Silver Price Forecast: Silver and the Dow

Silver Price Forecast: Silver and the Dow

 

The Dow making new highs is likely to be very good news for silver investors, because nominal silver peaks tend to come after significant nominal peaks in the Dow. These stock market rallies are driven by the expansion of the money supply, causing a big increase in value of paper assets (including stocks) relative to real assets.

When the increase in credit or the money supply has run its course, and is unable to drive paper price higher; value then flees from paper assets to safe assets such as physical gold and silver, causing massive price increases.

The two most significant nominal peaks of the Dow were in 1929 and 1973. Silver made a significant peak in 1935, about six years after the Dow’s major peak in 1929. Again, in 1980, silver made a significant peak, about seven years after the Dow’s major peak in 1973. So, if the Dow is currently forming a major peak (like I think it is), we could possibly expect a major peak in silver, towards the end of this decade to early next decade. This means we are likely to have rising silver prices for many years to come.

In 1929, when the Dow was making its peak, silver was still in a downtrend which only bottomed in 1931. However, in 1973, silver was already in an uptrend by the time the Dow peaked:

 

Dow vs Silver 70s

The top chart is the Dow from 1966 to 1974, and the bottom one is silver during the same period. Silver was already in an uptrend when the Dow peaked. The Dow made a major nominal peak near the beginning of 1973, with silver peaking about a year after that. Furthermore, silver made a major peak in 1980, about seven years after the Dow’s 1973 peak.

Notice that silver was still trapped within a cup formation (lower than the cup’s high), out of which it only broke out after the Dow peaked.

Below is a current comparison between the Dow (top chart) and silver (bottom chart):

 

Dow vs Silver current bull market

Like in 1973, silver is already in an uptrend long before the Dow’s possible major peak. The uptrend will still be intact, even if price falls further. If the Dow does peak very soon, will we have a silver top close to a year after the Dow’s peak? Also, will we have a major peak in silver coming some years after, like the 1980 peak?

Silver is again trapped within in a cup formation, lower than the cup high. This time the cup is much broader.  Again, can we expect a breakout from the cup’s high sometime soon after the Dow tops – like it did in 1973?

I believe that given the two questions above, the near future of the Dow will be telling for future silver prices.

The Dow’s relationship with the Dow/Gold ratio is highlighting something interesting regarding this current silver bull market compared to the previous two. Below is a 100-year chart of the Dow/Gold ratio:

 

dow gold ratio with Dow nominal peaks

 

In 1929, the Dow peak came at the same time as the Dow/Gold ratio peak; therefore, the nominal peak and the real peak coincided. The 1973 nominal Dow peak came 7 years after the Dow/Gold ratio peak. We are currently almost 14 years past the Dow/Gold ratio peak, and we still have not had a nominal peak in the Dow.

What is this progression in the timing of the Dow’s nominal peak relative to the Dow/Gold ratio telling us? Is this a natural progression or is it proving how increasingly bigger efforts are applied to artificially prop up the stock markets?

Whatever the reason, it has created a setup for a massive financial panic. Value is likely to run from paper assets to silver and gold like never before. While the first part of this collapse of paper assets has been relatively controlled; the last phase is far more likely to result in chaos. This means that the Dow’s collapse could be vicious.

At the same time, after having had a relatively subdued rise since the beginning of this bull market, silver could explode higher like never before, once the bottom is in. The current decline is likely to bring attractive opportunities to increase physical silver positions.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver Fractal Analysis Report .

Hubert – hubertmoolman.wordpress.com

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

Silver Price Forecast 2013: Silver’s Bullish Cup Formation

Silver Price Forecast 2013

The most significant fact about silver, from a charting point of view, is the mega cup pattern formed over a period of more than 30 years.

These cup (or cup and handle) patterns are very bullish formations. Below is a long-term silver chart showing the mega cup formation as well as two smaller cup formations:

silver price forecast

When a cup is formed, it is often an indication that the price will eventually go higher than the peaks of the cup. This is why the mega cup formation is so significant, because it is telling us that the price of silver will eventually go higher than the $50.

For all the cups shown on the silver chart, gold had a similar cup. The main difference between the gold cups and silver cups is the timing. See a similar chart for gold:

gold price forecast

In all three cases, the gold price went higher than the top of its cup before silver did. This means that gold was a leading indicator for the price of silver. In the case of the mega cup, silver has still not gone higher. Based on the fact that silver has always followed gold’s path by eventually going higher than the cup’s high, in the past, it is very likely that silver will do it again by going higher than the $50.

This is a very simple principle, but provides an enormous opportunity to those who are willing to buy physical silver and have the patience to hold on to it no matter how volatile the price swings.

The fact that we have such a big cup is what makes timing the breakout of the cup so difficult. I believe we have come close to the point where the silver price is about to challenge the cup’s high, and eventually breakthrough (more detail coming to premium subscribers only). First though, it has to make the low for the current decline.

On the charts above you can see that during the 70s, silver always went higher than its cup in the year following gold’s similar feat. It has already been more than three years since gold went higher than its cup high. Silver has still not gone higher; however this is reasonable considering the fact that the cup is so much bigger than the 70s cups.

Previously, I have written about how conditions are similar to that of 1973, when the Dow started a crash at the same time that gold started a spectacular rally. That was incidentally the year that silver also started a massive rally, and went higher than the cup formed before that.

Below is a silver chart showing price action around a cup of the early 70s:

silver price forecast

I have indicated a cup that was formed during the late to early 70s. Note that the gold chart also made a similar cup during that time. Early 1973, about the time when the Dow started its crash, silver was still trapped lower than the cup’s high. However, by 1973, the gold price had already gone higher than the cup’s high. In the same year silver went higher than the indicated cup’s high, eventually peaking multiples higher than the cup.

This is similar to today’s situation, with gold having already gone higher than the $850 area, and silver still lagging lower than the $50 area. This would suggest that the peak in the stock market (which I believe is busy happening now) will be the significant signal for the coming silver rally towards and beyond the $50 level.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver Fractal Analysis Report .

Hubert

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

Gold & Silver Forecast 2013: On the Verge of a New Monetary Order and Gold’s Rise

Gold Forecast 2013: On the Verge of a New Monetary Order and Gold’s Rise Silver Forecast 2013

The last three major bull markets of the Dow were followed by some type of economic crisis and a major 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, which always happens, the confidence in all things (like stocks) inflated by this expansion of credit fails, causing a massive economic crisis and a rush to gold.We are still in the midst of last one’s crisis.

It is the Dow’s last two bull markets that are of interest due to the significance, of how they relate to the current monetary system. In 1944 a new global monetary order was established with the Bretton Woods agreement. The world had just come out of the Great Depression, and was completing the Second World War.

The creation of the new global monetary order as well as the new world order that came as a result of the war was indeed a fresh start. The Bretton Woods system brought about an international basis for exchanging one currency for another. It also led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank).

The member states tied their currency to the U.S. Dollar which was in turn pegged to gold at a rate of $35 per ounce. The U.S. Dollar became the world’s reserve and premier currency. The Dow had just started a bull market, and it was with this new created order that it would rise to new highs.

Below is a comparison of the two Dow bull markets since the beginning of the global monetary order created in 1944 (charts from Yahoo Finance):

 

Comparison of Dow Bull Markets

The top chart shows the Dow from 1980 to 2013, and the bottom chart shows the Dow from 1944 to 1982.

The Bretton Woods agreement was in full use during the majority of the first bull market. It was altered only in 1971, when the link between the dollar and gold, at a fixed $35 per ounce, was severed. Also, by 1973, the fixed exchange rate system created by the Bretton Woods Agreement became a floating exchange rate system.

During this bull market (1944 to 1970s) interest rates were rising, until it peaked in 1981. The Dow rose 7.5 times in value from 1944 to 1973. The gold bull market started toward the end of the Dow bull market, taking gold from $35 to $850 in 1980 – a 24 fold increase.

The second (of the last two) bull market started at about 1980, and took place during a time of falling interest rates and an altered Bretton Woods Agreement. With more favourable conditions than the previous bull market, the Dow was able to rise 18 fold from 1980 to the current high.

Gold’ high of $1920, for this bull market is 7.68 times the low of $250.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? Furthermore, will gold increase more it did during the 70s, given the fact that the conditions for the current bull market (especially as regards to debt levels) are far more favourable. If gold only matches its 1970s bull market increase, it could go to $6 200 ($250*24.8).

Consider that the Dow had a fairly steady rise throughout its entire bull market (that started in the 40s), whereas the gold price rose violently towards the end of its entire bull market of the 70s, with a parabolic blow-off top. See chart, below:

Comparison of Dow and Gold Bull Market

This indicates the likelihood that we are still missing a parabolic blow-off before we can call the end of this bull market; a type of rally that doubles the price of gold, as a minimum, during a 6-month period.

