1999/2000 Gold Price Probabilities
In February 1998 we made a study of historic gold prices from 1979 to 1997 - which was subsequently posted to GOLD-EAGLE's Analysis section. Based upon the high, low and average annual London gold fix during the 19-year period, the numbers suggested the yellow metal had feasible certainty in reaching the $400/oz area, and more than fair probability of approaching $459 in 1998. As we all well-know it did not happen. In fact far from it.
The cardinal reason why gold's cyclic nature defied the Law of Probability last year is known by all: actions by the international Gold Cabal to purposely depress the price of gold through incessant Central Bank selling of gold reserves, and relentless gold leasing by gold producers and Central Banks. Both these very controversial activities - which nullify normal supply/demand dynamics came to a screeching halt on September 26, 1999, when 15 European Central banks announced they would severely curtail gold sales, and totally cease all gold leasing during the next five years. The Gold Cabal confessed… and repented.
Since the heretofore bogus supply of gold to the market no longer exists, it seems eminently logical the future price of gold will again be only subject to supply/demand dynamics - and therefore the long-term annual gold cycle will reassert itself.
The update of our 1998 study follows.
Yearly Price Cycle of the London Gold Price Fix
Although our price determination can hardly be considered an analysis de rigueur, it nevertheless does demonstrate a meaningful view of the yellow metal's lackluster (albeit cyclic) price trajectory during the last two decades of dramatic price increases in most other investment securities.
In order to reduce the risk of being accused of selecting a particular test period to support a preconceived hypothesis, allow us to explain our rationale for selection of the 1979-1998 period. Firstly, we did not take into account the years just prior to 1979, because the astronomical rise in gold prices was - in our opinion - not representative of the 'modern era' of gold. Besides, the years just prior to 1979 would have only skewed the curve - with a definite bias toward forecasting higher future gold prices.
Secondly, the selected period represents the most recent past to the present, and therefore will probably exert more influence upon the near future. Finally, any 20-year statistical record should be mathematically significant to provide some reasonable lines of probability. We do not pretend to make a gold price forecast, but rather just show what past performance is suggesting based upon the annual averages covering a 20-year period of the most recent past (1979-1998).
As we are all aware gold soared during all of 1979, culminating in its all-time record of $850 in January 1980. Since the peak of gold mania, the noble metal has basically been in a wide trading band with a down-sloping bias. However, when one stands back far enough to view the entire 20-year span, it is obvious to the student of Technical Analysis 101 that the downtrend was bottoming out during the last couple of years. And although gold made a valiant effort early 1996 to begin a new bull market, Central Bank bullion dumping and mining producers selling forward succeeded in squelching the rally for another day. Hence gold remained in the wide trading band forged during 20 years - albeit with a down-trending bias.
Recent Sea-change Reversal
Not a few experts recognize a sea-change reversal occurred in the last few weeks. Gold surged more than 25% in a fortnight on extremely heavy volume. Indeed, it was gold's greatest price increase in over 15-years -- heralding a new bull market for the noble metal.
Following are the raw data suggesting inescapable observations and conclusions.
LONDON GOLD PM FIX HISTORY (1979-1998)* | |||
Y E A R | H I G H | L O W | A V E R A G E |
---|---|---|---|
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 |
314.60 362.15 414.80 399.55 402.00 414.00 359.60 403.00 423.75 415.80 483.90 499.74 438.35 340.90 405.85 509.25 481.00 599.25 850.00 512.00 |
273.40 283.00 367.40 372.40 370.00 325.00 330.35 344.24 345.65 355.75 395.30 390.00 326.55 284.25 307.50 374.25 296.75 391.25 481.50 216.85 |
292.90 322.58 387.87 383.79 386.00 361.00 343.76 362.19 383.47 381.44 436.93 446.45 397.87 317.26 460.44 424.18 375.79 459.71 612.56 306.68 |
(*) Source: World Gold Council
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