Golden Parabola Update

Gold is now running up through the series of price targets that we laid out early this year, though a couple of months later than we had originally expected. The targets we laid out for this year were for Gold to climb up through the low to mid-1800s, to the mid to high 1900s, and then 2250+ after a bit longer correction. We have laid out the potential basis for an even higher potential rise for Gold for subscribers, but the above numbers are analogous to the price rises for Gold in the late 70's for this time period on an arithmetic basis. All of the calls for Gold to correct to lower levels have gone by the wayside as Gold moves into its higher sloped trajectory. With the higher slope in price the corrections tend to be short, sweet, and mostly sideways in nature. Trying to gauge Gold's price movements using the past metrics of this Golden Parabola will prove futile as the parabola accelerates to the upside.

Some seem to be concerned about whether another round of "QE" will be announced, but the necessity for further and more aggressive Dollar Inflation has already been laid out with the raising of the debt ceiling. In fact, the short delay in Gold's ramp up to a higher price trajectory might well have been caused by the deflationary psychology of the markets leading up to the debt ceiling rise announcement. Thus, we saw a pretty funky sideways move in Gold from April into mid-June. Yet, as soon as the debt ceiling for the US was raised in early August, Gold busted out of the trading channel it had been contained within since early 2009. The US doesn't have the cash flow to pay its bills and the interest on its huge debt as it is so any further spending must come from the printing of new Dollars.

As we had anticipated, the sharp rise in Gold out of its trading channel was not accompanied by any break lower in the Dollar Index. This is much like it was in the late 70's, too. We are now in the period where most nations are aggressively devaluing their currencies, a period of Global Competitive Currency Devaluations, where Gold starts to run parabolic in most currencies. Since the many different currencies are the reference point for the "Price of the US Dollar" via the Dollar Index, the reference point for Dollar pricing via the Dollar Index is falling at the same time that the Dollar is. The currency basket pricing scheme is like being in an elevator where the reference point of the building moves up and down in different directions while the elevator is moving. Without a constant reference point- you might go down, but end up on the same or a higher floor. The Dollar Index pricing scheme was created in the early 70's to help to protect the major currencies from falling too hard at times such as this.

We are seeing the true "Value of the US Dollar" reflected in the chart of $Gold where Gold is a measure of constant value. Thus, the "Dollar Elevator" falling is a true sign of the falling value of the Dollar as seen compared to the unmoving "Gold Building Reference Point" in the $Gold ratio chart. As the value of the US Dollar Falls, the price of Gold in Dollars rises.

The chart, below, is one of many Gold charts that we provide for our subscribers. We can see that Gold has traded in the main channel for a very long-time, and it has traded in the smaller middle channel since early 2009. With the debt ceiling rise in early August Gold busted out of the smaller middle channel as it moves up toward the thick black upper channel line that sits around $1975. We expect to see a short-term top in that area before Gold breaks that channel on its way up to the dotted black line above the main channel that will lie somewhere around $2250, or so, at that time. The upper dotted line is a similar distance to how far Gold fell below the main channel back in the Deflation Scare Low in late 2008. The $2250 price target is also an analogous target to the price rise for Gold off of the late 70's arithmetic chart at this juncture. It will be interesting to see if Gold stops at that $2250 level, or if it trades up closer to $2500. There is no longer any horizontal resistance on the Gold chart, and once Gold breaks the thick black upper channel line, there essentially will be no important angled line resistance left on the Gold chart. No doubt that the Gold chart is getting rather overbought, but one must remember that we are in a Historic Gold Bull where the only metrics we can compare to is the late 70's Gold Bull. We expect to only see very short-term relatively shallow corrections until higher price levels are reached.

We placed an arithmetic chart of Gold in Rand in red above the main $Gold Chart. We can see that a break higher out of the Ascending Triangle has occurred. The price target for the break-out is generally the height of the ascending triangle added to the top of the triangle, but Gold in Rand has already exceeded that price of 13,000. When Silver recently broke out of its ascending triangle, it rose to 2 times the height of the triangle which would be to around 16,000 for Gold in Rand. A similar move by Gold in Rand created huge moves for the South African Gold Producers back in 2002.

We had anticipated Gold in Rand breaking out of the triangle around the same time as $Gold busted up out of the channel it had been trading in since early 2009. In the late 70's it was not long after this break higher that the Gold Stocks started an aggressive move higher as the leverage of substantially higher Gold prices hit the Gold Producers. That leverage comes from a price of Gold that is moving sharply above the mining costs of the Gold Producers. We have recently seen many Gold Producers turn in 50%, or higher, earnings for this quarter all based on $1500 Gold. Once this price rise has consolidated at higher levels the leverage should start to return to the Gold stocks as investors start to realize that the price of Gold isn't coming back down anytime soon for any length of time. Those trading the Gold: Gold Stocks Ratio will be forced to cover their shorts (or they will lose their shorts and their shirts) giving rise to the first of 3 major rises for the Gold Stocks as seen in the late 70's. If like the 70's, the Gold Stocks have only barely broken out of their base at this time with the vast majority of price gains still to come. We show charts of all of these relationships to subscribers on our site, and we have now moved to tracking the 70's charts for the PM Stocks.