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A “Super-Secular” Trend In Gold

18 Aug

Weekend At Bernie's or at Bernanke's?

Weekend At Bernie’s or at Bernanke’s?

Wikipedia defines “market trends” as:

“. . . a tendency of a financial market to move in a particular direction over time. These trends are classified as secular for long time frames, primary for medium time frames, and secondary for short time frames. . . .

“A secular market trend is a long-term trend that lasts 5 to 25 years and consists of a series of primary trends.

“A secular bear market consists of smaller bull markets and larger bear markets; a secular bull market consists of larger bull markets and smaller bear markets.

In a secular bull market the prevailing trend is “bullish” or upward-moving. The United States stock market was described as being in a secular bull market from about 1983 to 2000 (or 2007), with brief upsets including the crash of 1987 and the market collapse of 2000-2002 triggered by the dot-com bubble.

“In a secular bear market, the prevailing trend is “bearish,” or downward-moving. . . .

“A primary trend has broad support throughout the entire market (most sectors) and lasts for a year or more.

“Secondary trends are short-term changes in price direction within a primary trend. The duration is a few weeks or a few months.”

•  Thus, Wikipedia defines three kinds of “market trends” that differ primarily in their duration.

Secular trends last between 5 and 25 years.

Primary trends last between 1 and 5 years.

Secondary trends last only weeks or months—but are certainly less than 1 year long.

•  In September of A.D. 2011, the price of gold peaked at a little over $1,900/ounce.  Today, the price of gold is about $1,370 per ounce.  If we defined that 23-month period as a trend, it would have to be a “primary” trend (greater than 1 year, less than 5).  Thus, we might argue that the “primary trend” for gold for the past 23 months was “bearish”.

But that 23-month primary trend was only one of the several “primary trends” that comprise a longer “secular” trend.  So, while the 23-month primary trend might be described as bearish, what was the nature of the longer “secular” trend—bullish or bearish?

The answer depends in part on whatever time frame we choose to identify our “secular” trend.

•  For example, suppose we defined the start of our time frame as A.D. 2000 when Saddam Hussein began to sell Iraqi crude oil for currencies other than the fiat/petro-dollar and thereby diminished the value of our “petro-dollars”?  What if we extended that trend until today?

In A.D.2000, the price of gold was about $275/ounce; today, $1,370.  Thus, over the past thirteen years—which is too long to constitute a “secondary” (weeks or months) or even “primary” (1 to 5 years) trend, and must therefore be a “secular” (5 to 25 years) trend—gold rose to $1,370.  That’s a 13-year long “secular trend,” bull market in gold that saw a price increase of nearly 400%.  That averages out to about 30%/year (as compared to the A.D. 2000 price of $275).

Within the context of that 13-year secular trend, the fall from $1,900 (A.D. 2011) to $1,370 (today) is truly only one of the series of bearish and bullish “primary trends”.  Those shorter, primary trends are mere components of the longer, 13-year, secular trend and therefore less important than the longer, secular trend.

•  We could also compute our current “trend” from A.D. 1971—when President Nixon stopped redeeming foreign-held paper-dollars with physical gold at the fixed rate of $35/ounce.  If we calculate the subsequent 42-year rise in the price of gold, we’ll see that gold increased from $35/ounce to $1,370/ounce today.  That’s an increase of 38 times (3,800%) in 42 years = 90%/year (again, as compared to the original, $35/ounce price).

It’s interesting that, according to Wikipedia, the maximum duration for a “secular” trend is 25 years.  And yet, the bullish trend since A.D. 1971 has lasted 42 years—17 more than a conventional “secular” trend.

What shall we call a market trend that lasts longer than 25 years?

How about “super-secular”?

•  We might also compute the current market trend in the price of gold from 1933 when the government removed gold as backing for the domestic dollar.  In 1933, the price of gold was $20/ounce; today, $1,370/ounce.  That’s a price increase of over 65 times (6500%) in 80 years for an average of about 80% per year (as compared to the original $20/ounce).

Again, we see evidence of a long-term market trend that exceeds the 25-year definition for “secular” trends and might therefore be defined as an 80-year-old, “super-secular” trend in the price of gold.