This cycle since about 1944, started with the creation of this global monetary order, and will likely end with the collapse of it. In fact, 2014 will be exactly 70 years since the creation of this dishonest system. We might have a perfect cycle of judgement, if the current monetary order collapses next year. Due to the imminent threat of collapse, it is essential to be invested in physical gold, since it is the perfect alternative to the current monetary regime.

It appears that we are on the verge of the worst part of this crisis. Our attention has to be on the stock markets. When the Dow reaches that “tipping-point” it will signal the start of the end. Previously, I have shown how it appears that the Dow is coming to that critical point.

There is a major risk aversion coming, and in the short-term this is likely to put downward pressure on gold. However, gold will find a footing, and will be driven higher by this very risk aversion. In other words, there is a deflation coming, and gold will prove to be the currency of choice.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver Fractal Analysis Report .

Hubert

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

Gold and Silver Forecast 2013

Gold & Silver Forecast: Possible Target For The Bottom In Gold

Gold Forecast 2013 - Silver Forecast 2013

The recent drop in gold and silver is not critical to buyers of physical metals. Instead, it is an opportunity – to buy more at lower prices; at worst, it is an irritation, since it means a longer wait. It would likely be critical only if the gold bull market is over, and prices do not rise higher than the 2011 highs for many years.

If you are buying paper gold (especially leveraged), then a drop like the current drop is likely to be critical. On top of that, the ride is almost guaranteed to remain painful, even if gold moves to $5000 over the next 2 years, due to extreme volatility.

It is important to try to identify good opportunities to buy more gold and silver (at the lowest prices), and to stay invested, for the most part of the bull market. This is what my premium service focuses on. Selling would only become an issue when the bull market is at an end (close to the top).

So, has the gold bull market come to an end?

In my previous article, I have provided an analysis of whether I think this gold bull market is over or not, using the relationship between the Dow and gold. Based on that analysis, it is unlikely that both the Dow and gold are going to make new significant all-time highs from here. We, therefore, have to decide whether it is equities that will continue a bull market from here, or gold.

Gold

Let’s look at gold patterns to see if we can find a possible level for the bottom. Below is a 7-year gold chart:

The first thing I would like to point out is the fact that a drop to the $1000 is possible. I do not believe that it is probable, however. If it goes to $1000 level, then it is unlikely that it will go there soon, as part of this drop. It would probably take a couple of years to get there, in such a case.

What is interesting; however, is the fact that if gold does a bottom similar to 1976, it would go to around $1000. That is a 60% decline of the move from the bottom of this bull market ($250) to the top at $1920.

Note that a drop below $1000 would probably mean that the gold bull market is over.

A bottom of $1300 is the call that I am going with. It is consistent with where I think the gold market is. I believe we are close to a major rally, very similar to the 1973 and 1979 gold rally. If this is the case, then there should be a very bullish pattern present on the gold chart.

The patterns that I have highlighted in red are the most bullish patterns I know. It is not a conventional pattern like those seen with traditional technical analysis. Based on the standard dimensions of this pattern, we should get an ideal bottom at $1300. If gold does not go lower than the $1300 level, over the next couple of weeks, then this pattern could be valid. If the pattern is valid, then gold will rally like it did in 1973 and 1979.

Also, I believe that the drop below $1522 is still part of the consolidating pattern since 2011, and not a break-down of that pattern. In other words, it is similar to the 2006/2007 and 2008/2009 consolidations, but with its major low right at the end, instead of at the beginning or close to the middle.

The $1300 level also represents a 50% retracement of the move from the $680 level in 2008, to the top at $1920. This is similar to the retracement we had in 1973, before the big rally.

There are some other indicators that suggest that we are close to the bottom, which I will share with my subscribers.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver Fractal Analysis Report .

Hubert

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

Gold and Silver Forecast 2013

Gold & Silver Forecast 2013: Like 1973, Dow’s Decline To Bring Massive Gold Rally?

Gold and Silver Forecast 2013

For gold to rise to levels significantly higher than the recent high of $1920, a new impetus is needed. Without additional energy from such an impetus, gold could just trade sideways for a very long time, or even fall further.

There is only so much value in the world economy, and it is split between all the different instruments (like gold, silver, stocks bonds, etc.) where value resides.

For gold (and silver) to rise significantly, relative to other instruments of value, value will have to be diverted away from those other competing instruments. The Dow, in particular, has been the biggest obstacle to a rise in precious metals, due to it sucking up most of the available value on global markets.

It is for this reason that the direction of the Dow is an important indicator of where gold will go over the next months. Analysis of the Dow itself, as well as, the Dow/Gold ratio is therefore, essential.

Dow/Gold Ratio

Previously, I have illustrated how, since the 1930’s, the Dow/Gold ratio level of 10 has been a pivotal point from where either the gold price rose significantly or the Dow. On Friday, the Dow/Gold ratio again hit that important level of 10.

The question, therefore, is whether it is gold or the Dow that will significantly rally from around this area? Below is a long-term Dow/Gold ratio chart:

I have drawn a yellow line at the 10 level. In 1995, when the ratio moved away from the 10 level, it was higher, and it was the Dow that started a massive rally. It was in 2008 at the end of the gold correction that the ratio hit the 10 level again.

It is almost certain that this ratio will move significantly from here, and in my opinion; it is gold that is heavily favoured. Technically, it appears that at the end of 2008 the ratio dropped lower than the important level of 10, which acted as some kind of support level. It is now busy completing the retest of that breakdown, and should the area around the 10 level hold; it will likely go into a free-fall (that is much lower than 10).

Dow & Gold

The Dow has just recently made an all-time high, and to many, it might appear that this is a start of a multi-month rally. However, the enormous debt-levels will virtually ensure that this rally is brought to an abrupt end very soon.

The Dow is making similar patterns to that of the 70s except for debt levels relative to GDP being much higher today than that of the 70s. Those patterns also indicate that the Dow’s current rally is likely to come to an end, leading to a possible crash.

Below, is one of the comparisons between the current period and the 70s, I have done for the Dow:

Dow 70s

Dow current

The top chart is the Dow from 1968 to 1974, and the bottom one is the Dow from 2008 to April 2013. I have illustrated how these patterns are alike by marking similar points from 1 to 6. If this comparison is valid, then the Dow could top very soon and start a severe decline.

The problem is that it is impossible to predict the exact level or time where the Dow will top. However, there is a good chance the top could be in this month; given the fact the Dow/Gold ratio has reached that important 10 level.

If we do get the decline in the Dow, similar to the 70s pattern, then it is possible that it could be much more severe than that of the 70s due to the extreme debt levels today. During that massive Decline of the Dow, gold actually did very well. See chart below:

gold vs dow 1970s

I have compared the gold chart (top) from 1970 to 1975 to the Dow chart (bottom) for the same period. From the beginning of 1973, the Dow started a massive drop, while gold started a huge rally.

Today, gold is in a similar position to that of the end of 1972 to the beginning of 1973 (point 1). Then, the price was in a consolidation that started when gold reached an all-time high of $70 (point a). While gold was getting near the end of its consolidation, the Dow was making all-time highs just like today – see point 1.1.

I am sure many were thinking that the gold price would decline back to the $35 level, while the Dow’s rally continues. That did not happen; in a similar manner, gold will likely not decline much further.

I do not know at what level the gold price decline will stop, but it is likely to be very soon, and it is likely to turnaround in a dramatic fashion. Just like in 1973, the gold bull market is not over. There are a few important signals that will confirm the coming rally in gold and silver. I will be sharing more relevant information regarding these markets with my subscribers over the next couple of days.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver Fractal Analysis Report .

Hubert

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

Silver Forecast 2013

Silver Price Forecast – Silver Premium Update August 2012

Silver Update

By Hubert Moolman

The silver chart has formed a big pennant like that of the gold chart. What this indicates is that the silver price will likely make a massive move soon. Technically, this move can be up or down. Note that this update is from my premium service originally published on 6 August 2012.

Below is a silver chart with the pennant:

The technical and fundamental evidence that I have collected, and look at, tells me that the price is likely to go upward out of this pennant formation.

On the chart above, you can see that the price has actually broken out (upward) of the pennant. We have to give it some time before we can say that it is a valid breakout. Also, I have drawn a blue line, which could become another area of resistance.

If we were to consider a move down, then a first target of $15 and one lower at $5 would come into play, based on the patterns. A price of $5 (and even $15) does not make any economic sense, given the amounts of fiat money currently available.

However, there is a real threat of deflation, currently, and the effect of this has to be considered when looking at the future silver price. In my opinion, we do have a perfect setup for a massive deflation which will destroy a lot of debt-based value.

Stock market values have been driven for years by this debt-based value, and will, therefore, be very badly devalued. Many believe that such a fall in stock market values will take down the silver price. I do not agree, and have given many reasons why.

Here, I would just like to point out that the current threat of deflation is due to the massive debt levels, and the inability to service those debt commitments. You can just look at the example of Spain or Greece.

