English: A bag of money, US dollars, spinning in a vortex of color, representing chicanery or misrepresentation of cost or economic information or data, but could represent outright financial fraud. (Photo credit: Wikipedia)
I’m not a fan of financial or monetary charts. Given that the data on which these charts are based are typically received from the government, and given that the government routinely lies about economic data, I can’t see how anyone can reasonably place significant reliance on charts.
I prefer to try to identify fundamentals. I look for long-term trends whose power I deem to be irresistible. Insofar as I can identify such trends, they may not tell me what the price of gold, or the unemployment rate, or the inflation rate, will be next week, but they’ll give a clue as to whether those numbers will be up or down a year from now. I’m more inclined to invest in trends that should be good for the next several years than I am to speculate (bet) on technical changes that might be reported in the next week.
But here’s a chart published by Chris Martenson, CEO & co-founder of Peak Prosperity and a long-time gold bug. The chart makes sense to me and is compelling. I’ve seen other chartists talk about “flag” formations in the past. They explained that the price of gold has been making a “flag” for the past year, and that such “flags” typically precede a major price change. The price change could be a big increase or a big decrease, but in the case of gold, a big increase is expected.
Until now I didn’t have enough brains or background to appreciate the “flag” argument–largely because I only saw “flags” one “flag” at time. But his chart shows a history of five “flag” formations in the past four years. That “history” makes the flag concept more easily understood and convincing.
This doesn’t mean that I now trust all charts and technical analyses of the price of gold. But I look at this chart and say, “Yeah, this makes some sense”. I not only see the flags’ “history,” I see that current flag is a monster compared to the previous four. The sheer magnitude of the current flag suggests that a huge price change is possible for gold. Mr. Martenson’s predicted $2500 gold is clearly possible and might even be understated.
More, when you see the previous four flag formations and subsequent jumps in the price of gold that took place in less than three years, it implies that after a flag formation finally breaks, the next big high in the price of gold will be reached, on average, in about six months. That implication proves nothing, but it does suggest that if and when the current “monster” flag breaks, we could see $2500 gold in less that six months. If so, that’ll be an exciting time for those of you who own gold.
Here’s the chart:
Zeke
August 20, 2012 at 11:47 AM
Hi Al,
This article may give some more insight on what is about to happen with gold.
http://www.capitalismisfreedom.com/economy/china-launching-gold-backed-global-currency
Mike
August 20, 2012 at 12:12 PM
Interesting article, too bad our congress isn’t smart enough to go back to gold based honest money before this place falls apart. Unless that is they want it to fall apart, could they be that sinister or stupid?
Gary
August 20, 2012 at 1:46 PM
Very interesting chart… I to am a chartest and I see some very troubling things with this otherwise “bullish” chart. 1) pattern and volume are questionable 2) price is below two major moving averages and nesting 3) I don’t know what cycles are being used to formulate those M/A’s 21/7 usually works them best 4) there is no RSI or Stocs on the chart as confirming indicators…
sem
August 20, 2012 at 2:36 PM
The following excerpt is taken from (JSMinset) today:
Heard the rumour China is buying 6,000 tonnes of gold? It may not be as crazy as it sounds
Frik Els | August 17, 2012
Hedge fund gurus George Soros and John Paulson and central banks around the world are jumping back into the bullion market.
At MarketWatch, Myra P. Saefong, speaks to Kevin Kerr, president of Kerr Trading International, Brien Lundin, editor of Gold Newsletter and Mark O’Byrne, executive director at GoldCore about “unconfirmed speculation” that China – the world’s number one producer and second-placed consumer (at the moment) – is gearing up to buy up to at least 5,000 to 6,000 tonnes starting before the end of the year.
Things that make you go ~~~Hmmm~.
PeaceOut
Yartap
August 20, 2012 at 4:29 PM
$2,500 dollar gold? Why so low?
Gary, I chart too. But, we need to add History to the outlook. Sonething a chart cannot do.
Sem, your right on target! I saw that too.
sem
August 20, 2012 at 4:53 PM
Welcome back Yartap:
I ‘peeped’ you on the other page (the other day), but I was not in a jovial enough mood (at the time) for salutations.