•  Over the past 80 years, the price of gold as measured in paper dollars has sometimes increased dramatically (in primary bull markets), sometimes fallen dramatically (in primary bear markets), and sometimes stagnated for extended periods.  But, depending on whether you want to calculate from A.D. 1933, A.D. 1971, or A.D. 2000, the price of gold has increased, on average, between 30% and 90% per year (as compared to its starting price) over a “secular trend” period of 13-years and two “super-secular” trends lasting up to 80 years.  So far.

Yes, the price of gold has fallen from its $1,900 peak in 2011 to $1,370 today.  That’s a mind-numbing fall of almost 30% in 2 years.  But it’s only a 2-year primary trend and only one component in each of the three, longer secular and super-secular trends in the price of gold.

These three secular and super-secular trends represent the fundamentals in gold and they’ve all been bullish for up to 80 years.

•  What are those “fundamentals”?

The 80-year, super-secular rise in the price of gold isn’t evidence of a conventional “bull market” in the sense of ordinary commodities or stocks.  Instead, it’s evidence of the declining value of the fiat dollar.  Fiat dollars are thefundamental” that drives the price of gold.

Gold isn’t going up based simply on conventional notions of supply and demand.  Supply and demand play a part in the price of gold, but the primary motivator is the fiat dollar’s loss of public confidence.  Gold rises in the secular and super-secular trends to reflect that loss.

There’s no evidence, and virtually no reason to imagine, that the value of the fiat dollar will ever again increase significantly.  Therefore, insofar as all evidence and common sense says the dollar will continue to depreciate, it follows that the price of gold will, on average, continue along the secular and super-secular trend lines illustrated in the following graph, until the fiat dollar dies.

GraphPaper1

Yes, the graph is simplistic.  Yes, the graph omits the 23-month decline in the price of gold from $1,900 to $1,370 and also omits the various ups and downs that characterized each of these “trend lines”.  But, even so, the graph still illustrates that, despite all of the ups and downs in the price of gold, the fundamental secular and super-secular relationship between gold and fiat dollars remains bullish–and has been so for 80 years.  Every time the fiat dollar suffers another major crisis and is shown, again, to have become worth less, the price of gold rises.  This rise will persist so long as we rely on fiat dollars.

Again, this rise isn’t evidence of a conventional “bull market” in gold.  It’s evidence that the fiat dollar is dying in its own super-secular, 80-year, bear market.

The fiat dollar’s death is concealed by a variety of market manipulations and reminds me of Weekend At Bernie’s—a 1989 comedy about two young guys trying to conceal their boss’s (Bernie’s) death.  The movie was based on a funny premise, but no matter how many gags made Bernie seem alive, the central fact remained that Bernie was dead and wouldn’t be reanimated in this life.  Similarly, the fiat dollar is dead (intrinsically worthless) and although an endless series of “gags” by the Federal Reserve of US gov-co can make the fiat dollar seem to “alive,” it’s dead and won’t be revived in this economy.

There’s nothing to suggest that the secular and super-secular trends in gold have ended or are even close to ending.  So long as the fundamental remains that fiat dollars are being issued by the Federal Reserve, the price of gold will rise.  That price will go up sometimes.  Sometimes it’ll go down.  But, long-term, so long as we have fiat dollars, the secular and super-secular price of gold will rise.

 
18 Comments

Posted by on August 18, 2013 in Economy, Fiat Currency, Gold & Silver Coin, Values

 

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18 responses to “A “Super-Secular” Trend In Gold

  1. Jetlag

    August 18, 2013 at 5:02 PM

    You bring up some valid points, which are confirmed by the chart linked below.

    As you say, the price of gold has been rising for some time – especially since 2002 – and it is, therefore, now quite high indeed.

    Given this past performance of gold, why would anyone expect it to do anything but more of the same?

    Chart:

     
  2. Cathy Baldwin

    August 19, 2013 at 1:53 AM

    The Bible mentions gold, 450 times. Genesis 2:10-12 speaks of the gold in Havilah, and it is good. Throughout to the end of Revelation 21:18 … and the city was pure gold, like glass. So it seems the Lord God Almighty loves the gold He has created. This creates a certain awareness of the unchanging value of gold even into the unseen world. It is a pleasurable feeling.

