first majestic silver

Golden Parabola Update

April 28, 2011

{This update to an editorial I wrote on 02-10-11 was provided to subscribers on our website over the last couple of weeks and is provided in limited scope with updated charts. The link to the original article follows.}

www.munknee.com/2011/02/goldrunner-the-golden-parabola/

The cycle for Gold to rise more aggressively into mid-year comes off of the first of multiple tops in Silver that we have just seen. At this point the cycle suggests that Gold will enter into a more aggressive higher rise in price as it starts to project the higher Vth Wave characteristics of this Golden Parabola.

Talk of a "Gold Bubble" has been very premature since the higher slope of the parabola in Gold is just getting started in this time-frame. Gold has a long way to go on the upside as I have suggested in past writings over the years. The first baby steps of the more aggressive rise in Gold commenced with the onset of Global Competitive Currency Devaluations which are now in full swing. The GCCD creates an environment where the true devaluation of the US Dollar in terms of Gold is barely seen in the US Dollar Index where the Dollar is "Priced" against a basket of currencies that are also being devalued. The only true read on the true extent of the Dollar Devaluation at hand is seen in the chart of Gold in US Dollars chart, itself.

The Golden Parabola continues to follow the cycle of the 70's Gold Bull as the US Dollar is devalued against Gold to balance the budget of the United States at this point in the "paper currency cycle." Much of the debt that must be devalued has not yet been moved to the balance sheet of the US Government at this time. From a fundamental standpoint we won't know the true height that Gold will achieve until the total of the balance sheet debt to be balanced is transferred to the balance sheet of the US Government. Yet, we can gauge the progress of today's Gold Bull from the 70's Gold Bull to a large extent.

As the course of Dollar Inflation drives Gold higher on the chart, it also drives the pricing environment for most everything in the US that is denominated in Dollars. Since the US Dollar is still the Reserve Currency for the World, the US exports this sharp price inflation in all directions. A gentleman who wrote extensively about all of the above in the past, called "Another", suggested that the Middle East Oil Producers set the price of oil to the price of Gold since they only wanted payment for Oil in Gold, since the ME Oil Producers did not trust the paper currencies that could be inflated at will. He also suggested that they set the price of Oil at a 1:10 ratio to the price of Gold in Dollars. Thus, we see the price of Oil tracking the price of Gold in general at a set ratio to a large extent. In fact, we saw price inflation in general track Gold in the late 70's, though much of the rise in general price inflation tends to lag the rise in the price of Gold since Gold's rise is directly related to the rise in Dollar Inflation that creates general price inflation. General price inflation lags the rise in the price of Gold since it takes time for the Dollar Inflation to work its way through the pricing environment of the various markets. Thus, not only are Gold and Silver great hedges against price inflation, but owning Gold and Silver is a great way to pre-empt the ravages of price inflation that are headed your way over the coming years at this point in the paper currency cycle. Let's move on to the Gold Charts.

THE GOLD CHARTS

At this point in the 1970's Gold Bull, Gold started to rise at a higher slope as Gold entered the more aggressive Vth Wave Channel that we will show in a bit. The first Gold Chart is one I created for the original Golden Parabola editorial to show my expectations that Gold was bottoming at that time at the 34 week EMA. The potential target for Gold into mid-year per the 1970's Gold Bull is up to around the $1860 level. On the chart, below, I have now added a blue line off of the tops since the 2008 Deflation Scare low. That blue line comes in at mid-year around the $1860 price level for Gold. We can see at this time that Gold had busted out to new historic highs with no horizontal resistance above on the chart, and with no real angled resistance on the chart until much higher price levels are reached. I expect the price of Gold to rise fairly rapidly up to the $1620 to $1640 area on the chart. The TA indicators that monitor price movements are all a "go."

The next chart of Gold shows Gold rising up through the same angled dotted line that it rose through back in 2006 on its way to the upper black solid line of the channel top which will be around the 1920 level into mid-year. This chart also includes a black dotted line above the channel line that mimics the extent that Gold overshot the channel on the down side into the Deflation Scare Bottom into late 2008. Since the necessary Dollar Inflation to deal with the larger current level of debt is so much larger today versus the late 70's, is it possible that Gold will overshoot the upper log channel on the upside to the extent it overshot the channel bottom on the downside? If so, then a higher target for Gold might come into play.

The next Gold chart shows a distinct channel for each "Phase" or Elliott Wave rise in this current Golden Parabola. We can see that Wave I was basically held in the smaller flat blue channel into late 2005. After Gold broke-out of that blue channel it moved into a higher sloped rise into the green channel that approximates Wave III in the current Golden Parabola. We can see on the chart that Gold has now busted up through the top of the Green Channel firmly into the Red Channel which appears to approximate the higher sloped Wave V advance. For subscribers I have been suggested that a rise above the black dotted line on this arithmetic chart might herald in a very sharp rise in price into mid-year. We can see a similar bust out of the Wave I Channel into the Green Wave III Channel back in late 2005. That move in late 2005, up and out of the Wave I blue channel, was basically "phase transition" into Wave III if you want to use that term.

Similarly, the current bust out of the Green Wave III Channel into the Red Wave V Channel appears to be the phase transition to Wave V in progress- a transition to a true higher priced slope of rise for the Golden Parabola. I would expect some "angled line resistance" into the $1620 to $1640 price level , I expect Gold to bust on through to sharply higher prices into mid-year.

The final chart for Gold is the "Fractal Gold Vs Armstrong Model Chart." I have placed a dotted red line to the right of the sold red vertical line in the coming period to denote the actual June 13th turn date that Mr. Armstrong has proposed. We can see that the Gold price is running hard and higher toward his turn date as it did into the last 2 similar turn dates represented by the solid red lines on the left hand side of the chart. We can see that the TA Indicators which are simply tools to measure the health of the rise of Gold suggest that higher Gold pricing into the June 13th turn date is very probable.

CONCLUSION

The current Golden Parabola has been tracking the Golden Parabola of the 1970's almost perfectly for over a decade. Today's Golden Parabola is driven by the parabolic growth of the US Dollar Inflation in response to the massive backdrop of debt that exists, today. We can project price targets as the Golden Parabola grows, but its final height will be determined by the necessary price level for Gold to balance the US budget once all of the liabilities of the US are eventually placed on its balance sheet. Many of those liabilities will not be transferred to the US balance sheet late in the Golden Parabola's rise in an attempt to compress the level of discomfort in terms of time that the Dollar Devaluation will create. Thus, it appears that at this time the terms "Bubble" and "Gold" do not belong in the same sentence. If you take a look at the Silver Chart, today, you will start to get an inkling of what is to come for the Gold price. It appears that we are just entering the higher sloped rise in Gold that has already begun in the Chart of Silver; and Silver still has a much higher path to climb into the future. There is no doubt that Gold has made a nice run since the original Golden Parabola article, but I expect the run to continue into mid-year.

As a quick note on the PM Stock Indices, this analogous break-out of Gold ushered in higher valuations for the large cap PM stocks in the late 70's. The PM stocks tend to be re-valued higher in short dynamic spurts, and I am looking for one of those spurts higher for the PM Stock Sector to commence with this break-out in Gold. I hope to return with an article on the PM Stock Indices in a few days.

Thank you for taking the time to read this article.


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