Gold - Marching Toward A Parabolic Move

September 5, 2005

There has been so much said about Gold throughout history that there is little new that we might add, I am afraid. What we can do, however, is to try to organize the information from a little different perspective- one that incorporates what we see of Gold, today, into a bit of a historical perspective.

We previously touched on the issue of the foundation that the fundamentals of a stock or commodity might provide, over time. The fundamentals are especially important for Gold since those fundamentals oscillate along two solid tiers. First, there is the metal, Gold, seen as a commodity. But more important is the role that Gold historically plays as a monetary device- Real Money! It seems that through history the monetary role of Gold has oscillated from a direct means of exchange, to a more recent role as fiat backing. That is acceptable as long as the paper currency is used as a "draw" on physical Gold held free and clear in a vault. To that end, we must return, IMO.

During times of relative stability, Gold trades more like a commodity based on simple supply and demand. During that time Gold is subject to all of the abuses of our trading systems. It is during the period when the world moves toward instability that the fundamentals of Gold switch to the second tier of fundamentals. Some believe that during such a transitional time that Gold is heavily manipulated. That may well be, or it may be a combination of manipulation combined with a lack of understanding by the masses in reference to Gold's importance as a historical and stable monetary foundation of life. Real money! If you ask someone on the street, today, "What is real money?" you will likely not hear the mention of Gold and Silver.

When instability to our economic system becomes apparent, Gold starts a march toward higher ground. It is only at the point of inflection when Gold is seen as the ultimate stabilizer of our monetary system that Gold historically starts its parabolic rise. The current environment might be placing us very close to the start of such a parabolic movement for Gold- the recognition of Gold as real money.

There is little doubt in my mind that the ordeal suffered by the Southeast US has the potential to kick the psychology of the masses out of denial. Inflation has already raised its ugly head, but this disaster threatens to unleash inflation like a two-headed monster. It will take some time for inflation to move through the system, but the Southeast disaster will likely be quite the catalyst. On the other hand, the same disaster threatens to roll over an economy that was already in trouble. Taken together, the increase of inflation along with tempered economy spells one thing- Stagflation, spelled "like in the 1970's." Unfortunately, all of this comes at a time when the Fed is already seriously behind the inflation curve in raising rates. All of the signs are there. Just look at the price of oil, whose price increases have not even started to move through the economy as of yet. And all of this is occurring during a time of the highest level of debt ever accumulated by a nation and its people. The Fed has but one choice….print, print, print. For Gold the result will go KABOOM!

It is my opinion that both the fundamentals of Gold and the psychology of the masses toward it, can all be evaluated in the price patterns of the chart of Gold. Let's take a look at the charts which seem to be asking a rather important question, today, "GOT GOLD?"

THE LINE IN THE SAND

The first chart simulates Falcor III's chart of Gold's line in the sand. Since 1981 the price of Gold has not traded above the thicker, top, dark blue line. Should Gold move above such an important time-held barrier, we might find that the first inklings of a move toward a monetary role for Gold is once again upon us. Could it be that the big wind that caused so much destruction in the Southeast United States might have blown the line in the sand, away. A break of the line might quickly take the price of gold above $500. Life is very fragile from all perspectives, and just a disgusting gust is all it takes.

[We continue to offer up our hearts and our prayers to the residents of the Southeast and to those who have helped to provide them some semblance of comfort. Please find your own special way to help. We all will likely need our neighbors as the years pass by. Please show your love for others. It seems our governmental structure might not be much help at crucial times.]

GOLD- STAIRWAY TO HEAVEN

The next chart is a linear chart showing Gold's unceasing march, upward. Since this chart is linear we might expect Gold's price action to move in an upward parabolic fashion at some point in time. Notice that Gold has corrected back to the tend line, then, lifted off of it. This is what we have expected, in fact, the second dotted trend line was recently touched right on cue. Notice that the MACD is rising, supported by a rising ADX line that suggests a trending movement is at hand. Also, it seems that the longer the time of correction in this chart, the larger the next move, upward. IMO, it is time to say "Goodbye" to Falcor's line in the sand. Gold $530ish, here we come.

GOLD- THE ANGLED-INVERSE FORMATION

In past articles we have shown some chart formations that we refer to as angled-inverse formations. The first time I saw such a concept, was a chart of BGO, annotated by CaptainHook. The chart formation seems to be created when the controlling support and resistance lines are angled compared to horizontal. In general, it seems that higher the angle, the more explosive the moves. Just take a look at the charts of RGLD and GLG- both are highly-angled versions. Hopefully, we can return soon to show some angled-inverse charts of the PM stocks.