     
  3. Anthony Clifton

    August 19, 2013 at 7:33 AM

    what {who} sanctifies the gold ?

    http://buelahman.wordpress.com/

    lies or truth ?

    http://www.redressonline.com/2013/08/quit-meddling-in-the-holy-land-john-kerry/

    who determines value ?

    http://en.wikipedia.org/wiki/In_loco_parentis

    at one time I used to play chess with “Moose”…our Nose Tackle on Defense

    American Heritage Dictionary:

    nose tackle –
    n. Football
    A defensive lineman who lines up opposite the center, usually in a three-person line.

    Read more:

    And whosoever shall exalt himself shall be abased ; and he that shall humble himself shall be exalted . But woe unto you, scribes and Pharisees, hypocrites! for ye shut up the kingdom of heaven against men: for ye neither go in yourselves, neither suffer ye them that are entering to go in . Woe unto you, scribes and Pharisees, hypocrites! for ye devour widows’ houses, and for a pretence make long prayer : therefore ye shall receive the greater damnation. Woe unto you, scribes and Pharisees, hypocrites! for ye compass sea and land to make one proselyte, and when he is made , ye make him twofold more the child of hell than yourselves. Woe unto you, ye blind guides, which say , Whosoever shall swear by the temple, it is nothing; but whosoever shall swear by the gold of the temple, he is a debtor ! Ye fools and blind: for whether is greater, the gold, or the temple that sanctifieth the gold? And, Whosoever shall swear by the altar, it is nothing; but whosoever sweareth by the gift that is upon it, he is guilty . Ye fools and blind: for whether is greater, the gift, or the altar that sanctifieth the gift? Whoso therefore shall swear by the altar, sweareth by it, and by all things thereon . And whoso shall swear by the temple, sweareth by it, and by him that dwelleth therein. And he that shall swear by heaven, sweareth by the throne of God, and by him that sitteth thereon .

    seems like it’s always either or…

    Moose managed to beat me twice….in three moves.

     
    • Adask

      August 19, 2013 at 9:51 AM

      Do you ever right coherent comments of your own? Or do you only “cut and paste” other people’s comments in a way that may seem coherent to you, but reads like James Joyce’s (stream of consciousness) in Ulysses?

      Your text are often too cryptic to be easily understood. Your texts seem self-indulgent in the sense that they may be perfectly logical to you, but are semi-incomprehensible to others. I wish you’d show the readers enough respect to actually make the effort to write a response or comment that they can understand without too much effort rather than just presenting another video or link and leaving the readers to figure out whatever it is your trying to communicate. Your “collage” of quotes, links and videos disrespects the readers.

      It’s bad business to disrespect the audience.

      What the fuck does B’Man’s comment on “another florida shooting” (as seen in your first link) have to do with the prices of gold in secular or super-secular trends? Anything? Or is it just another self-indulgent waste of other people’s time?

      What th’ fuck does Bob Seeger’s and a video with a picture about a running horsey have to do with the article on secular and super-secular trends in the price of gold.

      What th’ fuck does your occassional chess matches with “Moose” have to do with the super-secular trends article?

      This blog does not exist as a convenience for those whose notions of self-expression consist mostly of their right to post graffiti. If all you want to post is graffiti, get a can of paint, go down to the “hood” and “tag” some walls or street cars or some such.

      You comments waste my time. They waste my readers’ time. Stop insulting us. You’re not so damn smart that you’re entitled to write like a swami on LSD.

      Your previous comment is the last “stream of consciousness” text that I’ll post on this blog.

       
      • greg

        August 20, 2013 at 7:41 AM

        Thank you, Thank you, Thank you, what took so long?

         
      • Tony

        August 20, 2013 at 11:31 AM

        His writing is self-indulgence cubed.

         
      • Ummer Farooq (@faro0485)

        August 25, 2013 at 12:12 AM

        Matthew 13:10-17
        10 The disciples came to him and asked, “Why do you speak to the people in parables?”

