Where is that Gold cycle now?

Why not test some gold cycles to see what they throw up.

33
Mon, Jan 20, 2020 - 3:44pm

Several years ago, and before the December 2015 low, I posted here about one particular gold cycle.

To be frank about this subject, there is open dissent about whether time cycles exist in financial markets at all, or if there are quasi time cycles. Or if alternatively this markets valuation is a random walk through chaos as real events unfold and become discounted into the gold price event by event.

My own opinion on this is that cycles do exist, but they are transient. They appear. They disappear. they morph into longer or shorter periods when they return.

And that is my view about this. It's not easy, but I think it is worth the time and effort to figure these strange patterns out.

I see it as locating threads of non random semi predictability that are woven through a fairly random cloth, and following those threads to see where they lead me. Sometimes I arraive at a trade, othertimes no significant conclusion.

This is a slippery matter. And we MUST deal with partial information. And the situation, like reality, evolves and nothing is fixed.

But still thsee cycles or whatever they are seem to come back (when they choose to).

So let's work with an example which has been documented realtime right here.

The post I made here on SUN, AUG 9, 2015 was called Monthly Gold Cycles. Here if you're looking for it: https://www.tfmetalsreport.com/blog/7051/monthly-gold-cycles

At the time I posted this chart of the gold market:

As you can see I included a list of possible cycles on monthly (ie large) scale with the chart. These might be called "likely suspects" if I were to do a fresh search, a starting point in other words.

So how did it work out?

Pretty well ! It showed on the chart a date for a low at 30 September 2015, which was two months early since gold bottomed in December of that year.

That is just two price bars off on that scale. I was happy with the outcome, did most of my buying in Vovember, and a little more the following month.

That was then, and now we are approaching a five year anniversary.

So if these two or this one cycle, with a period of 5.3 to 5.6 years is still lurking around, or if it reappears, when would that be? The answer is a guesstimate of from early 2021 to mid 2021.

This however depends upon a repetition of the main cycle, and in the real world even a hammer does not strike the nail in the exact same way every time.

But I reproduced the list of many other prominent contenders to the throne of "boss cycle" above.

Some people will take a pen and paper, others make up a chart online or wherever, and many will simply move on.

Here is a sample weekly chart of the GLD fund to work with. I left some random lines on it for convenience. If they help use them. if not ignore them. It's the dates and prices this is more about.

I will make a reminder at this point - a cautionary note about cycles - sometimes at the time for an anticipated top, a bottom appears, or occasionally a breakout appears and the journey to an even higher top begins.

The cycles doesn't tell you what you want to know. It merely indicates points in time when significant events tend to occur.

Stops must be employed to do the rest or losses can accumulate instead of the preferred profits.

The cycle "turn" is when to look out for opportunity and-or danger, as controlled by the particular timescale you are working with.

Try it for several timescales. Keep notes. See what works and what doesn't (this time). Keep an open mind.

What alternative periods would i try? Well, I like to use the last price swing, and half and quarter that, and also try the thirds. I look to see if an alternate cycle appears at those periods and watch those times.

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  33 Comments

Jan 20, 2020 - 5:24pm

A couple of extra observations

1 The last high of that cycle took a year or more, and was a ranging multiple top as bulls expended their buying power against serious selling c 1950 dollars (basis bullion)

2 The last low of that cycle was a wedgy slow cascading fall towards a low from which a sharp fast rally sprang.

These characteristics are worth noticing, because the character of a cycle can "stick" and a peculiar shape can appear again like a fingerprint or signature caused by the same groups and entities interacting once again within that cycle.

and

3 If a swing gets to new highs, I would be adding on those halves, thirds and quarters of the previous downswing tothe breakout price to hopefully find likely price targets for where sellers would appear out of the woodwork to make an attempt to stop it rising.

In other words, I'd watch out around those intervals and prices, and pay far less attention in between those intervals and prices.

silverseekerargentus maximus
Jan 20, 2020 - 6:37pm

Cycle charting between the metals vs currency

AM, you got me thinking as I had just been looking at the Palladium:Silver price ratio over last 25 years, contemplating a ratio trade.

Over just the last 25 yrs, you could have taken two full cycle trips: accumulating Palladium at <20:1 to silver, and selling Palladium at >100:1 for silver. The ratio is the most extreme between all metals, ranging from 15:1 to 223:1!!! Its presently 143:1; looking like it may retest the 200:1 level again from < 30:1 as recently as 2016!

If you are stacking, watching these long term ratios, they can offer a potential exponential gain over your investing lifespan, with zero counter party risk and only a few trades per decade.

So, as an example: of one accumulated some Palladium, DCA in the 1990s, not even close to catching tops/bottoms, avg around $200 or less/ounce and stacked 10o ounces Palladium =$20k.

As price rallied in early 2000s, say you panic sold at $500/ounce when Silver was still $5/ounce, as you watched the ratio soaring, you could have stacked 10,000 ounces of Silver for the $50k proceeds.

Come 2007 and Silver is $20+ and Palladium is still around $500, so you look at the fool you were, missing out on the $1000+ Palladium peak that you sold out too early on, but figure hey, this is a pretty good ratio exchange, so you sell the 10,000 ounces of Silver for $200k and buy 400 ounces of Palladium, four times what you had 7 years earlier.