Silver is a real store of value and that is its most significant function. The current crisis will cause a massive rush to that which can store value that will not be destroyed by the debt-collapse. Silver is just about the opposite of debt.

Previously, I wrote about how this debt-based monetary system has created what I call a “mirror-effect”, whereby, silver (and gold) is pushed down in value, to a similar extent as to which paper assets such as general stocks are pushed up in value. This mirror-effect clearly shows up on the long-term charts of gold, silver and the Dow.

Below, is a long–term silver chart (real and nominal) from 1850 to present (generated at minefund.com):

I have drawn a vertical red line, approximately where silver was demonetized (1870s). Notice how the real price of silver collapsed after the red line, from about $30, until it bottomed in 1931 at $4.29. It then traded side-ways (from the big-picture view) for many years, until it spiked from about the early 1970s, making a peak in 1980, where after, it bottomed again in 2001.

Technically, the bottom in 2001 was the completion of what would be a remarkable double bottom reversal, with the first bottom being in 1931. After a double bottom formation, there is often a big rally, and that is exactly what happened next. If this pattern continues to follow the pattern of a valid double bottom, it will reach levels that will exceed the 1980 high by at least one multiple, but probably by many more.

The interesting thing about this possible double bottom is the fact that the two bottoms came 70 years apart. This 70 years period also appears on the long-term Dow chart. Below is a Dow chart (from stockcharts.com) from 1900 to present:

On the chart, I have indicated a 70 year period from when the Dow peaked in 1929, to the peak in 1999. The reason for using the 1999 peak instead of the 2007 peak, is the fact that the 1999 peak represents the real peak, since the Dow/Gold ratio peaked in 1999 (like it did in 1929).

Notice the dates of the peaks and how they fit in with that of the bottoms of the real silver price, as well as the similar 70 year periods between. In my opinion, the occurrence of the 70 year period on both charts, in the context as explained above, provides additional evidence of the link between silver’s demonetization (or suppression) and the massive debt bubble of this century – as explained in part 1 of this article.

While the Dow is inflated to the peak in 1929, silver is suppressed to its low in 1931. And again, the Dow is inflated to its peak in 1999, while silver is suppressed to its bottom in 2001.

So, the peaks and troughs, as presented in the above charts, are the manifestation (in visual form) of the debt-based monetary system causing paper and related assets to rise, while suppressing silver. Another way of looking at it is that the debt-based monetary system is fuelling speculation in paper assets by using energy diverted from precious metals.

Silver (like gold) stands in direct opposition to the current monetary system (they are inescapably linked). The fall (and falling) of this system is the rise of silver as money; therefore, massive increases in what silver can buy in real terms.

Looking at a bearish pattern to find critical levels

Below, is 6-year chart of silver, highlighting bearish fractals:

I have highlighted two fractals by indicating 4 similar points on both. Based on this comparison, we could now be at a very critical area. A break-down below the support (about $26), could mean that the current pattern could follow the 2007/2008 pattern, and take price much lower. This is presented not because I believe that price will break lower than the support, but to show why I think we are at a critical level, and why we should be watchfull.

Pattern Previously Covered

Here, is a follow-up on my previous article about the similar flag-type formations on the silver chart.Below is a graphic which compares the current pattern on silver (from about the beginning of 2011 to present) to a 2007 pattern:

This comparison is still very much valid; only if price goes lower than $26 could it become invalid. In fact, there is a good chance that price has broken out to the upside.

On both charts, I have suggested how the flag patterns might be similar, by marking similar points, from 1 to 6 (and alternatively from a to h). Based on this comparison, it appears that the silver price might now have found that point 6 or h (at the end of June), and is about to increase significantly.

We could be at very volatile area due to the possible breakout, since this is often the case after a breakout – so be aware! I am of the opinion that silver should make its move higher between now and the end of this month, if this comparison is to be confirmed.

Follow-up on Gold/Silver Ratio

In my last gold update, I covered the Gold/Silver ratio, and explained why I think the Gold/Silver ratio will soon fall straight down. Below is an updated Gold/Silver ratio chart:

On the chart I have indicated a trading channel in which the ratio has been moving for the last five months. It appears now to have finally broken down, out of the channel. This could be a very strong signal that silver and gold prices are about to rise significantly. Again, here we have to watch for a possible retest of that break-down area, before the ratio falls straight down.

Conclusion:

Silver appears to have broken out of the pennant or flag-type formation, and could now finally be setting-up for a massive rise in price. We should, however, be very watchful, due to the fact that we are at a critical area in price and time. There is a big threat of deflation, but, in my opinion, it is this very deflation (brought about by the collapse of the debt bubble) that could be driving silver prices higher.

For more of this kind of analysis on silver and gold, you are welcome to subscribe to my premium service. I have also recently completed a Long-term Silver 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”

Dow To Crash Soon?

Alternative Fractal on Dow Chart – this and the previous fractal suggest Dow to crash soon…

For more on silver and gold see my latest premium update (Premium Service).

For long-term guidance on gold and silver, see my Long-term Silver Fractal Report  & Long-term Gold Fractal Report  .

Gold/Platinum Ratio And The Coming Depression

During the gold bull market of the 1970s, the Gold/Platinum 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. At the start of the current gold bull market (2001), the Gold/Platinum ratio was just a bit higher than 0.4. If the ratio was to emulate its performance during the last gold bull market, it could reach 2.8 (that is gold being 2.8 times the value of platinum).

Similar conditions to that of the 70s, which propelled gold and other commodities higher during the 70s, are present now. However, this time, due to the current higher debt levels relative to GDP, compared to that of the 70s, conditions are more in favour of gold than commodities like platinum (that are more reliant on economic activity).

In the chart below, you can see that debt levels relative to GDP were much lower than it was during the Great Depression, as well as what it is currently.

US Debt to GDP ratio

 

What this is telling me, is that we are going to have conditions that are more like the Great Depression, for the remaining part of this gold bull market. The economic decline, which will mainly come as a result of the debt bubble bursting, will negatively affect a commodity like platinum, when compared with gold.

Although commodities, like platinum, will outperform most asset classes over the next years, they will still depreciate significantly as compared to gold (and silver).

Gold/Platinum Ratio suggests much higher gold prices are coming

There is an interesting pattern developing on the Gold/Platinum Ratio. This pattern is similar to a pattern on the silver chart. Below, is a graphic which features the Gold/Platinum Ratio chart (top) as well as the silver chart (bottom) (charts courtesy of stockcharts.com):

 

gold platinum ratio similar to silver chart

The graphic is self-explanatory, and indicates that the Gold/Platinum Ratio is in a position similar to where silver was at the end of January 2011. If the ratio was to continue to follow the silver pattern, then we could have gold being 1.7 times the value of platinum in this year. This is consistent with my expectation of a significantly higher “real’ gold price (relative to stocks and most commodities).

Note, that it is more probable that an increase in the Gold/Platinum Ratio would mean higher nominal gold prices, instead of lower gold prices. This is due to the fact that the recent decline in the ratio corresponds more with the correction in the gold price, since September of last year.

For more of this kind of analysis to help you navigate the financial markets, subscribe to my premium service .

Warm regards and God bless,

Hubert

http://hubertmoolman.wordpress.com/

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

A Massive Spike In The Price of Silver Is Imminent

A Massive Spike In The Price of Silver Is Imminent

Gold and silver are very close to entering the mania phase of this bull market. In order for gold and silver to go into the mania phase, value has to be diverted from somewhere, and that “somewhere” is most likely stocks. Since 2000, there has been a correction in stock values, in real terms; however, nominally, stocks are still significantly high (close to its all-time highs).

I expect that significant value will soon be diverted from the general stock market, to silver and gold, causing prices to rally significantly, until these metals also become overvalued.

This is exactly what happened in 2007/2008. Below is a graphic (charts from barchart.com) that illustrates how this happened in 2007/2008:

The top chart is for the S&P 500 and the bottom is for silver. I have drawn a yellow line, at the point where the S&P 500 peaked. It is only after the peak in the S&P 500 that silver broke out, and eventually rallied significantly (while the S&P 500 was crashing). From a “fractal” point of view, we are currently in a similar position, with stocks getting ready to peak.

Silver Fractal Analysis

Silver has made its way out of the giant flag; however, it fell back again, lower than the upper boundary of the flag, as shown in the following chart:

Previously, I have stated that price will eventually break out of the flag and go on to make much higher highs. Below, is some evidence to support this view:

The top chart is for gold and the bottom one is for silver. Gold and silver made similar patterns before and after reaching their respective 1980 highs. From the charts, you can see there is a similarity in how gold and silver approached their 1980 high. Both made a triangle-type pattern (green lines) just before it reached the 1980 all-time high. When it came out of that triangle pattern, it rallied strongly to the 1980 high, which started the formation of a flag-type pattern (yellow lines).

