Gold bull market … far from over

The bull market in Gold is entering its tenth consecutive year of a long term uptrend. In the entire history of the US stock market, 1885 – 2011, there has only been one long term uptrend that was longer. The thirteen year, 1987 – 2000, long term uptrend that led to the dotcom bubble in the late 1990’s. For many, this type of bull market in Gold will be a once in a lifetime event.

The bull market started during the dotcom bust, and the secular low in commodities, in 2001 when it was only $255/oz. Since this is more of a monetary event, (as are all bull markets in Gold), than a price appreciation event, this bull market has been unfolding in five Primary waves. One must keep in mind that Gold is not becoming more valuable. Its purchasing power remains relatively constant over time. This bull market is unfolding, in price, because the currencies that are required to purchase one ounce of Gold are becoming relatively less valuable. This is exactly what occurred during the 1933-1946 and 1967-1980 Gold bull markets as well.

In 1933 FDR lowered the value of the USD, relative to Gold, by raising its price from $20.67/oz. to $35.00/oz in USD. In 1970 Nixon lowered the value of the USD, relative to Gold, by removing the USD off the Gold standard completely when it was $42.00/oz. For the past several years the FED has been lowering the value of the USD, relative to Gold, with massive liquidity injections under the tranquil term of Quantitative Easing. Basically, the purchasing power of the USD is being devalued again, and, it requires more and more of these devalued USD’s to purchase one ounce of Gold. This is not a local event. Currencies worldwide are also being devalued, and, the cost of one ounce of Gold is rising worldwide no matter the currency.

Since Gold is always aligned with the commodity 13 year secular bull market, we are expecting Gold to top around the year 2014: 2001 – 2014. As noted above the bull market is unfolding in five Primary waves. Primary I took three years, 2001 – 2004, as the price of Gold rose modestly from $255 to $432. Primary wave II bottomed in 2004 at $371. Primary wave III lasted four years, 2004-2008, as Gold rose a much more impressive $371 to $1034. Notice the relationship of the rise in Primary wave III ($663) to the rise in Primary wave I ($167). Then during the economic meltdown of 2008 Gold declined in Primary wave IV to $681. At that low Gold entered its final primary wave of the bull market, the historically parabolic Primary wave V.

As you can observe from the weekly chart this bull market is expanding in complexity. The 1987-2000 13 year bull market in equities was even more complex. Primary wave I is quite simple, with an extended Major wave 3. Primary wave III was a bit more complex, with both Major waves 3 and 5 extending. Primary wave V is already more complex. Not only is Major wave 3 extending, but Intermediate wave five of Major 3 is also extending. This is exactly how markets prepare to go parabolic. The waves continue to subdivide, with minor corrections along the way, forcing buyers in at higher and higher prices. Naturally, there will be a sizeable correction at some point, when buying subsides, during Major wave 4. Then Gold will enter the parabolic Major wave 5. This will likely coincide with a worldwide economic event. The most likely culprit will be the continuously rising inflationary pressures in the fast growing emerging economies.

The 1967-1980 Gold bull market unfolded in time cycles with the following pattern in years: 3-3-3-2-2. This translates into important turning points in the following years: 1970-1973-1976-1978-1980. The current bull market appears to be following a slightly different time cycle pattern: 3-2-2-3-3, or 2004-2006-2008-2011-2014. As a result we expect Major wave 3 to top in 2011, and Major wave 4 to bottom in 2011 as well.

Currently Gold is in a Minor wave 4 downtrend. We’re expecting this downtrend to end in February around the $1315 area or a bit lower. Upon completion Minor wave 5, of Intermediate wave five, of Major wave 3 will be underway. This next uptrend could be quite dynamic. Historically, and even in this bull market, the fifth waves have been the strongest of the five wave sequence of a similar degree. In review of the entire bull market, thus far, these fifth waves have had a 2.62 to 4.24 multiple fibonacci relationship to their third waves. This suggests two potential upside targets for the end of Major wave 3 in 2011: $1700+ and $2200+. We’ll take the conservative target of $1700+ for now. You can track Gold along with us using page 10 on this link: http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1606987. We will review the Gold market again at the end of Major wave 3. Enjoy the bull market!

