War Cycles and The Price of Gold

51
Sun, Aug 17, 2014 - 4:49pm

There are many fundamental factors which contribute to the price valuation given to gold at any time. At the same time gold is valued by reference to it's comparative efficacy to other assets as: a non national (foreign) currency, a zero coupon AAA (and better) bond type asset, an inflation hedge, a hedge against systemic risk as per eg collapse or loss during war or catastrophe.

So I got to thinking that it might be interesting to look at repeating alleged cycles in the frequency and size of wars, and interpret those cycles by looking at the behaviour of the gold market during those historic times. So hopefully for every war cycle there would hopefully be a similar lead up period, and some similarity during it's crest and decline of current waves when compared with earlier waves of that particular war cycle.

The (alleged) war cycles I chose to work with are the following:

142 years

57 years

22 1/2 years

12 1/4 / 9.6 years (either one or the other dominates)

11 1/2 years

The 12 year cycle seems to be subdued during recent years so for this one I worked with the 9.6 year wave which seems to increase when those two are not in contest with each other.

So the cycles I worked with, and the date in the past corresponding with today (August 2014) are as follows:

142 years ... charts not available and difficult to compare with today

57 years ... 1957

22 1/2 years ... Jan 1992

11 1/2 years ... Jan 2003

9.6 years ... Jan 2005

It's interesting to see that August this year should be compared to January of the previous waves for three of these (war) cycles in the gold price. This may have repercussions to the reliability of seasonal charts and their predictions during the latter half of 2014. Subject to the approximate dimensions of these long term waves of course.

I considered looking into gold against logarithmic demographics, as in Secular Cycles and Millennial Trends by Korotayev, Malkov, and Khaltourina ( https://escholarship.org/uc/item/9c96x0p1#page-1 ) but the timescale is just too long for practical use, though the idea fascinates.

So I took the most well researched international war cycles instead and began to see what elements of the previous wave might be repeating, in modified modern form) this time round. If the act of war or the threat of war affects the price of gold, then looking at the same stage of a previous war cycle should hopefully compare in some way to the present price, provided the periods measured are an exact whole (complete) number of cycle waves apart.

The farther back in time I went the more I have used comparisons rather than absolute value prices - ratio with other markets, and logarithmic display, detrending against in inflation index to normalize data and make it "look similar". As they come into recent years I just compared the price of gold then with the price now.

57 Year war cycle last time round looking first at the price of stocks

Courtesy of www.macrotrends.net: Gold - inflation adjusted against CPI

Observation: In both cases a large trading range is nearing or at completion with stocks attacking new highs.

57 year war cycle last time (looking in gold price vs stocks):

Courtesy of www.macrotrends.net: Gold against S&P 500

Observation: the stocks to gold ratio is presently at a similar level at it was at this stage of the last wave. Last time the ratio was clearly declining, but this time the recent rally is large enough to make me question whether this is similar or different. The case remains open on that.

22 1/2 year war cycle last time round in gold price:

Gold price against itself

Observation: This is extremely interesting. A declining downtrend of a mature near swing in gold in both charts!

11 1/4 year war cycle last time round in gold price:

Gold price against itself

Observation: In this timeframe gold has made a historic low causing a major bull to begin. This time round the low is several smaller swings later, and although a breakout may be forming like it did a decade ago, the major low is not present for such a length of time as to gain recognition and "bring in bulls" as it did back then.

9.6 year war cycle last time round in gold price

Gold price against itself

Observation: Similarity abounds, and many of the smaller swings seem to be synchronized! Following this "analog" would entail construction of a new higher support plateau from which a bull could gain strength and then make a continuation of more bullish upwards swings.

The similarities are visually obvious if they exist, or if not visibly obvious are probably non existent. I personally see a series of pending breakouts in past waves when those waves were at a similar stage to today. But allowances must be made and a months or two are neither here nor there in such a basic approach. readers might be interested to try this for themselves, but with shorter term cycles in war or other assets like eg bonds whose prices are encapsulated in the price of gold.