Gold passed its 1980 all-time high during 2008, while silver is yet to do so. By looking at the pattern of how gold passed its 1980 high, we can predict how silver might do it as well. If silver continues to follow the pattern that gold formed, then we can expect a massive spike towards the $50 and beyond, very soon. Read my previous article for more about this comparison.

For more of this kind of analysis, see my Long-term Silver Fractal Analysis Report , or subscribe to my premium service .

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 Forecast 2012: Gold Market Update

Below, is an extract of my Gold Premium Update for 23 January 2012:

Gold is at a “sweet spot” at a moment; pullbacks should be aggressively bought. It just needs a trigger to launch it for the most spectacular rally since the late 70’s. I believe that trigger is likely to be the crash (or decline) of the stock markets.

This crash, if it occurs, is in anticipation of the inevitable bursting of the debt bubble. This is much like during the Great Depression when the stock markets crashed and bottomed before Total Debt as a % of GDP peaked in 1933. The Sovereign Debt-Crisis (especially in Europe) is the obvious sign that the debt bubble is bursting; with every additional unit of debt producing less or no increased GDP.

We do not have to only look that far, for an example of what is likely to come. Below, is a graphic that compares gold and the Dow, from June 2008 to May 2009.

The reason that I took these dates is because the period is similar (based on fractal analysis) to the current period. Gold bottomed in October 2008, more than four months before the Dow made a bottom.  From the time of gold’s bottom, gold and Dow moved together at first, where after gold continued its rally, while the Dow was falling. It was also during this period that the gold stocks started a rally. However, this time, conditions are even better for gold stocks (more in the Gold Stocks Update).

Gold Long-Term

Currently, it is macro factors that are driving gold; therefore, once it starts moving up, it will often not make sense when compared to what other assets like stocks are doing. This is what greed and fear do: they make people to act irrationally. Fear and greed will push gold and silver higher at a phenomenal rate, despite major economic decline.

We, therefore, have to keep a close eye on the long-term charts, since the evidence for a massive rise should be there (note that I have done extensive analysis of gold and silver’s long-term charts).

Update on the previous Gold Alert

The fractals identified in the previous alert appear to be playing out as predicted. Below, is an updated version of the chart from that alert:

The two patterns are indicated by points 1 to 10, to show how they are similar. Point 10 appears to be in now. The next important barrier is the downtrend line.  Note that a short-term reaction, before piercing the line is possible.

Furthermore, should price pierce the line and rally, I would expect some kind of retest of the breakout area. Please note that these are just short-term movements, and it is anybody’s guess what will really happen. We have to focus on the big move, which is a significantly higher price over the coming months.

Gold/Silver Ratio

Below is a chart of the gold/silver ratio:

I have drawn a support line that was violated recently. This is a good signal for silver and gold price. We could see a quick move to 45, however, we are likely to see a retest of that 54 area, before that.

This could also mean that we could have a risk-aversion episode when we retest the breakdown level, with gold and the Dollar rallying. A retest will be a good opportunity to load up on silver, since price is likely to pullback.

At some point – after retesting the breakdown area (if it does) – this ratio is likely to fall very fast. That might be the point when silver and gold really start to take-off.

For more of this kind of analysis, see my Gold Long-term Fractal Analysis Report and Long-term Silver Fractal Analysis Report , or subscribe to my premium service .

Hubert Moolman

 

Dow’s Bubble To Burst With The 60yr + Debt Bubble?

You may have noticed that I have just started my latest blog: picturegoldandsilver, which contains gold and silver analysis through use of images  – less reading -:).

You can see or follow it on twitter: https://twitter.com/picturegold as well as find this post:  Dow’s Bubble To Burst With The 60yr + Debt Bubble?

If you have a twitter account (or not), please feel free to follow picturegoldandsilver. I will be posting a lot of unique analysis there.

Warm regards,

Hubert

Silver Analysis: Why Silver For A Monetary Collapse? Part 2

Silver Analysis: Silver Forecast

In part 1, I stated:

“We are at the edge of a major economic crisis. Our monetary system is the underlying cause of this major crisis. The massive debt bubble created by our monetary system is about to burst. The demonetization of gold and silver, has over the years diverted value from these metals, to all paper assets (such as bonds) linked to the debt-based monetary system.

The process of the devaluation of gold and silver, started by the demonetization of gold and silver, is about to reverse at a greater speed than ever before. This is similar to what happened during the late 70s, when the gold and silver price increased significantly. However, what happened in the 70’s was just a prelude to this coming rally. The 70’s was the end of a cycle, this is likely the end of a major cycle; an end of an era of the debt-based monetary system (dishonest money).”

What this debt-based monetary system has done, is to create what I call a “mirror-effect”, whereby, silver (and gold) is pushed down in value, to a similar extent as to which paper assets such as general stocks are pushed up in value. This mirror-effect clearly shows up on the long-term charts of gold, silver and the Dow.

Here (in part 2), I would like to show how this “mirror effect” of silver versus the assets linked to the debt-based monetary system (general stocks in this case), shows up on the long-term charts. This “mirror effect”, also reveals an interesting cycle, which provides more evidence to support my view, of the impending judgment of this system (monetary system), in terms of standards according to the Holy Scripture.

recommended: similarities between current crisis and great depression

Below, is a long–term silver chart (real and nominal) from 1850 to present (generated at minefund.com):

MineFund’s real precious metals prices are deflated by U.S. consumer price inflation (Consumer Price Index-All Urban Consumers, not seasonally adjusted, January 2011 = 100).

I have drawn a vertical red line, approximately where silver was demonetized (1870s). Notice how the real price of silver collapsed after the red line, from about $30, until it bottomed in 1931 at $4.29. It then traded side-ways (from the big-picture view) for many years, until it spiked from about the early 1970s, making a peak in 1980, where after, it bottomed again in 2001.

Technically, the bottom in 2001 was the completion of what would be a remarkable double bottom reversal, with the first bottom being in 1931. After a double bottom formation, there is often a big rally, and that is exactly what happened next. If this pattern continues to follow the pattern of a valid double bottom, it will reach levels that will exceed the 1980 high by at least one multiple, but probably by many more.

However, the purpose of this article is not to deal with targets. The interesting thing about this possible double bottom is the fact that the two bottoms came 70 years apart. This 70 years period also appears on the long-term Dow chart. Below is a Dow chart (from stockcharts.com) from 1900 to present:

On the chart, I have indicated a 70 year period from when the Dow peaked in 1929, to the peak in 1999. The reason for using the 1999 peak instead of the 2007 peak, is the fact that the 1999 peak represents the real peak, since the Dow/Gold peaked in 1999 (like it did in 1929).

Notice the dates of the peaks and how they fit in with that of the bottoms of the real silver price, as well as the similar 70 year periods between. In my opinion, the occurrence of the 70 year period on both charts, in the context as explained above, provides additional evidence of the link between silver’s demonetization (or suppression) and the massive debt bubble of this century – as explained in part 1 of this article.

While the Dow is inflated to the peak in 1929, silver is suppressed to its low in 1931. And again, the Dow is inflated to its peak in 1999, while silver is suppressed to its bottom in 2001.

So, the peaks and troughs, as presented in the above charts, are the manifestation (in visual form) of the debt-based monetary system causing paper and related assets to rise, while suppressing silver. Another way of looking at it is that the debt-based monetary system is fuelling speculation in paper assets by using energy diverted from precious metals. THIS IS THE REAL MANIPULATION OF GOLD AND SILVER – it is in the open.

Silver (like gold) stands in direct opposition to the current monetary system (they are inescapably linked). The fall (and falling) of this system is the rise of silver as money; therefore, massive increases in what silver can buy in real terms. 

Update on the silver pattern presented in my previous article

In my previous article on silver, I presented the following graphic that compares the silver chart from 2007 to today, to the gold chart from 2008 to 2010 (all charts generated at fxstreet.com):

It seems that silver has now made that low at point 12 (note, there is still a possibility of a retest). Price is now looking to break out of the down-trend since September (point 7). If silver continues to follow gold’s pattern above, we could see new all-time highs over the coming months.

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 – more detail on my website.

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 and Dow Forecast 2012 Video: Impetus for Mania Phase in Gold

Gold Price Forecast 2012 – Video

For more detailed analysis of gold, silver and the Dow, you are welcome to subscribe to my free newsletter (on sidebar) or premium service. Also consider my fractal analysis report on gold, silver and gold mining.

Warm regards and God bless,

Hubert

http://hubertmoolman.wordpress.com/ (gold & silver newsletter)

hubert@hgmandassociates.co.za

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

Gold Price Forecast 2012: The Impetus for the Mania Phase in Gold

Gold and Dow Forecast 2012:

For gold to rise to levels significantly higher than the recent high of $1920, a new impetus is needed. Without additional energy from such an impetus, gold could just trade sideways for a very long time, or even fall further. See the following chart (from barchart.com):

Gold price forecast with support

There is only so much value in the world economy, and it is split between all the different instruments (like gold, silver, stocks bonds, etc.) where value resides.

