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Chart 1: Gold Declines from Secondary Highs
The chart below compares the declines in Gold after secondary highs. Gold peaked in January 1980 but then made a lower high towards the end of the year. It rallied back to nearly $750/oz then. Gold peaked in summer 2011 but a year later rallied back to $1800/oz. We compare the current decline from
that lower high in 2012 to the lower high in late 1980.
Based on the current scale, the major low for Gold in 1985 came at the tail end of March 2017. I circled where Gold could be according to recent price action. That suggests a bottom after March 2017.
We are looking to benefit from the post-Fed rally while also reducing the risk in our portfolio. In other words, we want to raise cash and hedge again after a sector rebound. The cash would be used to buy at lower prices sometime before next summer.
Yesterday's 30-page update included a few extra charts on Bonds, bond sentiment and the stock market. There are numerous parallels between 2015-2016 and 1998-1999. Specifically, we are talking about the declines and rebounds in Oil and Emerging Markets along with the sharp rebound in bond yields and aging equity bull market trading at extremely rich levels.
We will discuss and analyze the two periods in a public video coming soon.
The next major catalyst for Gold has to be a peak in the stock market. Could that be caused by a surging US Dollar? Higher inflation? Higher rates? It could be the dollar by itself or two of those three things. The equity bull market could form a blowoff top in the next few quarters. It is already very stretched but technically has room to run at least another 10%.
The bottom line is use strength to de-risk and prepare your portfolio for weakness early next year and a buying opportunity sometime in Q2 2017.
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