What peaks my interest in this angled-inverse chart of gold is something I noticed in the charts of RGLD, Copper, and Silver. If we see the explosive rise I soon expect out of Gold, the price action cannot hit the upper trend line by the time it reaches resistance at around $530. This suggests a shorter correction once the price of Gold hits $530, before an assault on $580ish, and then $640ish. All of this should see the individual Gold stocks start to price in much higher Gold prices, once the line in the sand it taken out. Many investors might be left at the station "trading" as the Gold stocks take off! The Gold stocks will likely be discounting far more than a Gold price of $530…………as the line in the sand is blown, away. Interestingly, a retest of such an important line should absolutely be forthcoming, but don't be surprised if such a retrace is very short and does not reach its mark.

EVERYTHING HAS A TIME AND A PLACE

Some wise person in the past suggested that one should never make a future prediction which included both price and time…….so we won't. What we will do is to add a little more to the concept of higher Gold prices as suggested, above. We can see in this chart that the top solid channel line for Gold rises to about $572 in about one year's time. The dotted spike line above it reaches that mark at a slightly earlier time period. The fib. indicator line at $572ish lies at about the one year time-frame.

KABOOM! GOLD'S PARABOLIC MOVE

We know that Gold has historically moved up in parabolic fashion once Gold's monetary role has been widely recognized. I have seen different opinions of how such a parabolic move might play out. Some believe that the move will be a 2-part affair with a deep correction in between the two bullish segments. I do not believe that such will occur. I believe that we are engaged in one continuous giant 5th wave sweep, higher- one that will only accelerate as the months and years pass by……..one that will be leaving many behind to fuel the price rise due to a fear of missing out and losing everything.

The following chart is a linear chart that might spike up into a parabola as time goes by. I believe the little circle to the left is similar in relation to the constant march that the price of Gold displays over on the right. Using a ratio on this chart, one might suggest that Gold's price might eventually reach to about $3,000. Unfortunately, such comparisons to the 70's might prove fruitless given the massive amount of debt the US and its citizens have taken on. $3,000 might be a conservative estimate as a target for monetary Gold.

[I apologize for the above chart. It was created using the "paint tool", something I am totally unfamiliar with.]

UPDATE ON THE HUI

In our first couple of editorials we discussed the HUI index and Silver. It seems that the fractal relationship shown in the first HUI editorial continues to play out. I believe we will see a rather vertical move over the next couple of weeks to approximately the 240ish area. After that, a series of vertical moves might take us to 280ish, and 365ish. At least I have seen nothing that might suggest a change of expectations.

Though we invest longer-term and only sell smaller portions of our core PM holdings at what we consider intermediate tops, we tried to time the last editorial on Silver from a short-term perspective. It seems we were a day early, but if that bottom should hold in the longer time-frames, we will quietly smile, and smile widely…….for "An Explosion IS coming!"

[Updated chart of the HUI fractal, below.]

REAL GOLD VERSUS GOLD PROXIES

It might be well worth our time to remind everyone that different substitutes for investing in Gold do exist, but there is only one real money- PHYSICAL GOLD. We will not discuss physical Silver at this time, but simply place physical Silver under physical Gold's historical wing as to a common relationship. IMO, physical Gold should be a part of everyone's investment portfolio, but we are speaking of the physical metal held in your personal possession. Nothing else will do in a time of real need. One might find that at such a crucial time, everything else is simply paper. Have a plan for the ownership of physical Gold and Silver, and get started, today.

In honor of Sister SLD from the Gold-Eagle Forum………"GOLD AND SILVER- A WAY OF LIFE!"

Again, I'd like to thank all of the posters at the Gold-Eagle.com Forum for their daily input. This thank you is especially extended to TQ and to Grininbarrett. Special thanks go to Dr. Vronsky and Westerman for creating the Gold-Eagle site and for editing my work. The Gold-Eagle.com Forum can be linked at www.gold-eagle.com/cgi-bin/gn/get/forum.html.

Thanks also go out to CaptainHook and David Petch of TreasureChests. I will continue to provide their link since I truly believe that their work would benefit everyone. They can be found atwww.treasurechests.info/index.php.

There are many great editorials that can be found on the Gold-Eagle site at the following link. www.gold-eagle.com/research/petchndx.html

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A one-ounce gold nugget is rarer than a five-carat diamond.

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