 to January 1980. More detail of this comparison with the gold chart of the 1970s, can be found in my Gold Fractal Report. The current debt-crisis should continue to boost gold over the next couple of years.

In order to achieve maximum benefit from the expected rally in gold stocks, it is important to choose the right type of gold stocks.

Despite the likelihood that most gold stocks will rise during the next couple of months and more, some, for example, perform better when the going is good and vice versa. In my previous gold stocks article, I presented the following chart (from finance.yahoo.com):

It illustrates how the South African gold stocks underperformed the HUI significantly, since 2001. Those who would have invested in the South African gold stocks in 2001, would have missed out on the big gains made by the non-South African HUI stocks. This is another example of how some stocks perform better or worse, depending on the conditions.

My current research, however, favours South African (SA) gold stocks over other gold stocks, for this next rally. The current and coming conditions are an ideal set-up for these stocks. Again, it is important to ask which South African gold stocks. My analysis (fundamental and fractal analysis) of the economic conditions, as well as the expected levels of the ZAR gold price and energy cost, which affects SA gold mines, helps me to choose the ideal ZAR gold stocks for a particular time.

Currently, I favour the ones that do well when the going is good. Below, is a chart (from finance.yahoo.com) that compares the price of Anglogold (AU) with that of DRDGold (DROOY):

DRDGold, is a good example of a gold stock that performs well when the going is good for SA gold stocks in general. On the chart, I have highlighted (with yellow) the last period of ideal conditions for SA gold mines; during which, DRDgold significantly outperformed Anglogold. Since then (about May 2002), conditions have not been that great for the SA gold mines, therefore, Anglogold has mostly outperformed DRDgold. It appears we are currently entering a period where DRDgold is likely to outperform Anglogold.

The HUI is set to spike, and break out at the all-time high level soon. Below is a long-term chart (from finance.yahoo.com) of the HUI:

The 500 area has now been successfully tested, and HUI looks set to rally over the next 4 months (at least). We could see the 800 level reached as a minimum.

I have done detailed Fractal Analysis on the HUI, XAU and the GDX, in my Gold Mining Special Report. The report also highlights why the current conditions are ideal for a gold stocks rally. The report is $50. I believe the report offers great value, and trust that you will find it useful and interesting. I offer a money back guarantee, should you not be satisfied with the report.

Please visit my site for more information or to subscribe to my free or premium service. I have also recently started doing free video updates.

Warm regards and God bless,

Hubert

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Gold Stocks Forecast – Why A Mega Gold Stocks Rally Is Imminent – Must Read!

Gold Stocks Forecast:

During the Great Depression, at a certain point, gold stocks started a massive rally. While most things were going down in price, gold stocks made significant gains, becoming one of the best performing sectors during that time. Below is a chart (from sharelynx.com), which illustrates the performance of the gold stocks during this time:

It would seem that some stocks were going up as much as 300% and more, within a 1 to 2 year period. It was no coincidence that gold stocks performed as well as they did. Like all goods, gold stocks will thrive under the ideal conditions. During the Great Depression those ideal conditions, perfect for a gold stocks rally, were present.

I have done some research, to establish what those ideal conditions are. Based on my findings, it is clear that massive gold stocks rallies follow a peculiar pattern of events and conditions. The pattern of events and conditions during the Great Depression is the prime example of this.

I have also found that the conditions today, are very similar to that of the Great Depression. Today, the pattern of events prior to the great gold stocks rally during the Great Depression, are playing-off in a similar manner. Based on my research, it is clear that a massive rally in gold stocks, like that of the Great Depression, is imminent.

During the 1920s there was a massive rally in the Dow, driven by the expansion of the money supply. This rally came to an end, when the Dow peaked in 1929 (also the Dow/gold ratio), followed by a severe crash. This set off a series of events and conditions, eventually leading to the massive rally in gold stocks.

The Dow peaked in 1999 (also the Dow/gold ratio) and in 2007, with a big crash from October 2007 to March 2009. This came after a huge rally in the Dow, since at least 1987. In a similar manner this has set off a series of events and conditions that will lead to a historic rally in gold stocks.

One of the peculiarities during the time of the Great Depression was the initial underperformance of South African gold mines during the first phase of the Depression. While the price of the US goldmine: Homestake, was increasing since 1929 already, the South African gold mines were still caught in a downward trend, from about 1927 until 1932 (see chart above). When the South African gold mines finally did start rallying in 1932, they outperformed.

Today, we have a similar situation as illustrated by the following chart (from finance.yahoo.com):

The chart compares the HUI to three South African gold mines: Harmony (HMY), DRD (or DROOY) and Gold Fields (GFI). You can see that South African gold mines have significantly underperformed since 2000, just like they did during the period of 1929 to about 1932.

This underperformance, I belief, was mainly due to the down trend in the US dollar/SA Rand exchange rate. It appears that this condition is about to change, with the South African gold mines outperforming most other gold mines, just like they did from 1932 during the Great Depression.

