Posted: Friday , 07 Sep 2012
The Fractal Gold chart work is a direct comparison of Gold, today, to the late 70's Gold Parabola. Thus, "timing" is taken directly from the late 70's cycle, with price targets created from a combination of the late 70's Gold price and different technical analysis techniques. We developed a price target back in 2006/ 2007 for Gold to reach the $10,000 to $12,000 range during this Gold Bull. Anything above that range would mean that the "Stagflation" comparison to the late 70's was exceeded and "Hyper-inflation" would become a real possibility.
During the early stages of the Gold Bull we were able to show Gold's advance versus the late 70's on a single long-term chart since similar chart resistance points were evident. This gave us the timing for what we coined in 2007, the projected "Deflation Scare waterfall decline into the 4th quarter of 2008." Below, is a sample chart from 09-29-07.
After Gold re-tested the "old 1980 top" in the 4th quarter of 2008, the move to new historic highs left no horizontal resistance on the chart to help guide the way. Thus, in late 2010/ early 2011, we used the time and price relationships from the late 70's to project Gold's price advance into the middle of 2011 to $1860- in April adjusted upward to $1920 via normal technical analysis methods. That projection was fulfilled late in the middle 3rd of 2011.
Gold's next momentum rise off of the late 70's fractal model projected a price rise up to $3500 to $3600 into the middle of 2012. The fundamentals and the Gold Chart looked good going into March of 2012 compared to 70's Gold with the Fed printing up over $1.3 Trillion Dollars in swaps to Europe since the Gold Bull is driven by US Dollar inflation/ devaluation.
Yet the markets "listened to what the Fed said- not what it did" as it printed over $1.3 trillion Dollars-over double the amount of Dollar printing that shot Gold up from $1300 to $1900 into mid-2011. Thus, the markets have not yet devalued the Dollar based on the huge Dollar printing done since December of 2011 and have not marked up Gold, yet. This leaves a huge amount of Dollar Devaluation for the markets to factor in, with much more to come, that will drive Gold sharply higher. We have often noted that "the Fed owns the psychology of the markets"- the main tool they use to heavily manage the markets. Thus it appears, the Fed has created a sort of delay in the cycle that fits their apparent needs. The above is the reason for the strong support along Gold's log channel bottom with value investors, smart money, and Central Banks heavily accumulating Gold.
When Gold failed to continue the rise to match the 70's in March of this year, we turned to a Model of a 3 fan-line formation for subscribers as an alternative potential corrective formation. That model has played out almost to perfection, with the corrective formation recently terminating. This delay in terms of a longer correction fits with Elliott Wave Theory since corrections sometimes extend based on the current psychology- in this case one created via Fed speak to accomplish their needs. Read more>>Fractal Analysis: Huge dollar devaluation will drive gold much higher