Wednesday, September 05, 2012


While we are waiting for the current narrow trading ranges in the Dow and the S&P to resolve themselves I thought it would be interesting to take a look at the status of the bull market in gold which has lasted 14 years and counting.

On the monthly bar chart above this post you can see that the gold bull market has been punctuated by several trading ranges which have lasted a year or more each (blue dash ovals). The latest one started in the summer of 2011 when gold hit an all time high near $1925.

Bull markets in commodities tend to end in wild bursts of enthusiasm which show up in weekly and monthly charts as V-shaped tops with very steep angles of ascent and then descent. Rarely is such a top followed by an extended trading range. In fact the drop from the $1925 top in gold has so far been smaller in percentage terms than the 33% drop which followed the  2008 high. This is reason to believe that the bull market in gold is still intact and that the current trading range will be resolved to the upside.

My best guess right now is that gold will rally to $2300 or so at which price its value in dollars would match the inflation-adjusted high price established in the year 1980. That top was followed by an 18 year bear market.


Bill said...

Thank you for your work, Carl. I appreciate this analysis. Never occurred to me, but now that I see it laid out it makes total sense.

Nav said...

Global gold ETF holdings reached a new record of 79.1Moz
(previously 78.5Moz) on Thursday. (Bloomberg Aug 30, 2012)
Decent-size sellers in Gold Today ,
Great read .
Thank You !

Poly said...


What's the significance of the $2,300 top?

Although one more speculative surge to a final top is certainly in the cards (what I call a C-Wave), do not discount Gold's ability in a final wave to move as much as it did (nominally) during the entire Bull Market.

Once Gold goes truly parabolic, the $100 daily moves will see it beyond $3,000 in short order. But I concur with your V top, this could all occur within the same month.

Unknown said...

Gold prices are very high because we have an unstable economic situation. The monety euro is very unstable as all currencies.