Monthly Archives: December 2011

GOLD’S D-WAVE CONFIRMED

With the move below $1535 this morning gold has confirmed that it is still moving down into a D-Wave bottom. There has been some question as to whether or not the D-Wave had bottomed in September. The penetration of that intermediate low this morning confirms that the D-Wave did not end during the overnight selloff on September 26.

In the chart below I have marked with blue arrows the last several yearly cycle lows. As you can see they tend to occur in January or February. The timing band for the next cycle low should occur sometime in early to mid January. That should mark the bottom of this D-Wave decline with the slight possibility that there could be one more short daily cycle down bottoming in early February. This will almost certainly be dependent on whether the dollar cycle has one or two more daily cycles higher before rolling over into an intermediate decline. Current sentiment levels on the dollar index are suggesting only one daily cycle higher, which should signal a final bottom in the gold market sometime in the next 2-3 weeks.

If gold can make it back to the 50% retracement in the next couple of weeks I would probably be inclined to call a yearly cycle low at that point. If however gold holds above $1500 at the next daily cycle low due in early to mid-January then I would be wary of one more daily cycle down to test the 2010 consolidation zone and 50% retracement ($1400) sometime in early February.

The combination of the dollar rally out of its three year cycle low, a yearly cycle low, and a D-Wave decline are going to produce a very sharp correction in the gold bull market. Before this is over most analysts will declare the gold bull dead. On the contrary sometime early next year you are going to get the single best buying opportunity we will ever have to reenter the secular gold bull in preparation for the bubble phase that should top in late 2014 or early 2015.

As a matter of fact now that we have confirmed that this is an ongoing D-Wave decline Once that bottom has formed it will generate a violent A-wave advance that should test the 1800 to $1900 level rather quickly later this spring.

Serious money will be made during the A-wave advance. One just needs the patience to wait for the D-Wave to bottom before jumping back into the pool.

GOLD IS ON THE VERGE OF MOVING INTO THE BUBBLE PHASE OF THE BULL MARKET

I know that during a correction of the magnitude we are seeing right now it seems more like the gold bull is dead than on the verge of moving into what I expect will be one of the greatest parabolic moves in history.

However, all of the conditions necessary to launch the bubble phase are now in place. Gold is in the process of putting in an intermediate degree bottom. That bottom, which is only days away if it didn’t already happen today, is going to be the single greatest buying opportunity, probably of the decade.

Gold sentiment is at multiyear lows. Retail traders that bought at $1900 have gotten wiped out. The media is full of stories calling for the death of the gold bull. Institutional traders from John Paulson, George Soros, and Dennis Gartman have all gotten knocked off the bull.

Breadth in the universally hated mining sector is back down to levels that have only been exceeded during the crash in 2008.

This sector has consolidated for so long that no one believes in mining stocks anymore. This is exactly the same sentiment that was prevalent in the silver market in the fall of 2010.

All the conditions are in place to launch the next stage of the secular bull market.

Up until now my expectation has been that we would see gold consolidate for probably the better part of a year before the next C-wave breaks out to new highs.

However, the scenario that is unfolding in the CRB and dollar indexes has me wondering if the gold bull isn’t going to start evolving much faster than I originally expected. Let’s just say that if I am correct and the dollar is on the verge of topping then we are probably going to see a much shorter consolidation than originally expected. Gold could launch much more quickly out of the B-Wave bottom than I expected and move to new all-time highs as early as the next intermediate cycle.

As a matter of fact I’m pretty confident that if the dollar turns down it is going to trigger the beginning of the third and final, bubble phase, in the gold bull market. 

The public is already starting to become aware of the gold bull. All we need at this point to start the flood is for gold to recover quickly from this selloff. If gold quickly shoots back up and tags, or penetrates that big psychological $2000 number I expect it will be the siren call that draws the public into the bull market. And it is the public coming into a market that triggers the bubble phase.

During this phase of the bull I expect we will see the normal ABCD wave pattern break down as gold starts to accelerate into what will almost certainly be the most incredible parabolic advance, maybe in history. By the fall of 2014 I expect we will see gold somewhere between $7,000 and $20,000 an ounce.

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