        11 He replied, “Because the knowledge of the secrets of the kingdom of heaven has been given to you, but not to them. 12 Whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them. 13 This is why I speak to them in parables:

        “Though seeing, they do not see;
        though hearing, they do not hear or understand.

        14 In them is fulfilled the prophecy of Isaiah:

        “‘You will be ever hearing but never understanding;
        you will be ever seeing but never perceiving.
        15 For this people’s heart has become calloused;
        they hardly hear with their ears,
        and they have closed their eyes.
        Otherwise they might see with their eyes,
        hear with their ears,
        understand with their hearts
        and turn, and I would heal them.’[a]

        16 But blessed are your eyes because they see, and your ears because they hear.
        17 For truly I tell you, many prophets and righteous people longed to see what you see but did not see it, and to hear what you hear but did not hear it.

        Let me guess, someone slip some unholy gmo bread into your mouth that God had called your guardian angels to step aside?

        Surely this picture will make it clear to you what it means for gold to be bullish… http://encyclopediaurantia.org/images/san020.jpg

         
  4. PETER

    August 19, 2013 at 9:54 AM

    Thank-you teacher(s) as all who contribute to this destination do, especially you Al.

    Maybe a good term to use in reference to the super-cycle (trend) in precious metals would be paradigm shift. It is underway as we speak, possibly to be a major beneficiary of all the fraud, abuse and overall corruption going on globally, another super cycle of course.

    Al, on melodies show the other day you stated you believed we have put in a bottom. I agree with you. Melody dismissed technical analysis having much credibility.I believe it is a way of determining the beginning and end of trends and historical prices of such.

    On silver, a chart will indicate the gold:silver ratio hit almost 70 to 1 during this corrective phase, a billboard sign saying BUY -BUY-BUY. The silver chart also tagged an important pivot point here in the 20 dollar level, in my opinion perfectly healthy action . One must be glad we are at such low levels in which accumulate. Knowing where this market is going should not be disheartening to those in the know.

    As I stated, as a novice on Elliott Wave Theory this market is entering into wave 3 of super cycle 3 , simply stated we are going into middle gear. This wave will be powerful and will attract a lot of attention when it blows through 100 dollars an ounce! probably much sooner than you think. My observations indicate the most oversold condition was reached during this corrective phase and deepest reading of bearishness during the whole bull market, extremely bullish!

    Most of my studies are on silver since silver is poor man’s gold. Since I am a poor man that is what I accumulate and is the main focus of my attention. Silver will have better percentage gains going forward compared to gold so that’s good for us Po folks.

    Heard anything about COMEX vaults being bone dry, as in zero inventory? What happens when the worlds billionaires want their stuff ? This may be one of the underpinnings to move this market up. Maybe it is the allocated accounts gone missing of over 100000 tons gold or more. This will more than likely be a real good bull market. What is it that is said of bull markets? 90% of the money is made in the last 10% of the move, we ain’t there yet folks, keep the faith and press on .

     
  5. Peg-Powers

    August 19, 2013 at 12:26 PM

    I’m quite certain that most women are offended by the Ef word, no matter where encountered. I know I am. We realize that Alfred can only tolerate a certain amount of looney loquaciousness; so please, everyone, shape up! Show some respect.

     
  6. PETER

    August 21, 2013 at 11:01 AM

    Anyone out there in Adask land study technical analysis?

     
  7. PETER

    August 21, 2013 at 12:12 PM

    There is an interesting correlation to rising Japanese yen to rising gold and silver prices. A rising yen also appears to be a major headwind to the S&P500 stock index, all of which are at major turning points presently. The past 20 months of corrective action in precious metals has been a wonderful time to dispose of “GREEN TRASH” (dollars). There may not be low levels in price like this to purchase much longer, I kind of wish these levels would stay in place for a while so I could dispose of more “GREEN TRASH”. I do not think the market is going to accommodate me as I wish.

