Gold Prices: The Big Picture

March 19, 2015

gold price forecastIt doesn’t cease to amaze us to see the ongoing consistency in price moves over the years.  Gold has phases and as each one comes up, we watch it closely to see if this time repeats a similar pattern.

The next pattern coming up is a big one. It’s the major bear market low and the start of a new bull market, and it’ll be exciting to see how gold performs this time around.

This article will be more technical than usual but we think it’s important in determining where the gold market currently stands. So bear with us…

Chart 1 shows the major phases of gold prices since 1969.  That is, this chart shows gold’s market moves since it began moving freely in the early 1970s.

gold phases

You can see the major low areas in gold prices, marked in red, have occurred on average every 8 years. The last one happened just shy of the 8 year mark at the lows of the 2008 financial crisis.

And now, most exciting, is that the next 7-8 year low could occur this year, or into 2016.  In other words, by this time next year we’ll probably have already seen the lows.

This means we’ll take advantage of weakness this year to buy more, and plan to keep all of your positions for several years.  Once the lows have been established, the next direction will be a big new bull market!

Note the blue lines.  A major high area tends to occur every 11 years.  The last 11 year high happened in 2012 at the second gold peak of the bull market.  This tells us the next high could occur 11 years after the 2008 low.... which is in 2019.

Now if this major gold phase continues, we could see an exciting gold move develop, and we want to be sure to be onboard!

Gold Timing: B decline over?

In order to focus on the next major low timing, Chart 2 will help.   

The intermediate moves in gold prices also help us identify major trend shifts. 

For example, the best moves in a bull market are the rises we call a C rise. This is when gold breaks up to a new high.

When gold failed to rise to a new high in 2012 during its C rise, it was the first telltale sign that the bull market was maturing (see Chart 2A).

Gold then broke clearly below its 23 month moving average in 2013 turning clearly bearish.  It then went on to form bearish intermediate moves up until today.

We’re showing you a daily chart this time in order to better see the moves. 

First note the clear down channel.  It started with a very bearish D low. When D declines break down, you know the bear market is real.

The next C rise in 2014 was also a bearish rise because it failed to rise above the prior A peak. 

And the D decline low that followed was bearish because it fell to a new low last November.

The difference here is that gold didn’t have a waterfall type of decline, in view of a super strong dollar.  This is a quiet sign of a bottom wanting to form.

The latest A rise in January ended right at the 23 month moving average, showing that the bear is still in control.  But the subtle strength in gold is now ready to show us if it’s real, or if gold will have one more down move.

What To Watch For

A “B” decline has been underway for 7 weeks now.  If gold prices fall sharply below its November low during this B decline, it’ll be a bearish sign.

This is why we’re at a crossroads.  This B decline will tell us a lot depending on how it ends up.  If it slips below $1143 for a short while to possibly the bottom of the two year down channel, it won’t be so bad, and a bottom could then be forming.

The key is the 23 month moving average at $1275.  Once this level is clearly surpassed, gold will turn bullish for the first time since 2012. 

Visit the Aden Report for more insights.

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Mary Anne & Pamela Aden are well known analysts and editors of The Aden Forecast, a market newsletter named 2010 Letter of the Year by MarketWatch, which provides specific forecasts and recommendations on gold, stocks, interest rates and the other major markets. For more information, go to www.adenforecast.com

78 percent of the yearly gold supply--is made into jewelry.