So I’m starting to see lots of chatter about traders preparing to back up the truck when gold reaches $1000. First off, if you believe like I do, that this was a mostly manufactured bear market by the bullion banks in order to stretch price as low as possible before the next phase of the bull market begins, then there’s no way it’s going to be that easy.
To begin with, if there’s anything I have learned over the years, it’s that almost no one is able to pull the trigger in real time during a bloodbath phase (the final 5-7 days of an intermediate degree decline). So it’s all fine and dandy to make plans to buy hand over fist when gold reaches $1000, but in real time as the losses are mounting day after day panic can lay waste to the best laid plans, and I have found that very few traders are able to think clearly enough to follow their plan during the last few days of an intermediate decline. The panic phase is just too intense.
While you may have a set price in mind where you think the bottom is going to occur, as that real time panic sets in traders always have doubts. So while it’s easy to envision a bottom at $1000 right now in a fairly serene low volatility market, what happens in real time is that volatility surges, and as price approaches your target your emotions start to conjure up scenarios where gold goes to $900, or $800, or $700. So in real time traders almost always end up like a deer in headlights unable to pull the trigger for fear that the bottom will not occur where they think it will.
Now let’s backtrack to that idea that the bullion banks are trying to artificially stretch the price of gold as low as possible before allowing the secular bull market to resume. If you believe like I do that this was a big contributing factor in this bear market then I think we have to assume that there is very little chance gold is going to bottom at $1000 and make it that easy for everyone to get on board the next leg of the bull market. I’m going to suggest that the odds are very high that this bear market will bottom not with a nice tidy moved to $1000, or even a bit early at $1050 or $1100, but almost certainly as an overshoot to the downside.
If we assume that the bullion banks want to stretch price as low as possible before they release it to the upside, then the strategy most suitable for triggering a massive high-volume washout would be to sucker longs into the market with a fake bottom at $1000 and then to run those stops and force everyone who bought to puke up their shares during a volatile stop run below that level.
So while one can probably start buying at $1000 you should keep some dry powder available because I seriously doubt this 8 year cycle low is going to make things as tidy and neat and easy as buying at $1000 and then sitting back to get rich.
Hi Gary, what if Gold has already bottomed at $1130-1140 and with the next move it will just touch that or drop few $s below and then resume the bull trend? This could be a possibility given the amount of people waiting for $1000 touch.. What do you reckon?
Unlikely IMO. Last November was way too early for the 8 year cycle low. Not to mention it had none of the charactieristics of a complete mind blowing panic that should occur at an 8 year cycle low.
8 YCL’s should be so severe that everyone is absolutely stunned by the magnitude of the losses. This is exactly what happened at the last 8 YCL in 2008 and not at all what we saw last November.
I’m of the opinion that we still have a much larger degree panic phase ahead of us yet. A phase where miners are selling at completely illogical prices.
I think GDX should at least go down and retest the 52 week low, maybe go even lower and shake all the Schiff-tards out of their positions 😉
Why do you think anyone who’s buying now would sell after a 15% drop?
For T.Kumars comment.
I have done a study of prior 8 yr lows in GOLD, and do see that as “possible”. I dont see that they are always Mind blowing panic like 2008. Look at the 2000 lows , they were a double bottom. 1993 was a grind down into a wedge . The 1993 lows look very much like our current wedge. If it completes with a slightly new low this summer…it could be done.
Chart here
http://www.screencast.com/t/Rj1inlu81Q
The bottoms you noted were 35% and 39% declines. I think both of those would elicit huge panic in the sector. Gold is currently already down 40% and if it drops another 15-20% I’m pretty sure we will see a massive washout.
Nice chart…. I think it confirms what I am writing about – the low is not this year 6,5 years are a little bit too short.
I expect the bottom next year or 7,5 years in sync with the previous cycles
Gary – If you believe “this was a mostly manufactured bear market by the bullion banks in order to stretch price as low as possible before the next phase of the bull market begins”, then who manufactured the 10 year run-up in gold from 250 to 1930 and how did the bullion banks magically stop it’s ascent at, let’s say – 1932, in or to finally beat the price back down in what you call a ‘manufactured bear market’?