Three yrs later, you are again feeling stupid as you see Silver rocketing to $50; but hey; Palladium is doing ok at $800, so you hold...

Summer of 2014 rolls around and SHIT! Palladium is still around $800+/ounce but Silver has plummeted to sub $20; so you say "how low can it go?", and begin DCA selling your 400 ounces Palladium for ~ $800/ounce netting $320k and buy back into ~ 18K ounces of Silver near where you sold in 2007, as Silver continued down to $14 by 2015, you've added 8K ounces more Silver to the stack!

You now again feel like a fool in 2020, with Palladium @$2300/ounce and Silver still around $20; but your return over the last 25 yrs is presently 18k ounces x $18= $324k/ $20k =1600% or 12% annual ROR, and you've made three ratio trades during that time, even sucking at it; with not a single additional dollar of investment and no exposure to Wall St. you crushed the Dow's ~5X increase over the same time frame.

Studying the long term charts, and in the example above; I intentionally made conservative to bad trades considering that you can never call a top or bottom... It appears that you could play the ratio trade poorly, even with a small portion of your stack and use Palladium spikes to your advantage given the extreme ratio swings, even relative to Gold:Silver.

AM, given the cyclical periods for Gold, have you given the Palladium:Silver ratio any thought? Perhaps in practice you hit the coin shop with a couple tubes of Eagles a month when the ratio is low, and sell an ounce or two of Palladium/month as the ratio goes nuts.

Bottom line, if I held any Palladium right now, I would be eying 200:1 but at 143:1 today, start DCA back into silver. You'll need a strong back and a long attention span...

That must be a wild range to

That must be a wild range to trade.

Of course the advantage of range trading is that if you wait, optimized trades count for less, and the "error" of unoptimized trades is made up by the width of the range.

If markets were totally chaotic, or totally manipulated, making risk reduction analysis impossible, ranges would still work, provided there is time to wait.

I will make up an Ag : Pa cross and see what it looks like. Since they are industrially used, that makes me intuitively suspect that a Copper : Palladium cross might be similar.

I won't know until I look.

silverseekerargentus maximus
Jan 20, 2020 - 8:17pm

Ratio trades

Eric Sprott has said he likes Silver because the highs are so high and lows so low...copper not so much due to the massive stock to mine flows. With Palladium and Platinum coinage available for trading, perhaps working the ratios as the economic cycles present opportunity can provide an X^ multiplier we seek via holding metal vs fiat currency. I don't expect we'll see high bond yields until there's a major currency crisis, and with Silver ratio to the other Precious Metals currently ridiculously low; it seems loading hard into Silver is the present trade.

Also, if seeking some paper exposure and leverage, Silver Stocks. Thirdly, maybe a small Gold into Platinum trade expecting Platinum to catch up to Palladium?

Thanks again AM for your cycle musings!

Stevediva
Jan 20, 2020 - 8:28pm
50yankStevediva
Jan 20, 2020 - 8:43pm

@stevediva

More buyers than sellers?

Broke above 1563 resistance?

Montross515
Jan 20, 2020 - 9:14pm

Cycles

If the US dollar is going down in value everyday, then gold and silver are going up in value everyday. Whether the market reflects this underlying realty only matters in the short run. If you need to earn fiat for groceries trying to time the bank interventions might not be a good idea. If you want to preserve the value of your estate, the metals work.

Belladonna
Jan 20, 2020 - 9:27pm
silverseekerMontross515
Jan 20, 2020 - 11:15pm

Ratio trading between the metals is not fiat for groceries

Most of us are not planning to sell our metals in exchange for decreciating fiat. The manipulation of the metals has caused full cycles > 10:1 swings between Gold:Silver in the last century, but also between Palladium and Silver twice just in the last two decades. You can exit the fiat casino and trade the metals ratios over yearly time frames, forget the intraday stress, and exponentially increase the # of ounces taken from the bankers Ponzi Scheme markets. We can assert that fiat is trash and the metals are the true currency.

This can occur right now if those controlling the physical supply of PGM metals recognize this.

matt_silverseeker
Jan 21, 2020 - 12:03am

It is easier said than done

Trading can be fun, but is extremely difficult to do with consistent profits.

Argentus writes about cycles appearing and disappearing. I agree with that statement. The same can be said about trends, and also about profitable indicator based trading schemes.

When you analyze market data, you are always looking at the past. In fact, it is very easy to design a hugely profitable trading strategy by analyzing historical data. All you have to do is optimize the strategy to give maximum profit based on the historical data. In fact, traders.com publishes the most profitable trading schemes doing just that for popular indicators like the CCI. MACD, moving average crossovers, etc. The problem is that all these trades have been optimized for the past. If you start trading with them, they may continue to work for a while, at least until they don't. We they stop working, you can quickly lose your shirt.

I think that there are very few way to eliminate almost all risk and be assured profit on trades. These things are out of reach to average investors or are illegal, though. The HFT guys have the ability to front run and spoof for consistently skimming pennies from the market. Big whales have the ability to manipulate prices. People with inside information can get in or out of a trade before everyone else discovers the reason for doing so.

I'm not saying everyone should give up. I'm just trying to make the point that there is no single indicator (such as price ratios) or even combinations of indicators that will tell you what the future is.

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