Below is a long-term chart of the JSE Gold Index (in ZAR):

I have done some fractal analysis on the chart, by indicating two patterns that appear similar. I have indicated 5 points on both patterns to illustrate how they are similar. If the bigger (current) pattern continues in a similar manner like the smaller pattern, then we are in for huge rally. This is consistent with analysis I have done for the ZAR gold price, US dollar gold price, HUI, XAU and GDX.

I have prepared a report: Gold Mining Special Report, which highlights the ideal conditions for gold stocks to rally. The report also covers Fractal Analysis of the HUI, XAU and GDX with usable targets for these indices. This is an extremely useful report that should help the reader to benefit from the coming gold stocks rally. The report is $50 ($30 for subscribers of my premium service), and I believe it will prove to be worth every dollar.

For a good preview of the report, see this video.

 

Warm regards and God bless,

Hubert

hubert@hgmandassociates.co.za

http://hubertmoolman.wordpress.com/

Visit my Youtube Channel for my video updates on gold and silver

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Rand Gold Price vs JSE Gold Index by Hubert Moolman

Below is a chart that compares the Rand gold price to the JSE miners (JSE Gold Index):

The blue(ish) chart is the Rand gold price and the black one is the JSE Gold Index. I have indicated similar “fractal” positions, which indicate that we are at a point in time where both charts should rise significantly. The other important point to note is the fact that the JSE Gold Index should catch-up with the Rand gold price over the next 18 months or so, just like it did from late 2001 to middle 2002.

Warm regards

Hubert Moolman

http://hgmandassociates.com

JSE GOLD MINERS INDEX

JSE Gold miners are almost in the mania zone. Soon prices will rise faster than almost anything else. See my fractal analysis below:

Warm regards

Hubert

Gold/Platinum Ratio And Economic Weakness… by Hubert Moolman

Most people are mainly concerned with what is going on right now and are less concerned with what happened yesterday, last week or last year. The further in the past an event or development, the less are we concerned about (or aware of) it, and the less is our understanding of it. This appears to be our nature, and it causes many to miss important “big picture” developments.

Here, I would like to discuss one such development and at the same time highlight the outlook for economic conditions over the next few years.

Platinum has been a star performer since the beginning of this century. From about the year 2000 to 2008 it went from just under $400 to a high of $2200. That is an incredible rally, and possibly unrivaled during that period by any other metal or investment class. What is discussed here for platinum holds true for many other assets, even fiat money, but in different aspects, and to various degrees.

Since about the turn of the century, platinum has become the prestige metal. Even credit card companies got into the act by replacing gold cards with platinum cards as their premier credit cards. This, together with platinum’s subsequent rise, ensured that the world became almost platinum crazy.

Even here in South Africa, where we have such an exciting gold history, it became evident that platinum was considered the “new” gold. It appeared that gold took the backseat and platinum enjoyed a new elevated status.

A lot of this fascination with platinum was due to it again becoming more valuable than gold. This platinum mania was indeed justified due to its stellar price performance, especially versus gold. However, it is this very fascination and mania that prevents many from seeing what has been developing over the last 40 years or more, and is now about to conclude (over the remainder of gold’s bull market). Many will be surprised at the impressive gold miner rallies, straight ahead, which will come despite weak general markets.

To understand this development, it is important to understand what the outlook is for the world economy over the next decade. I refer you to my view of the world economy for the next several years.

It is even more important to understand the underlying fundamental cause of this development, since most other factors, like the state of the world economy, are merely symptoms of the “wrong.” This and other articles on my website should help you understand the underlying cause of most of our economic problems.

For most of the last century we have had a corrupt monetary system. This corrupt debt-based monetary system has been suppressing the price of gold for at least the last 80 years. Fiat money and fractional reserve banking are main features of this system, which is the chief underlying cause of most of our economic problems.

This system is now in its 11^th hour, and so are all those trends that have come about due to its existence. One such trend is: platinum consistently getting more valuable than gold. There are many more, such as gold and gold mining shares as a percentage of global assets decreasing significantly since at least 1981, having plummeted from 26% of global (investment) assets in 1981 to just 0.8% in 2009, according to Sprott Asset Management.

It is important to note that there will always be such trends, such as increase or decrease between gold and other asset classes; however, under a proper monetary system they will not be as out of balance to the extreme that they are under a debt-based monetary system.

Below is a long-term gold/platinum ratio chart.

 

chart comes from sharelynx.com

During the gold bull market of the 1970s, it is clear that this ratio was in a significant uptrend. It went from about 0.2 to 1.4 over a 12 year period. That is a seven-fold increase. I have said it before, the same conditions that propelled gold and other commodities higher during the 70s are present now.

These factors are pushing gold higher now and will continue to do so for many years to come. I certainly expect the gold/platinum ratio to trend higher, just as it did in the 70s. As you can see on the chart, the trend for this ratio has begun moving higher in 2008, and like it did in the 70s, it will accelerate as we move along in this bull market.

