Mary Ann and Pamela Aden: “Believe It or Not: Gold’s 8-Year Cycle Still on Track”- Kitco

Posted on :Aug 06, 2013

By: Mary Ann and Pamela Aden

Kitco

August 5, 2013

Given gold’s retreat during 2013, it would seem the Midas  Metal’s best days are behind it, at least for a while.

But nothing is further from the truth. The strong demand for  gold has not gone away.   International investors, central banks and corporations are all  looking to buy gold and these low Summer months are likely providing the best  price.

Asian investors, especially in China and India, are buying  coins and bullion like mad. Sales are up 22% annually in China and 52% in  India.

Gold analyst Jim Willie said it best when he said, “The  migration of gold from West to East is the grand story of the decade.”  They know, as our dear friend Richard Russell  recently reminded us, that gold and international power still go hand in hand.

Beyond the obvious demand, history is also on gold’s side.  Gold’s movements are in line with historic trends, never mind what the  no-nothing, hand-wringing Cassandra’s are saying.

A Unique Moment in History

Never has there been a time in the past when central bank  policies so obviously determined market movements. And this past month provided  an extreme example.

The ongoing tapering talk pushed gold down sharply because the  market believes if the Fed stops stimulating the economy, an inflationary  outcome is unlikely, especially if it’s combined with higher interest rates  boosting the dollar. All of this is bad for gold.

What’s more, there may be darker forces at work as well.  There’s a distinct possibility the gold market is being manipulated by central  bankers – again. The most recent example was a few months ago when Germany  demanded the immediate repatriation of its gold, but then it quietly accepted a  seven-year delivery plan. There have been too many similar incidents in recent  months to pass them off as chance.

Manipulation was blamed on the central bankers back in the  1970s, and it’s still the same. Only this time more central bankers and more  powerful groups have joined in as well.

Nothing material really changed to justify a $700 drop in gold  prices from over $1903 in 2011 to almost $1200 earlier this month. This 36%  fall is clearly the steepest in gold’s 12-year bull market. The worst dip prior  to this was an almost 30% decline in 2008.

Gold’s 8-Year Cycle:  On track

But looking at gold’s full bull market rise from 2001 to 2011,  gold gained over 660%, so a 36% decline isn’t bad from that perspective.

The fact is, if you got into the bull market early, even up  until mid-2010, you’re fine. But if you bought anytime after mid-2010, you are  break-even to down.

But even if you’re down, it’s just a matter of time before we  see higher gold prices, so it’s imperative you keep a core position.

Gold has had a consistent low area nearly every 8 years. You  can see below, it’s been pretty reliable by several months. February 2001 saw  an 8-year low, following a modest gold rise in 1996. Gold then rose sharply  until it fell to the next low in Nov 2008, which was just three months shy of  the 8-year mark.

This bring us to today… gold is now almost 5 years closer to  the next major 8-year low.  This doesn’t  mean gold is going down until then. It’s simply saying that 2015 or early 2016  is a likely time period for the next key low in gold.

There are always important major rises in-between the  lows.  During major bull markets, gold  tends to stay above the high reached prior to the 8-year low area. In today’s  case, this means gold should stay above the $1000 high of 2008, where the blue  horizontal line and the 2001 uptrend meet.

For now, so far, so good. Gold held above  the $1200 level and it’s now showing the first signs of renewed strength by  staying above $1275. And since gold is currently rising from an extremely  oversold area, there’s a good chance it will break through its next important  resistance at $1350.

If so, it’ll be a good sign the decline is  over and the price is indeed headed higher.

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