This one?
Posted on 12/10/2004 7:02:08 PM PST by SierraWasp
GET OUT OF GOLD! Head for the exits!
Commentary: Gold has likely topped
By Tim W. Wood, Cycles News & Views Last Update: 1:19 PM ET Dec. 9, 2004
GULF SHORES, Ala. (Cycles) -- It's truly amazing to watch the sentiment pendulum as it swings from one extreme to the other.
At the 2001 bottom, everyone everywhere was totally disgusted with gold. When I suggested buying gold I was met with rejection, "Gold is dead" to quote my critics.
Here we are some four years later, gold topped $458 last week - a three year high. On Wednesday, gold fell more than $15 and continues to drop as of this writing. Gold bulls are calling this a "simple correction" but I'm here to tell you that the pendulum is swinging back.
The majority is always right as sentiment swells near the end of a major move. But, the majority is also always left holding the bag at the end of that major move because they never see the turn coming. That turn appears to be at hand.
Let me make it perfectly clear that according to my work, the underlying cyclical structure of gold is now on thin ice. We saw the first sign of trouble yesterday and it's suggesting that gold is now finishing a major move.
The dominant long-term cycle in gold is the nine-year cycle.
Historically, the longest advance ever seen into a nine-year cycle top was 41 months and that was seen during the great bull market advance into the1980 top.
Gold has now entered uncharted waters, so to speak, in that the current nine-year cycle has thus far advanced into its 44th month.
Gold vs.CRB
On the surface this does indeed appear to be a bullish development -- and in fact has driven gold sentiment to record levels. But, when we dig deeper into the underlying performance and technical conditions the story begins to change.
To begin with, the Commodity Research Bureau Index (CRB) has pushed back to the same levels that it was at in January 1980 when gold topped at near $873 an oz.
The fact is that the CRB is back at these exact same extreme levels, yet gold has thus far failed to even move 50 percent of the way back up to its 1980 peak, from the 2001 low at 255. If this run in gold was healthy and proportionally related to the advance in the CRB we would have $800 to $900 gold right now.
Gold vs. dollar
Now examine gold's current performance in relation to the dollar with gold's performance in relation to the dollar during its bull market, which topped in 1980. During this time the dollar index fell from the 1976 high at 107.60 to 84.79 in January 1980, which corresponded with the $873 peak in gold. This was a 21.2 percent decline that resulted in a 760 percent advance in gold.
This time the dollar index has fallen 32.8 percent from the 2001 high at 121.29 to the recent low at 81.55, while gold has only advanced some 80 percent.
If we apply the 1976 to 1980 gold/dollar ratio to today's situation, gold should have advanced some 1,167 percent, based on the corresponding 32.76 percent decline in the dollar. This would mean that gold would have advanced to over $3,200 an oz.
This simple ratio analysis proves that the relationship between the falling dollar and rising gold is NOT constant.
Nine-year vs. three-year cycle
In addition to gold's poor performance in relation to the CRB and the dollar, I want to point out that there is strong technical evidence suggesting that gold has made its final push into what will likely mark the top for the current nine-year cycle.
Let me explain one such piece of supporting evidence. Historically, the nine-year cycle in gold has topped with the first full underlying three-year cycle within the CRB. You can see an example of this in the chart below.
I've marked the 1976 nine-year cycle low in gold with a "9." The corresponding three-year cycle low in the CRB occurred in 1977.
Notice that gold topped with the first underlying three-year cycle advance of the CRB. This occurred in January 1980 in gold and in February 1980 in the CRB. The point being, that both topped with the first 3-year cycle advance of the CRB within the nine-year gold cycle.
The next nine-year cycle low for gold occurred in 1985 and the corresponding three-year cycle low in the CRB came in 1986. Both advanced out of these lows with gold topping in December 1987 and the CRB in June 1988. Again, the point being that gold topped with the first underlying three-year cycle advance in the CRB.