For gold (and silver) to rise significantly, relative to other instruments of value, value will have to be diverted away from those other competing instruments. The printing of more money does benefit gold, but it does not necessarily benefit gold more than other assets—such as commodities, for example.

recommended: Why silver for a monetary collapse?

Historically gold has made its significant gains, relative to other assets (as well as nominally), not during inflation, but during deflation (Note: I am using the terms inflation and deflation very loosely in this case). These significant gold rallies historically occur when value flees instruments such as stocks and certain commodities.

Since the 1920s there have been three major gold rallies (1930s, 1970s and the current rally).  Below is a Dow Jones Industrial Average chart (from stockcharts.com) from 1900 to today.

On the chart, I have indicated the periods where a gold rally occurred. During the 1930s there was one big rally (increase based on the real price of gold – data from minefund.com) from about 1931 to 1934. During the 1970s there were two rallies, and I have also indicated two rallies since 2001.

All three major gold rallies came after a significant top in the Dow and the Dow/Gold ratio (1929, 1966 and 1999). A great portion of the 1930s and 1970s rallies occurred when the Dow was falling significantly. In fact, the biggest rise in the gold price occurred when the Dow was falling or was trading closer to the bottom of its trading range during that period.

• The 1932 bottom in the Dow came during the 1930s gold rally indicated. Also, the top in the price of gold came when the Dow was trading closer to the 41.22 low in the Dow than to the 381.17 high.
• The 1974 bottom in the Dow came during the 1970s gold rally indicated. Also, the top in the first of the two gold rallies of the 1970s came at about the low in the Dow in 1974.

From the above it is clear that the Dow was weak and/or falling when gold had its best rallies. In other words, much value was diverted from the Dow and related instruments to gold during these periods. A weak and/or falling Dow (or what it represents) was an impetus for the massive increase in the gold price during these rallies.

The current gold rally (since 2001) has mostly been during the time when the Dow has also been rising, with the exception of a short period in both 2002 and the end of 2008 to Feb 2009. The best of the current gold rally, since 2001, has been during a time when the Dow was rising as well. Therefore, based on the evidence from the 1930s and 1970s gold rallies, I believe the current gold rally has not yet had its best period – it is still to come. My current fundamental and fractal analysis of the Dow and gold supports this view.

Find me also at: picturegoldandsilver – gold and silver analysis contained in one image/picture

The Dow is currently trading close to its all-time high, and it is my opinion that gold will step into the next phase of this bull market when the Dow starts to fall. A falling Dow, with weak economic conditions, will be the impetus for the next massive rally in gold, just like it was in previous bull markets. A falling and/or weak Dow will in some way represent the diverting of value from stocks to gold. For more on the fundamentals of why a falling Dow will cause the next massive rise in gold, see my article called: Is a Gold Parabolic Blow-off Long Due?

My current analysis suggests that this is likely to happen soon, since gold appears to be bottoming (or has already bottomed), whereas the Dow appears to be looking for that final point (see this article for more details).

For more detailed analysis of gold, silver and the Dow, you are welcome to subscribe to my free service (on sidebar) or premium service. Also consider my fractal analysis report on gold, silver and gold mining.

Warm regards and God bless,

Hubert

(gold and silver newsletter)

Find me also at: picturegoldandsilver – gold and silver analysis contained in one image/picture

hubert@hgmandassociates.co.za

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

2012, The Dow’s Annus Horribilis and Gold’s…

I must admit that I do not prescribe to the 2012 end of the world or end of an era phenomenon; however, my recent analysis suggests that 2012 could indeed be a very significant year.

I have been following a fractal (pattern) on the Dow chart for the last couple of years. I have written about it before, in a previous article. Basically, the Dow chart is forming a similar pattern to that which was formed in the late 60s to early 70s.

If this pattern continues in a similar manner to that of the late 60s to early 70s pattern, the Dow could indeed have an annus horribilis (horrible year). Below, is a long-term chart of the Dow:

I have highlighted two fractals on the chart. I have also indicated five points on both fractals to illustrate how they could be similar. Point 1 on both fractals was the exact point at which the Dow gold ratio made a significant peak. This is an important marker, and it gives credibility to the comparison of these two patterns.

It appears that the Dow is currently searching for that point 5. Point 5 could already be in, or it could be a little higher than the recent high (of 12 928). However, from a timing point of view, it is likely that we have reached point 5 already (a retest could still be possible).

If the current fractal continues its similarity to that of the late 60s to early 70s fractal, the Dow could have a horrible drop for most of 2012. I do not wish to speculate as to how low it will go; however, if it stays exactly true to the past fractal (fractals do not always stay exactly true), it could drop to 6000.

Since my other analysis suggests that we are at the end of era (an era of the corrupt debt-based monetary system), I would really expect the worst-case scenario. That means that a drop to 1000 is very possible (not necessarily in 2012), even though it appears highly unlikely.

The Dow’s inflated value, relative to the value of gold, was brought about by this debt-based monetary system. It follows naturally that in the event of the debt-based monetary system collapsing (it will eventually); the Dow gold ratio could go back to levels prior to the introduction of this system. This level could be anywhere between 0.2 and 1, in my opinion. Therefore, it is possible to have a gold price of $5000, with the Dow at 1000. I do not say that we will have these levels, but it is certainly possible. All I am saying is that we have to be prepared for extremes never before seen in our lifetime.

In addition, I have written before of how similar today’s conditions are to that of the Great Depression. Based on that analysis, today’s economic fundamentals certainly support the theory of a massive drop in the Dow, relative to gold and even the US dollar.

Now, if you think that gold cannot rise when the Dow has a massive drop as suggested above, then you should look at the following chart and think again:

I have compared the gold chart (top) from 1970 to 1975 to the Dow chart (bottom) for the same period. From the beginning of 1973, the Dow started a massive drop, while gold started a huge rally. Furthermore, the beginning of 1973 happens to be the same point as point 5 in the first chart.

From a short-term perspective, the Dow gold ratio is “overbought”, and could drop significant lower over the coming months. Below is a 3 year chart of the Dow gold ratio:

On the chart, I have drawn a possible blue support line, which now could be resistance. It appears that the ratio broke down from that support in July this year, and is now in the process of retesting that break-down point. The RSI seems to be at a three-year extreme, and suggests that upside potential from here, could be limited. If the ratio turns around now or closer to that blue line, it could fall very fast.

Gold appears to be at a very critical point of the bull market. See the chart below:

The gold price is currently holding just above the upward sloping line. Based on my long-term fractal analysis, this line is a critical area, and should price rebound form this line; it could rally like it did in late 1979.

For more detailed gold and silver analysis subscribe to my premium service. I have also recently completed a detailed fractal analysis report for gold and silver. You can also subscribe to my free newsletter on the sidebar.

Warm regards and God bless,

Hubert

http://hubertmoolman.wordpress.com/ (gold and silver newsletter)

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”

Dow Jones Forecast 2012

Below, is a recent video I posted on my youtube channel: fractal signs. I do some fractal analysis on the Dow Jones Industrial Index.

For regular video analysis of HUI, JSE Index, Dow, Gold and Silver, subscribe to my youtube channel.

Silver vs Nasdaq (Silver Price Forecast 2012): A response to Mr Erik Swarts

Silver Price Forecast 2012:

I recently read an article by Mr Erik Swarts, which I found very interesting. I enjoy reading his articles, since he often identifies fractals on financial charts, in order to forecast, what may or may not happen. This is exactly what I specialize in.

In this particular article, he compares silver with the NASDAQ, and states:

“To further color what I perceived to be the unbridled risk appetite within the silver market, I contrasted silver with the parabolic rise and break of the Nasdaq market in 2000. Interestingly, both markets have traded very similar, both through the parabolic rise and breakdown, when contrasted with the relative strength of their closest cousins – the SPX for the NDX and GLD with SLV”

Specifically in that article (and the related articles), he compares the April 2011 peak in silver, with that of the Nasdaq in 2000. The correlation between the two patterns has been quite accurate thus far. However, I am of the view that this correlation will not continue; it is about to diverge significantly. This is why:

On financial charts, a particular pattern can often repeat itself, on the same chart, as well as on the chart of another good. Often, two patterns correlate for some time, but then it can suddenly diverge. Whether two patterns will continue their correlation or diverge, depends on many things.

One of the important things that I look at is the context in which the two patterns exist. If the context in which they exist are similar, then it is very likely that the correlation between the two patterns will continue, and vice versa.

When considering the context, one also has to look at the relevant time frame. If the relevant conditions surrounding both patterns, exist in similar time frames, or span over similar time frames, it increases the likelihood of the two patterns continuing the correlation.

The top in the Nasdaq in 2000, came at a time when the stocks were significantly overvalued compared to real assets. In fact, it was at all-time highs. This is because the Dow/gold ratio peaked in 1999, at about 44, and was still close to 40 when the NASDAQ peaked.