    On the bull and bear historic time frame my study on the Dow Jones Industrial average indicates: in late 1999 a 3 year bear trend started, it lasted until 2003, at that point a 4.5 year bull trend started, at the end of 2007 that trend began to turn which led to the plunge of 2008, that bear trend lasted 1.5 years, from that bottom in 2009 to date it has been 4.5 years of bullish action, it appears to be rolling over now. The last two bear trends were 3 years and 1.5 years. Let’s see what the market has in store for the time frame of this bear trend emerging now.

     
    • Adask

      August 21, 2013 at 1:10 PM

      You’re right, but you’re not precise. Yes, there have been 3 year and 5 bear market and bull market “trends” but they were only “primary” trends that were relatively short-lived and only component parts of longer “secular” and even “super-secular trends that could last up to 25 or even 80 years–so far. I’m trying to communicate that the investor should tend to look at the long-term secular and super-secular “trends” while the speculator might focus on the “primary” and “secondary” “trends”. In all of this, I’m arguing that it’s not enough to simply say “trend” without specifying the kind (duration) of the particular “trend”. If we can see the long-term (secular & super-secular) trends we might not be so impressed (or frightened) by the short-term (primary and secondary) trends.

       
  8. Peter

    August 23, 2013 at 3:59 PM

    Long term here we have been putting in a massive topping pattern in general equities,probably about 14 years,a mega phone top. when this baby goes it is going to drop hard.Bonds are leading the wa y down,gold and silver may react violently to the upside for a long time( super cycle) .Al, I remember looking at a chart of silver going way back ,if im correct silver has been in a SECULAR bear market since 1840. Thanks Al

     
  9. Ummer Farooq (@faro0485)

    August 24, 2013 at 11:19 PM

    It is pointless to look at the gold dollar chart. Dollars are worthless fed backed fraud monopoly paper.

    No rather look at the Irish famine of food/farming control. Yes even gold becomes pointless when it is not moving. http://www.youtube.com/watch?v=GQ8iRMGnb1g

    Heck hoarding will be like a mill stone for sure for many as the fall into the fire and many of us are being goaded into hoarding…

     
  10. Adask

    August 25, 2013 at 8:05 AM

    Ummer Farooq commented above and closed with a picture of Israelites worshiping the “golden calf” saying, “Surely this picture will make it clear to you what it means for gold to be bullish.” His intent isn’t clear to me, but I presume he means to imply that the pursuit of gold today is an example of idolatry.

    I promote the idea that people should acquire gold but not as something to worship. The Bible recognizes gold and silver as a form of wealth or “money”. As with other forms of wealth it’s not the gold that’s evil–it’s the love of gold that’s the root of all evil. I don’t advocate that anyone “love” gold. However, I do advocate owning gold as a means to escape the losses I believe are inevitable for those who own paper, fiat dollars.

    I don’t advocate that anyone worship a “golden calf”–but I do advocate owning gold as a means to escape the “worship” of the “paper calf” we call Federal Reserve Notes.

     
  11. Anthony Clifton

    August 25, 2013 at 11:53 AM

    you also struggle to be commercially viable in a world where the Remnant is just that…

     
  12. PETER

    August 25, 2013 at 1:33 PM

    Silver according to my studies hit an all time high in 1477@806 per oz U.S.D. It is my understanding with the discovery of the New World large discoveries were made. The stockpiles that were accumulated in the past hundreds of years are gone. Were does the price go for something that has been depleted and perception of that fact becomes known by more and more people everyday. The unfolding of a big move is underway.

     
  13. PETER

    August 27, 2013 at 10:40 AM

    Just adding to the above comment, maybe it can prove insightful. It appears silver may hit a ceiling at around 75.00. I only say that because it appears that at or around A.D. 1884 that was the level at which the price began to plunge until about A.D. 1964. I’m not sure of the significance of that move. There exists the discoveries of silver in the western U.S.A. in large quantities. Next would be the 100.00 level last seen around A.D. 1850. In technical terms that’s called resistance, it’s old resistance, therefore it may not have a lot of staying power and the price may punch through easily. The stockpiles that were accumulated from A.D. 1884 to A.D. 1964 could be pretty drawn down thanks to Globalism and the poor planning by those perched in there concrete and glass towers. It is entirely possible the central planners never expected 4 billion users of resources in the east to arrive on the scene.

     

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