About tony caldaro

Investor
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11 Responses to Gold bull market … far from over

  1. Pingback: Gold should double | the ELLIOTT WAVE lives on

  2. cobbense says:

    Re the gold “bull market” (really waterfall fiat collapse?) topping out in 2014, Janszen of iTulip is working on this scenario. which also has a gold top in $USD in 2014:

    US Treasury market blow-up 2012 to 2015

    Posted in a comment in this thread:

    http://www.itulip.com/forums/showthread.php/17958-Can-gold-survive-a-Chinese-bust-Strong-dollar-for-2011

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  3. rcp54321 says:

    Tony –
    I’m seeking clarification please.
    “Wave 3 can not be the shortest wave of the three waves: 1, 3 or 5.”
    Am I correct that Minor 1 extends approx 400 ($865 to $1265) and that Minor 3 runs up another 275 ($1155 to $1430) ? If so, wouldn’t these parameters limit Minor 5 to less than a further rise of 275 : something like $1315 to a max of $1590 ? Have I misunderstood your suggestion that Major 3 could top $1700 ? Have I got my numbers wrong ?
    Yours,
    Robert

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  4. x0521 says:

    Tony, timely update re: gold-(during the pullback for a better entry). After the correction in silver and plat, would you expect these t0 perform equally as well. Obviuosly after this recent move silver needs to correct deeper near term. Also, what about gold miners? If gold doubles (say from 1300 t0 2600) what size increase would you expect in the miners? If oil corrects to 75 to 80, 150 a target before the equity bull tops in 2012 (double also)? thanks.

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    • tony caldaro says:

      You are welcome!
      Yes, both Silver and Platinum should perform well.
      Think Silver will have a steep correction during Major wave 4 in Gold.
      I only track SLW, GG, and IAG in the metals sector.
      Have not been impressed with either of the last two, no comment.
      Crude, yes possibly.
      cheers!

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  5. lemosbrasil says:

    hi tony

    i dont know if i can post about the dow and sp500 here.

    But, lets go and i sorry if i dont !

    Im was thinking what you said to me yesterday about the double top in 1.440 to last primary 5.

    wso, i got a insight !!!

    look…the primary 3 is underway, is correct ? ok….

    thw next downtrend begin now, around 1.290.1.313. so, you suppose and me too, that this downtrend goes to around 1.180-1200. but , this downtrend could be major wave 4 and the major wave 4 coudl be until 1.363 !! in this case, we could have a primary 3 until this 1.363 !!!

    SO, the large downtrend from 1.363 until 1.150-1.160 could be the primary 4 !!!

    This movement seems to the last movement in july 2009- may 2010 ! when we went from 869 until 1.150 and after 1.040 and after 1.229 and after 1.010 !!!

    This is what i am thinking after you said to me about the characteristic of primary movement !
    But you can say to me: WHY DO YOU THINK ABOUT 1.440 TO THE TOP OF THE PRIMARY 5 ?

    Because i traced a channel with 2 trendlines in scale logaritmic ! i put im my blog http://www.volatilidadefinanceira.blogspot.com

    In this case, the the trendilne from 1.576 in a scale logaritmic touches 1.440 in febreuary 2012 !! like you preview to the top of bull market !!

    The primaries lines , i put there too..

    RESUMING: WHAT DO YOU THINK ABOUT THIS SPECULATION ?

    Thanks for you patience with me !

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    • tony caldaro says:

      Hi Lemo,
      The current uptrend from SPX 1011 is Major wave 1 of Primary III.
      Let’s assume for a moment that the uptrend goes much higher, without any trend changes.
      Depending on how high it does go it could be all of Primary III.
      Again let’s assume the SPX goes to 1440 without a trend change, ending Primary III.
      Then a steep correction for Primary wave IV could set up your double top at 1440 to end Primary V.
      Since we are a long way in both time and price, this is only creative speculation at this time.
      Nevertheless, your scenario is possible.
      cheers!

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      • lemosbrasil says:

        Ok Tony !

        I really forgot that this current uptrend is a major wave 1 to theory elliot ! sorry !

        And i understant about the duble top in 1.440 .

        thanks a lot !

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