I do not believe silver was overvalued on a historical basis (on a short-term basis it might have been). It was only at its 1980 all-time nominal high, and still below the inflation adjusted high. The gold/silver ratio might have been at a recent low (it was at 32), but that is not an all-time low. In fact, the long-term mean (200 years and more) is lower. So, in terms of gold, silver was not at an extreme level, it was in fact undervalued.

The top in the Nasdaq was an all-time high, with no other peak coming close to it. As said before, the peak in silver was only at the 1980 all-time nominal high. So, the structures of the two charts are very different from a long-term perspective; therefore, the two peaks are very different from a long- term perspective. The macro view takes precedence over the short-term view, and in this case, the macro view, suggests that the pattern of silver should diverge from the Nasdaq pattern.

To illustrate that the macro view suggests that the path for silver is likely up, and not down from here, I have prepared the following chart that compares silver to the Dow:

The top is silver, and the bottom is the Dow. In order to put the two charts in similar context, I have looked for certain markers, and matched the charts accordingly. In 1980, the Dow made a bottom, as measured in gold and silver. For silver, a similar bottom would be when the Dow/silver ratio peaked. For both charts, these points, respectively, were at significant lows for each.

Using the Dow/gold and Dow/silver ratio as a marker is important, since it gives us a proper context. It gives us what a Dow/dollar ratio is not able to give us, since it is an unreliable measure, due to the nature of fiat money.

I have marked the points that I perceive to be similar (1 to 4). It is interesting to note that point 1, on both charts, came about 7 years after the Dow/silver ratio bottomed/peaked. Based on this comparison, we are at a point just above point 4, on the silver chart, relative to the Dow chart. If the silver pattern continues to follow the Dow pattern, we could test the $50 level soon, and could make new all-time highs over the coming years.

Also, it does not mean that I do not expect the markets to be in for a rough ride over the coming months. In fact, I expect a significantly rough ride for the stock markets; it is just that I expect silver to move up, counter to the direction of the general markets.

For more silver analysis, visit my video channel. Also, you can subscribe to my premium service here.

Respectfully,

Hubert Moolman

http://hubertmoolman.wordpress.com/

Similarities Between Current Crisis And Great Depression

My latest video update: Great Depression vs Now

 

For more of this kind of analysis to help you navigate the financial markets, subscribe to my premium service .

Warm regards and God bless,

Hubert

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”

Gold Signals The End…By Hubert Moolman

Gold remains our best means of economic measurement. It is not a perfect or 100% consistent measure of wealth, but it is our best. Due to its monetary properties, gold can be used to measure wealth across generations. Just like we have the sun and moon to discern the times and seasons, I believe, we have gold to discern changes in wealth. It is interesting that the sun is often compared to gold, and the moon to silver. Just like a day in the Middle Ages is comparable to a day in this century, an ounce of gold in the Middle Ages is comparable to one today.

Currently we use fiat currency, like the dollar, for economic measurement. However, this creates a huge distortion due to the fiat currency being highly unstable. Can you imagine what would be the effect on our planet if we did not use the normal cycles that the sun and moon provides us with? Our ability to produce food for example, could be severely disrupted, leading to famine or possible extinction of mankind.

By using a highly unreliable measure like the US dollar, our ability to make proper economic decisions is severely impaired, since we (the common man) are not easily able to distinguish between a real increase or decrease in wealth , for example. This causes a great misallocation of wealth and will lead to a severe economic depression.

When you look at a chart of the average day’s wages in dollars compared to the average day’s wages in gold ounces, with some analysis, you will understand why the dollar cannot be used as an economic measure. These charts show that the average daily wage for Americans, have gone from about $20 in 1964 to about $152 in 2010, whereas in gold it has fallen from just short of 60% of an ounce  of gold in 1964 to just 12,67% of an ounce of gold in 2010.

Gold is telling us that people are now earning less money than they did in 1964, whereas the dollar is telling us the opposite. Which measure is telling the truth?  This bizarre situation is evident in our “economic” and “accounting” language, when we talk about a real and nominal increase in prices. An example would be when an economist tells you that house prices have increased in nominal terms, but decreased in real terms. What? How can something go up and down at the very same time? Using a proper measure, there would be no need to have a “nominal” as well as a “real” analysis.

These bizarre and illogical concepts in our economic language are as a result of the bizarre measure of value called fiat money. We have to look at the right signs to discern the times. I prefer to look at the “behaviour” of gold to discern the economic times.

What is gold’s “behaviour” telling me?

Gold Rallies and Debt

Since 1900, we have had three major rallies in the gold price. The first started during the Great Depression, the second since about 1968, and the current since about 2001. Note, the gold price went up during the Great Depression, since most things as measured in currency (gold) depreciated. Further to that, in 1933, due to increased demand, the gold price was increased from $20.67 to $35. During the first two rallies, there were major economic declines. The economic decline during the Great Depression was much worse than that of the 70s. This is mostly due to the difference in debt levels during the two periods. The debt level during the Great Depression was far greater than that of the 70s. The greater number of defaults, due to the bigger debt, took a bigger chunk of value out of the economy.

The current gold rally is still in progress. Debt levels now are greater than during both the previous major gold rallies. It is believed that in 2008, total debt as a percentage of GDP in the US stood at more than 340% compared to 265% during the Great Depression. At some point during the Great Depression, debt levels collapsed, causing a major economic decline. The rally in gold is a way reflection of how debt levels collapse. The current major rally in gold is thus telling me that we are likely to have an economic decline far greater than that of the Great Depression, in the US and most parts of the world. This economic decline has already started, and is about to intensify.

New Monetary Order

In 1933, Franklin D. Roosevelt changed the monetary order in the US, with Executive Order 6102. Fundamentally the dollar changed its nature due to this order, and was therefore no longer backed by gold – for US citizens.  As mentioned earlier, this and the revaluation of gold was done, due to the increased demand for gold. The principle is: people became aware that there were far more claims on gold (read dollars) issued than the gold available, and therefore demanded their gold. This was mainly the result of the increase in credit during the 20s. As explained above, this run to real money (gold) is basically the flip side of the contraction of credit or debt.

So, the revaluation of gold was done to halt or slow the debt contraction, with those who handed their gold to the government, paying the bill for this decrease in debt contraction. Also, it prevented the banking system from leaking more gold, due this increased demand for gold. The system was recharged, and ready to go, as we know, for another 38 years.

The late 60s to early 70’s (start of the second gold rally) brought the same problem, however, this time it was sovereign nations that became aware that there were far more claims on gold (or dollars) circulating than the gold that the US had available. Some nations requested their gold because of this fact, and the US banking system was once again leaking gold like it did during the Great Depression.

Like in the 30s, the US knew that it would not be able to deliver the demand for gold, due to this “gold run”, and it therefore decided to close the “gold window”. Just like the US citizens, nations could no longer exchange their dollars for gold. This stopped more gold from leaking out of the US reserves, and the system was yet again recharged. The bankruptcy of the US was now well hidden, and it seemed like the perfect con. No more demand for gold from neither citizens nor sovereign nations that might expose the bankruptcy (too many dollars), too few ounces of gold.

Dollar could now be printed without any accountability to those users of dollars (basically the whole world). They have done it: the perfect con.  Or have they?

No, there might be no one that will be able to bring the bankruptcy to light, due to the seemingly faultless plan; however, it is the natural laws that will bring this con to an end.

How? Debt levels are once again at historically high levels. The level of debt that this system can carry is limited. The level that it is limited to might not be known, however, one can look at natural laws in order to estimate a possible limit. It is my believe that the natural cycle (limits) for these type of systems (man-made systems) are linked to the human cycles of 40 years , 70 years and 80 years, as per the Holy Scripture.

The period of 40 years is associated with middle age, judgment, as well as a generation. The period of 70 years is associated with a life-time and judgment. The period of 80 years is associated with an extended life-time, two 40 year periods and also judgment.

The history of this dollar monetary system appears to follow these natural cycles with an almost scary accuracy. From the period of the Great Depression (gold revaluation) to Nixon closing the gold window is more or less 40 years. That is the period of 1929 to 1933 to 1971.

The period from 1929 peak in the Dow – when the stock market crashed, as well as the peak in the Dow/Gold ratio – to 1999 when the stock market made a peak (1^st of 2 peaks), and the Dow/Gold ratio peaked, is 70 years. Remember, the Dow/Gold ratio is a significant indicator of the extent to which claims on real assets exceed the actual real assets; therefore, it is an extremely important signal when determining turning points in the current fiat money system.

The year 2014 will be 70 years since the Bretton Woods agreement that brought about the current monetary system, with the dollar as reserve currency. This is how the relationship with the US and the gold of other nation states in the US came about.

We are already in the period that marks 80 years since the Great Depression. The year 2013 will mark 80 years since the 1933 gold revaluation. It is currently 40 years since the closing of the gold window.

The point here is that the natural cycles appears to be very relevant to this man-made monetary system, and that it is very likely that we are extremely close to the end.

