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

Barron’s Gold Mining Index Forecast

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

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

Barron's Gold Mining Index Analysis

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

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

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

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

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

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

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

Warm regards,

Hubert

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

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

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

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

Hubert

http://hubertmoolman.wordpress.com

hubert@hgmandassociates.co.za

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

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

Silver Price Forecast:

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

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

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

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

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

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

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

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

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

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

Silver Chart Update:

Below, is a 6 year silver chart:

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

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

Warm regards and God bless,

Hubert

hubert@hgmandassociates.co.za

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Do the charts for these gold stocks agree?

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

HUI Analysis

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

Fractal Analysis of the HUI – only for Premium Subscribers.

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

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

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

Warm regards and God bless,

Hubert

http://hubertmoolman.wordpress.com/

hubert@hgmandassociates.co.za

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

How To Choose Gold Stocks During This Rally

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Warm regards and God bless,

Hubert

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