The top at 1900 was natural. It was a C-wave top. The correction was completely natural until Germany asked for their gold back. That was the point that things started happening that I had never seen before. Prenmarket attacks of such size that they would never occur naturally. Cycles topping on day 1 of a new cycle. That has never happened in history.
Gary, aren’t we in the 7th year of an 8YC? You’ve said in the past that 8YC s do not contract.
Any cycle can stretch or contract. Cycles have timing BANDS, not timing dates.
Be careful about getting aggressively short right here. I’m expecting the bullion banks to manufacture a rally this week to suck in more longs before they take it back down.
Maybe we get another one of those FOMC rocket launches tomorrow that will be quickly taken down.
Gary, what about gold in euros… i mean, i’m european, so i bought gold spending my euros… In euro, gold is not so close to his bottom as it is in usd. In 2014 it has marked 28.75e/gr. as bottom, now is at 33,75e/gr….
As you said, you are expecting a strong dollar going forward, it means the downside of gold in euros could be not so large…. What do you think about? Do you agree??
Thanks.
Andrea.
I agree.
Forget about strong dollar 2015 is a major 15 years cycle low for the euro. The USD can test the low one more time and make lower low but that is all.
Gold in euro will move higher this autumn, but than it will plunge lower again.
The 8 year cycle low for gold is next year not now.
Great explanation of the trader psychology and nice theory…. if this was the bottom of the bear market… but is not.
Here is another theory – November was a bottom but not of the bear market.
A lot of miners have bottomed confirming it but the moves gold/silver are corrective.
Look at gold in euro the move higher is corrective expanded flat confirming that the bottom was not the bottom of the bear market and there will be one more leg lower.
We will see a move lower in August but just wave b of the correction higher. It will probably make a lower low for expanded flat 1090 +- 10 points and rally higher will follow. Many will jump on the bull bandwagon and get killed again before the real 8 year cycle low in 2016.
So do not scratch your head when you see in the next weeks 15-16-17 of the 20-25 week cycle the gold higher around 1250 instead around 1100 preparing for the final plunge… sorry no bloodbath.
Never before have we (USA) been at the debt levels we are at now ! With the world so advanced . We look at charts that can play games ,with the new masters . Thank you all for being so in-depth ,,,,, I’ll keep buying gold ! Thank you keep it up as it is helpful !
What about 30yr commodity cycle? Ten yrs up (ie 2001-2011) then 20yrs down (2011-2031?) – this has occurred for 200yrs, what is different now?
Actually the norm is a 20-30 year bull market in commodities. The short bull cycle in the 70’s was the anomaly not the rule.
For all the discussion about the timing of gold
markets there is needed, a NEW definition for gold …
as an ANCHOR for MONEY.
Money anchors all currencies, (via bid/ask ratios) ,
each country uses Currency, (basis of tax laws).
You work for currency, (not money) … you buy sell
with currency … (you do not go into McDonald’s
with a tiny speck of Gold or 1/10th oz of Silver.
While Gold is poor as an Anchor … it is the
best Anchor … it is bid/ask daily … it has
5000 years of history. It is periodic-table stable,
element, rare, does not rot, or rust, nor attract bugs.
You guys know all that stuff … but you really need
to redefine Money as an Anchor … that currency (‘s)
is not money (just a coupon for money … It should
be anchored by Government’s agreement and contract
law).
Movement of Gold is minimal as it is the sanctity
of contract (ownership), the ACH clearing of
check balances, the SWIFT foreign payment system.
Gold would not be wholly owned by Governments …
nor by banks … rather they provide the legal
basis that gold is money … the world-anchor
for all currency, based on world-wide bid/ask.
Gold is the best Money, as Anchor for all Currency(s).
Gold is no good as a currency … but is excellent as the
basis of Money (anchor) by all governments acceptance .
Gold seldom moves … just the contract of ownership …
so gold is no heavier than then a BitCoin