The great debt bubble of the last century peaked in 1999, when the Dow/gold ratio peaked. This was the tipping point, which signaled the end of the prosperity that was built by this debt. This was soon confirmed, when gold bottomed, and started an uptrend that continues to accelerate. Likewise, in the middle of the 60s, the Dow/gold ratio peaked, whereafter the link of the dollar to gold was removed and gold started its upward march in the 70s.

We are on a downward economic activity trend, and this should accelerate and continue until debt levels are acceptable for a new economic boom. I believe this will take at least 10 years.

Despite the fact that commodities, like platinum, will outperform most asset classes over the next years, I believe that they will still depreciate significantly as compared to gold (and silver). This is basically what happened during the 70s and is also what happened during the great depression. I have written about  the similarities of the great depression, the 70s and today.

Below is a chart that shows the cyclical downturn(s) of industrial production in the US over the last 50 years.

 

You will notice that during the two parts (70 to 75 and then 76 to 80) of the gold bull market, industrial production turned  down significantly. Also, note that the downturn occurred towards the end of those gold rallies and, in the case of the second one, continued until after the end of the gold rally.

Back to the long-term gold/platinum ratio chart

On the chart, you will see a 25-year down-trend resistance line, which was broken in 2008. In textbook fashion, the ratio has moved up quickly since then, whereafter it has returned to test the breakout area. A quick move to 1 is expected very soon, and it would go a long way in confirming that the trend in this ratio is unfolding very much like the one of the 70s and is likely to continue throughout this decade. 

I believe that the ratio will reach the 1.4 level faster than many would believe (if they believe at all) and that it will go on to reach levels unimaginable for many, because they are unable to comprehend the long-term developments. I just wonder whether banks will revert back to gold credit cards as their premier card. Actually, I wonder if banks will still be around.

Warm regards and God bless–

Hubert

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Please visit my blog and website for more of my work, as well as my free and premium service.

http://hgmandassociates.com/

You can email any comments to hubert@hgmandassociates.co.za

South African Gold Miners, Dollar/Rand Rate and the HUI by Hubert Moolman

US dollar/SA exchange rate

The Dollar/Rand exchange rate is a very important rate for South African gold miners, as well as an important proxy for gold miners in general. Together with some other indicators, this ratio can tell us when gold miners are about to increase in real terms—that is, as compared to all other asset classes (including gold itself). When this happens, you really want to be in gold miners.

I can tell you that by all indication, especially my unique fractal analysis, we are entering such a time. This article is an attempt to illustrate why I think we are entering the time where gold (and silver) miners will be the best performing asset class over the next many years.

Below is a 5-year US dollar/SA rand chart.

 

On the chart, I have highlighted two fractals (pattern 1 and 2). The period over which each of these patterns formed can also be viewed as a cycle. If my comparison of the two fractals is correct, then we are now at the beginning of a new cycle.

To show the similarity of the two patterns, I have marked similar points (1 to 4) on both patterns. We are now just about after point 4, and this would represent the bottom (5 November 2010). From here I expect the rate to rise, thus giving JSE gold miners leverage on the gold that they are selling.

Remember that a significant part of JSE gold miner’s cost is in Rand or non-USD currency, whereas they get Dollars for the gold that they sell. Of course, this is not the only condition needed for gold miners to prosper.  Margin (revenue less cost) is king in any business and no different for gold miners. Their margins are most favourable when the gold price is rising in real terms.

The gold price is currently rising in real terms and should continue to do so for at least the next 5 months. In fact, I believe this increase in real terms will accelerate over the next 5 months due to the deflationary conditions that I expect from now to about April next year.

Expected timing and target for the US dollar/SA rand exchange rate

Below are two charts which zoom into the last part of the two fractals presented on the first chart of this article. (The full analysis continues for subscribers and pay per article clients only.)

 

 

JSE Gold Index

Below is a chart of the JSE Gold index that I did awhile back. I have highlighted two possible matching fractals. The commentary on the chart is self-explanatory. Note that, since then, the index has broken upward out of the flag.

This chart and fractal analysis is consistent with my expectation for gold miners. It also illustrates why I think the rallies in gold miners will be explosive. The expected timing and price targets will be made available to my premium subscribers and pay per article clients.

 

Below, I have done the same analysis for Anglogold (in S. African rand). The note on the chart is also self-explanatory. The reason I have used Anglogold is to illustrate a fractal on the HUI, which you will see on the last chart. Again, the pennant/flag has broken out since then.

 

 On the last chart, I have the HUI compared to Anglogold (in US dollars). Again, I have highlighted two possible fractals and marked points 5, 6 and 7 on both. For Anglogold, these points also correlate with points 5, 6 and 7 on the Anglogold (in S. African rand) chart. The HUI has of course also broken out of the line drawn since then.

This analysis presents a similar view as to what should be expected for gold miners, as presented under the JSE Gold and US dollar/South African rand analysis. The HUI should increase significantly in value over the next many years. The expected timing and price targets for the HUI will be made available to my subscribers and pay per article clients.

 

Warm regards and God bless

Hubert

“And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved”

Please visit my blog and website for more of my work and premium service. http://hgmandassociates.com/

You can email any comments to hubert@hgmandassociates.co.za