The end of the monetary system is likely to come before a peak in gold, if by decree (creation of a new monetary system), but still forced by natural law. If the system is ended by natural law, then it is likely to come at the peak in gold or after. The peak in gold I refer to is gold as measured against other real assets (not paper money).

Another possibility to keep in mind is the fact that gold could also be outlawed by most governments. I am not saying that this will happen, however it is a possibility, and should be watched for. If this comes to being, I believe we have entered the period when this might happen.

Again, the nature of gold allows us to keep track of the times and seasons of this corrupt system, by studying the behaviour of gold.

Gold Fractal Analysis

Based on the above analysis and long-term fractal analysis, it appears that we are close to a top in gold (in terms of fiat currency and real assets). However, let this not confuse you to think that we are close to a top in the price of gold in terms of the dollar or other currency amount.

We are close in terms of time (as early as the end of 2012 to the beginning of 2013), but $ 1920 is not close to $10 000, should $10 000 be the peak in the gold price, for example. It is also likely that gold will not have a peak in fiat currency as such, but instead, just discontinue trading in fiat currency. That means we might come to a point where gold will only be exchanged for real assets.

Below is a 38yr gold chart (thanks to goldprice.org):

I have done some fractal analysis on this chart. I published this analysis the first time when gold was well under $ 1200 dollars. The fractals indicated have astonishingly continued to keep its similarity as we have progressed during this gold bull market.

On the chart I have indicated two patterns marked by the numbers 1 to 3. The first pattern (fractal) forms a small cup between 1974 and 1978, compared to the second pattern which forms a big cup between 1980 and 2008. If the bigger pattern continues it similarity to the smaller pattern, then the parabolic (based on a long-term scale) move in gold should continue, taking gold to multiples of the current price. I have indicated the point in the 70s that is similar to point where we are at now.

What I wanted to highlight here is the fact that according to my fractal analysis, it appears that gold has reached a critical point where it is expected to rise really fast. Also, this analysis suggests that we could peak as early as the end of 2012 to 2013, and we should as a minimum reach $ 4000 by then. This is consistent with the above analysis regarding gold and the monetary system.

Please note, the above fractal analysis is just a very big picture analysis, as well as a simplistic analysis prepared for this article. One has to also look at the context in which both patterns exist as well as look at confirmation standards.

My premium subscription service and long-term fractal analysis report provides more usable information regarding the price of gold and silver. Please contact me for details as well as a free current edition of my premium service.

Other Important Points

I believe there are enough signs that indicate that we have entered a period where we should expect the worst. We should thus prepare for the worst, with the hope that we would be able to cope with whatever comes our way.

Due to the great probability that the fiat money system might come to an end soon, it is not desirable to exchange physical gold and silver for fiat money. Where possible it is better to exchange them for real goods and services and productive assets.

An economic depression is virtually assured due to the bankrupt monetary system as well as the extreme debt levels.

For more analysis, subscribe to my blog or premium service.

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. For more information on the report see this article.  The report is $50 ($30 for subscribers of my premium service), and I believe it will prove to be worth every dollar.

Warm regards

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”

Turning Point By Hubert Moolman

I received an email from a good friend of mine, today. His comment, per the email, is in response to a prediction by Gann Global Financial, that 12 May 2011, was the 60-year anniversary of the commodity top, and that we might be at a turning point of what will be a 1 ½ year decline in overall commodities.

Below, is his email comment:

Hubert,

I don’t see how a failing dollar can allow for this prediction,

but it sure as hell seems like the markets are expecting it.

Initials.

I think his comment aptly summarises the peculiarity of the situation we find ourselves in, in today’s markets.

My reply (with additional comments added for this publication) is below:

Very, interesting. I agree we are at a big long-term turning point. I also agree that commodities have put in a long term high, but a high measured in what? Measured in dollar fiat or gold real money. My view is that commodities will decline significantly as measured in gold. Silver is more difficult, since it is part money and part classic commodity. However, the time we are going in now, should make its commodity role insignificant, and it will behave just like money, and follow gold. So, I would say that silver might have peaked in pure commodity terms, but as a currency it will peak when gold does.

So, commodities might have peaked (in real terms), but that means real money, is only just beginning its parabolic move. Fundamentally, gold and silver are real money and not pure commodities. We are in a time, where things will be exposed for what they really are. Fiat money and its related debt instruments will be exposed as worthless pieces of paper, whereas gold and silver will be exposed as the best value preservers.

Paper assets and other debt driven assets including stocks, have also peaked, as far back as 1999, and might soon start its panic drop, taking it to its lows. I think the K-wave analysts are right , when saying that we are in the Winter part of the K-wave. I believe this decline will last until at least 2020. I think so, due to a fractal calculation I did for gold.

The problem with establishing targets for the lows in commodities and stocks, is the fact that we are dealing with fiat money, which is an inconsistent measure. The 1965 dollar is, for example, is a completely different dollar to the current one. So the Dow, for example, should technically drop to $1000, but one is inclined to think that it might be impossible in terms of the current worthless dollar. I expect a huge drop in the Dow over the next couple of years, but whether it will be to $6000 or to $1000 remains to be seen. I believe both are possibilities. Remember, I think, the Dollar is closer to a long-term bottom, than a top, when measured against other currencies. Below is a chart (compliments of Yahoo Finance) I did for the Dow. I have indicated how two patterns (fractals) could be similar. The Dow might be searching for that point 5, before it could make a huge decline over the next 18 months or so. That point 5 might still be at 13100 or even at the all time high or higher, but we just have to wait and see. I have also indicated another possibility for the Dow, which suggest we might have a smaller correction (to about 9 -10 K), before we get to point 5 and the big correction.

Gold

In my opinion, gold and silver is looking extremely bullish at this point. Below is a gold chart which indicates a glimpse of my fractal work:

Gold should soon attack the upper boundary of the channel indicated. That means it should pass      $1600 very soon.  Based on the fractal work, it should eventually (after much volatility) go through the upper channel, and then really take-off from there.

Silver has just recently signaled and confirmed its intention to go to $100 and beyond over the next couple of years. By just about reaching the $50 dollar area, it completed a giant cup in similar manner to gold, when it touched its 1980 high. It is very normal to have a retraction after the cup is formed. It is normal for these retractions to retract about a third of the cup’s depth. For silver this can be anywhere close to that $30 to $34 dollar area, which means that should the cup be valid, the bottom for silver could be in. If not, it should not be much lower.

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

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

Dollar Gold, Rand Gold, DOW, JSE Gold and HUI – by Hubert Moolman

Let’s start with a big picture view. Below is a long term Dow/gold ratio chart. As you can see on the chart, it has just been one-way traffic the last ten years, with the ratio moving down from almost 45 to about 8.16. It seems that the next temporary stop might be between the 4 and 6 level. I have previously written how the 10 Dow/gold ratio level has been a pivot point back all the way to 1930.

This number has acted like a “golden ratio” in that things really start to happen before or after the Dow/gold ratio breaches 10, in either direction. In the past it was the level from where either the gold price or the Dow increased spectacularly while the other went nowhere to down.

 Chart generated on the stockcharts.com website

As you can see on the chart, in 2009 the ratio went through the 10 level (going down), touching 7, from where it went back to test the 10 level. Since April 2010, it has resumed the downward move and appears ready to accelerate its fall.

So, in my opinion conditions will continue to favour gold, relative to the Dow.

What will be the effect of conditions on gold, going forward?

Higher—much higher—prices. That will be the major effect on the gold price, going forward. From a shorter term perspective, things are much like they were in 2007. This can be seen from the following chart:

 chart generated on the fxstreet.com website

More information and analysis of this chart is available to subscribers to my premium service.

From a longer term perspective (see my Long Term Gold Fractal Analysis), conditions are much more like the 70s, when gold was continuously making all time highs. The similarities to the 70s are likely to continue throughout this decade, with conditions propelling gold higher on a parabolic path, whereas the world economy and the Dow in particular will be going nowhere. The world’s great debt bubble will continue deflating, and until it has appropriately deflated there can be no recovery. Along with gold and silver, much higher prices should eventually be expected for commodities, whereas paper and all things inflated by the great debt bubble of the last century should lose significant value relative to gold, silver and commodities.

What will be the effect of conditions on the Dow, going forward?

As I have said, I expect the world economy to go nowhere over the next decade. It can only recover when we are at the end of this huge debt crisis, which could take another 10 years or more. A peak in the gold price will likely be a good signal that the end of the world debt crisis is only a few years away. I believe we are still far from a peak in the gold price, however, which means we’re even further from having conditions suitable for a growing world economy and a Dow worth investing in.

I wrote previously: “Debt levels have become a huge burden and will strangle the world economy for at least the next 10 years. The debt will have to be settled eventually, either voluntarily (unlikely) or by force (death of all fiat denominated debt).  All future production will be severely reduced by the debt obligation and the effects will be a world economy in chaos and possibly with life threatening phenomena like starvation being the order of the day.