Happy to know you’re up and running (PC-wise, anyway).
peaceOut
Ummer
August 21, 2012 at 4:02 AM
It must be exiting for all those South Indian and Arab wives who were married around 1999-2004.
sem
August 21, 2012 at 1:41 PM
There’s an old saying in the Markets:
“Buy The Rumor…Sell The Fact!” I think that’s occurring as we speak.
PeaceOut
Mvg-Avg
August 21, 2012 at 3:31 PM
There’s another saying “flags fly at half mast’.My experience with flags have taught me that they are counter trend formations within a primary trend .You call them as flags ,pennants ,wedges ; they are just pauses in the trend.The pattern on your gold chart is saying the market has finished consolidating. The silver chart is lovely ,the yearlong consolidation is what is commonly called a falling wedge ,a garden variety flag if you will.Both of these are getting ready to advance powerfully . I suspect silver is headed to the 70 area by april of 2013 .I like to tell folks that there are galactic oceans of paper (promises to pay) out there that will be looking to find a safe home. There is only one problem:there aint any gold or silver available for them. As one who looks at charts I believe we are headed into WAVE 3 OF 3 in Elliott wave sequence ,the move is set and starting it’s going to be nice. A wise man told me that buying silver anywhere under 50 is like getting it for free.
sem
August 21, 2012 at 5:19 PM
An excerpt by Dr. Stephen Leeb:
So silver has two drivers going forward. One is the monetary aspect because silver is money. But the other is the industrial component, and the demand for silver to cultivate energy is going to skyrocket. Later on, people will not believe you could buy silver in the $20s. It’s a gift right now at $29.
I think it will be very difficult going forward to acquire large amounts of physical silver. Countries will have a very hard time picking up the necessary silver they will need for all of the demands. When you couple in the investment boom, that is still in front of us, that means the price of silver is literally going into the stratosphere.
The Chinese know this and that is why they are buying so much physical silver, as well as gold. I have said to many times that we are going to have a mania in the junior mining shares, but we are also going to have a mania in the price of physical silver.”
© 2012 by King World News®.
Yartap
August 22, 2012 at 12:09 AM
Mvg-Avg and sem,
The play I like to make is based upon my observations of the timing and price movements of gold and silver.
What I do is wait for confirmation that gold is going up, then I buy silver. I have noticed that silver will “lag” a little behind gold. If gold rockets up, I know that silver is more volatile than gold. So, silver sling-shots up at a greater rate than gold. At the first sign that gold is receding, I then convert my silver to gold. Silver falls faster than gold. Thus, this strategy gives more profit and retains more value. Then I wait to convert back to silver (if needed). Please keep in mine, this is only for your expectation of a rocket blast in pricing. Conversion cost must be considered.
History shows that it is time to buy silver. The charts are very close to the indication of -GO! I have already started small purchases.
Mvg-Avg
August 24, 2012 at 12:15 PM
There are times in one’s llife that stand out as confirmation that the train of thought at that a given time was correct. I recall back in the late 90′s being bullish on silver,it seemed very much like the wrong investment to pursue.In hindsight buying silver in the 3 and 4 dollar range was probably the smartest investment decicion I ever made .When I recall the feedback I received from the crowd, I was wrong, even” you will trip over your long grey beard before silver ever goes back up”,well I will never forget that statement,it’s etched on my mind. This bull market is now just as invisible as it was 14 years ago .Remember one thing about Bull markets ” EARLY stage bull markets are always invisible to the herd “. Maybe if you read Exodus 3:22 and heed the instructions and count it as a lesson ,in days of old maybe the Israelites were enjoying a powerful Bull market.There is nothing new under the sun!!!
sem
August 24, 2012 at 6:38 PM
It’s been said, “The two happiest days in a boat owners life, is the day he buys the boat and the day he sells that boat.”. I was that ‘boat owner’ (from $8-50 silver), at 80% of my position. However, I can move more freely now as the inevitable rise in the (more portable) other PM’s is encouraging.
PeaceOut