Another example of this historical relationship can be found with the cycles advancing out of the 1993 lows. This time, gold topped in February 1996 and the CRB topped 2 months later in April.
In our current case, the last nine-year cycle low in gold occurred in April 2001 and the corresponding low in the CRB occurred in November 2001. The three-year cycle in the CRB is now beginning to show signs of this top -- and if this relationship holds -- it will mark the top for the current nine-year cycle in gold.
Additionally, there is technical evidence suggesting that the dollar has made a major cycle low.
I warned of this in the December issue of Cycles News & Views. Wednesday was the final trigger to move gold holdings to cash.
Cash out
Please understand that I'm not just being contrary for the sake of being contrary. I can assure you that it would be much easier to just join the crowd and tell you to buy gold because it's going to the moon and that the dollar is going to zero.
However, the current technical conditions do not support this popular bullish opinion at this time. The current nine-year cycle in gold is now long tired and weak. Therefore, I can't pretend that it isn't.
I do believe that the dollar has much further to fall and that gold has enormous potential in the future. But, my work currently suggests that this will not happen within the current cycles. Nothing moves in a straight line and most things tend to take longer than we think.
There is a time to hold stocks. There is a time to hold bonds and there is a time to hold gold. My opinion is that profits from gold should now be taken and held in cash.
I previously warned my subscribers to dance close to the door in anticipation of unloading their gold positions. Wednesday appears to have signaled that it is now time to EXIT that door.
Tim W. Wood edits Cycles News & Views, an investment newsletter that applies a "quantified approach" to the classic Dow Theory and offers analysis on the stock, bond, gold and dollar markets. (cyclesman.com)
I got out of gold, actually I never got into it, over 30 years ago. I figured 174 grains of lead was worth an ounce of gold. Felt pretty secure ever since.
here is the secret- when you hear all those radio commercials trying to get people to buy gold then sell short
A tarnished gold ping to y'all!!! (grin)
Do you think there will be a backlash against all those conservative radio hosts who push gold when their fans are left holding the bag?
Gold is risky. especially what with all those alchemists out there
Evra time I tries ta carry them gold bars to the danged store... They keep pullin my danged pants down in spite of me wearing both a belt an supenders!!!
Stock market down? Get gold.
Stock market up? Get gold.
Dollar down? Get gold.
Dollar up? Get gold.
Oil Down? Get gold.
Oil up? Get gold.
But where is Tracy Gold?
never has been in the past...
besides they just speak the commercials- no one believes they actually sell the gold
Specially on "Coast-ta-Coast!" Ol Art Bell bedder stick to usin it to plate the contacts on his ham rig, or stickin into his teeth!!! (so's he kin git bedder receptshun)
I actually had significant gold mining stocks which I liquidated last month, not because I predicted a downturn, but because I just needed the cash. I still have bullion in the safe deposit box, but that's an insurance policy I never think about, except when I see one of these threads.
Just a little bit west of Stockton, CA! Butcha hafta dig fer it!!!
However... I've always wondered if... say there actually was a terrorist nuclear attack on an American city and and it produced panic, along with total and immediate economic collapse... Do you think you could buy a plane ticket with one a them there bars of bullion, or buck line with it???
Tell me how you think that would actually work in your favor, honestly and truly...
You know, that makes a heck of a lot of sense. Gold is always touted as the ultimate hedge against catastrophic economic conditions, but if the feces hits the rotory device, I'd rather have Smith and Wesson than Merrill and Lynch.
It just seemed like a better idea than putting pork bellies in there.
Gold holds value better than the Yankee fiat dollar. Shoot, as far as that goes a Confederate $5 note (today's value around $50 in very good condition) holds value better than a Lincoln $5 bill (today's value around 32 cents).
Y'all sell... please...
This one?
Gold OR Guns?
A well balanced portfolio MUST include both! There doesn't have to be an either/or in the equation.
Gold will buy more ammo. Guns will protect the gold.
A serious question from a complete idiot on gold: could it possibly bottom BELOW $300-$350?
--Boris
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