That is just how it works when you have huge debt – you will have less of your future income/production available due to the debt obligation that has to be met every month.”

From a shorter term perspective, the 11000 level could prove to be a barrier to the Dow, and it could fall to the 9000 level or below.

The Rand Gold Price

Below is a chart of the South African rand gold price.

 chart generated on the goldprice.org website

I have indicated a possible symmetrical triangle. In textbook fashion, the price broke out of the triangle, advanced for a few weeks, and has returned to a support at nearly the same level where it broke out. It is now at a point where it could spike significantly higher. This is a great signal for the SA gold miners, as well as possible evidence that the HUI breakout will have “legs”. For more analysis on JSE gold miners and the HUI index, please visit my website (premium service).

Conclusion

I believe gold and silver are the assets to own throughout the next several years. They might be the most functional assets with which to protect one’s wealth during the coming storm. I encourage you to look after yourself and your loved ones, and please obtain the most functional assets to protect your wealth.

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 (http://blogs.fin24.com/hubertmooolman) for older but informative articles.

My premium service is $10 per article.It covers various topics like the dollar gold price, silver price, rand gold price, HUI, JSE gold miners and Dow individually Please email me for more information.

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

Gold’s Rise And The Dow’s Fate by Hubert Moolman

24 June 2010

In a previous article called “Gold, Dow And The South African Rand” (dated 24 May 2010), I stated: “we will probably have more of these scary drops in the gold price as we continue into this volatile phase of the gold bull market. The good news for gold bugs is that we will also have some huge up days, and the general trend will be very much up.”  If you look at the gold chart, you will notice that despite the volatility in the gold price since then, the trend is definitely up. When these scary drops happen, many people start panicking and eventually get “shaken off” this great bull market.

It is important to keep the big picture in mind. When one only focuses on the day to day movements of the gold price, one will be one of those who will lose out. At this point, where gold is going parabolic, you could sell all, and a week later the gold price could be $150 higher (or even more). At this stage of the gold bull, a sharp drop in price is an ideal opportunity to add to long-term positions; it is not a time to panic and sell one’s core holdings. Believe me, while gold is going higher in this bull market, there will be many sharp (daily or weekly) drops.

What is the big picture for gold?

The chart above is a long-term gold chart (thanks to goldprice.org). This chart is the big picture for gold, as far as I am concerned. If you look at the chart, like I do, then it should tell you that the gold price is going to explode upwards very soon. It should also tell you why looking at the big picture is so important, and why focussing on gold’s day to day movement might cost you a fortune. For more information about this gold chart and its analysis, you can purchase my Long Term Gold Fractal Analysis Report (email me for details).

What is the short-term gold picture?

I have marked the two patterns that I feel are similar. I have marked the patterns by highlighting 5 points on each. If the second pattern resolves in a similar manner to the first, then the gold price should hit point 5 on the upper resistance (trend) line indicated on the chart. For these fractals (patterns) to really be similar, there should be a measurable relationship between the two patterns, measurable in terms of time as well as price movement. So, for the second pattern to resolve like the first and still be a valid fractal of the first, it has a certain amount of time to do it, and a certain price movement to cover.

I can tell you that time has been moving, whereas price has not been moving as fast as should be expected (based on the time movement). What does this mean? If these two patterns are actually fractals, then price has to catch up with time, and that should mean strong rallies (shorter time periods) could be coming up. As I am writing this, gold is up $20 the last couple of hours. It is going to be interesting.

Is the big picture in gold, as shown above, consistent with what is going on in the world economy today and with what is expected going forward? Consider the following:

• Debt levels world-wide are at historically high levels
• These debts are holding back the world’s economy, and will continue to do so for a significant number of years. (see here for more on this)
• These debt levels are probably going to bring down the current world monetary system.
• All fiat currencies are depreciating, as measured against gold, and this will increase as more countries struggle to meet their debt obligations
• Tangible assets like gold and silver are under-valued as compared to intangible assets like equities and bonds. This is illustrated by the Dow/gold ratio. (see here for more on this)

When one takes into account the points above, then it is hard not to agree that the big picture in gold, illustrated above, is probably accurate.

If the world’s debt levels are at all-time high levels and are likely to hold back the world’s economy, then this should affect the economics of listed companies and the real values of companies listed on the great stock exchanges of the world.

This does not bode well for Dow and other listed stocks. They will very likely lose real value (as measured in terms of gold, silver and other commodities) over the next couple of years and beyond.

Nominal value (the value as listed on the exchanges in terms of fiat currency), is an altogether different matter. This matter is often referred to under the inflation vs. deflation debate. It makes things easier when one distinguishes between nominal and real values, when trying to understand this inflation/deflation debate, or where the stock markets are going over the next couple of years. One could still have higher nominal values for general stocks, notwithstanding bad economic conditions. Will we have higher or lower nominal values for general stocks over the next couple of years and beyond?

For more on this and gold commentary, you can subscribe to my free newsletter at http://hgmandassociates.com.

There are also some great signals that I like to use when forecasting where the stock market is likely to go in the future. One such signal or proxy is the value of the South African rand compared to other currencies. The South African rand has been a fairly reliable measure or proxy for risk aversion. When the general markets take a hit and everyone is running for safety, the Rand usually gets hit hard.

Below are two South African rand charts that I have been tracking. I have done some proprietary fractal analysis, which I would like to share with you.

The first is a 5 year US dollar/SA rand chart (generated on fxstreet.com). In a previous article, I have used this chart and more to show why I think the Dow has topped for now. On this chart, I have indicated two black lines as a possible trading range. I have also indicated two possible fractals. I have marked 4 points on each fractal pattern to indicate how they are similar. If the second pattern resolves like the first pattern, then price should break out of that top line of the trading range and make its way towards the 9 price level. This will likely mean that the Dow will visit the 9000 level. This appears to be consistent with fractal analysis I have done on the Dow.

The second is a 5 year Canadian dollar/SA rand (generated on fxstreet.com). Again, I have applied my proprietary fractal analysis to his chart. I really like this chart, since it clearly illustrates (in textbook fashion) how effective fractal analysis can be. This chart gives a clear signal when fractal analysis is applied. It is probably due to the fact that both South Africa and Canada are resource based economies (just a guess).

Again, I have indicated two possible fractals. I have marked 6 points on each fractal to indicate how they are similar. If the second pattern resolves like the first pattern, then price should break out of that top black line, and make its way towards the 8.5 price level. This will likely mean that the Dow will break down. The similarity of the sections indicated by the circles gives me added confidence that the second pattern will resolve like the first.

My other recent articles you will find at  http://blogs.24.com/hubertmooolman , since I only recently started posting here.

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If you find this information useful, please forward it to friends or family so that I can continue to reach people that would not normally read informative sites such as this one. You can subscribe to my newsletter at http://hgmandassociates.com/. My newsletter is free and I send it out whenever I feel I have relevant information to share. I do gratefully accept donations, though, so that I can continue to research and write. Send me an email for details. 

May God bless you.

Hubert Moolman

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

Jim’s Formula – published with the permission of Jim Sinclair

Jim’s Formula:
September 1, 2006

1. First interest rates rise affecting the drivers of the US economy, housing, but before that auto production goes from bull to a bear markets.

2. This impacts many other industries and the jobs report. An economy is either rising at a rising rate or business activity is falling at an increasing rate. That is economic law 101. There is no such thing in any market as a Plateau of Prosperity or Cinderella – Goldilocks situations.

3. We have witnessed the Dow rise on economic news indicating deceleration of activity. This continues until major corporations announced poor earnings, making the Dow fall faster than it rose, moving it deeply into the red.

4. The formula economically is inherent in #2 which is lower economic activity equals lower profits.

5. Lower profits leads to lower Federal Tax revenues.

6. Lower Federal tax revenues in the face of increased Federal spending causes geometric, not arithmetic, rises in the US Federal Budget deficit. This is also true for cities & States as it is for the Federal government.

7. The increased US Federal Budget deficit in the face of a US Trade Deficit increases the US Current Account Deficit.

8. The US Current Account Balance is the speedometer of the money exiting the US into world markets (deficit).

9. It is this deficit that must be met by incoming investment in the US in any form. It could be anything from businesses, equities to Treasury instruments. We are already seeing a fall off in the situation of developing nations carrying the spending habits of industrial nations; a contradiction in terms.

10. If the investment by non US entities fails to meet the exiting dollars by all means, then the US must turn within to finance the shortfall.

11. Assuming the US turns inside to finance all maturities, interest rates will rise with the long term rates moving fastest regardless of prevailing business conditions.

12. This will further contract business activity and start a downward spiral of unparalleled dimension because the size of US debt already issued is of unparalleled dimension.

Therefore as you get to #12 you are automatically right back at #1. This is an economic downward spiral.

I heard all this “slow business” as negative to gold talk in the 70s. It was totally wrong then. It will be exactly the same now.