I did find it interesting to remember the major news headline events of those past times and compare with the hottest fresh news of 2014. but that is a different conversation. That aspect is also worth looking into I think.

~~~~~~~~~~~~~~~~~~~~~~~~~~

Sources of related material:

Martin Armstrong on Cycles of War:

https://armstrongeconomics.com/cycle-of-war-political-economy/

Larry Edelson on War Cycles:

https://www.moneyandmarkets.com/very-serious-stuff-war-cycles-hit-this-year-prepare-now-51479#.U_EPCGx0yUk

Dewey - "Cycles" : https://www.bibliotecapleyades.net/ciencia/cycles/cycles11.htm

Some of Mr Dewey's published work has been used in the charts I have created for this contribution.

~~~~~~~~~~~~~~~~~~~~~~~~~~~

Have a great weekend everybody!

Argentus Maximus

The author posts daily commentary on the gold and silver markets in the TFMR forum: The Setup For The Big Trade. More information about the author & his work can be found here: RhythmNPrice.

About the Author

  51 Comments

Danforth Coxwell
Aug 17, 2014 - 4:53pm

JUst want to mention again......

The best way to protect yourself against the spread of infectious disease, including Ebola, is to wash your hands. Contact your local Public Health Department for more details.

Yes a first.......

Aug 17, 2014 - 5:10pm

A real question of course is:

A real question of course is: does war account for what percentage of the value given to gold?

I don't think the answer is a constant percentage. Instead I am intuitively convinced that when war is "high" other fundamentals will get forgotten and ignored for a while, and vice versa. Such is sentiment.

sierra skier
Aug 17, 2014 - 5:22pm

Analysis comparrison

Must be those clean hands. 2nd

This will be a fun read.

Everything revolves in cycles from women's hemlines and men's ties to commodities and politics (wars). A large part of this is those in charge creating the circuses to keep the public occupied so as to be non-concerned with the economic and loss of freedom for more security issues. I just hope the cycle for PMs will come around one of these days so I look better in my wife's view.

sierra skier
Aug 17, 2014 - 5:26pm

War is often used as a cover

for the poor economic conditions as a distraction so I think that wars often come as a result of poor economic times when PMs should be up in value.

lnardozi
Aug 17, 2014 - 5:30pm

Good God, Y'all

What is it good for?

Absolutely nothin'.

(fourth)

Green Lantern
Aug 17, 2014 - 5:53pm

Some more Cycles and Economics

Here's one more guy comparing war cycles and financial cycles

Part 1 of Is War Predictable? It's ok but not indepth as it could be with cycles

The Cycles of Economics and War part 1

The next guy is actually pretty good and has all the Dewey cycles. Wish I had that book he shows. Video's aren't very well done but he has good information. Sometimes people making interesting comments in the youtube comment section. Looking at the next few years between now and 2017 for STHTF

Is War Predictable?
amarula4
Aug 17, 2014 - 6:52pm

Belangp explains gold/silver market manipulation

Know your opponent

Know the Opponent
Chuck Diesel
Aug 17, 2014 - 8:38pm

OT: the other side of the Ferguson story

I'm sorry for inserting this into the thread, but being from St. Louis, I feel compelled to offer it up. This allegedly is a family friend of Darren Wilson who called into a very popular morning talk show here on Friday. She called in to offer Darren's side of what happened. Obviously there is no way to prove what she's saying, but , if true, it certainly casts a lot of doubt on what we've been hearing.

https://www.971talk.com/blogs/dana-show-blog/audio-demand/exclusive-call...

thesandbox
Aug 17, 2014 - 9:38pm

the Hall of Justice...

has spoken......thanks GL.

Green Lanternlnardozi
Aug 17, 2014 - 9:46pm

What is it good

What is it good for?

Absolutely nothin'.

(fourth)

It's really a very arrogant and dismissing statement considering (you correct me if I am wrong) you have zero clue of the implication of this work, where it comes from, who uses it or even it's implications on a more popular subject that people love to talk about manipulation. The people that run the show have this technology, spent probably billions of dollars in research to gather every piece of information they could on how cycles work together AND that's why they are ahead of the game, and you aren't.

I doubt you have the least bit inclination to look for the deeper analogs AM hints at the end of his article which probably done with the utmost of diligence would yield more than you could ever imagine.

You would dismiss the work and insult the author who by the way if you follow his thread know that he has a track record at the future direction of the metals as good or better than any of the luminaries (possible because he considers information that 90% summarily dismiss) in the field and he gives his time and effort for free and in a few key strokes of being a smart ass you dismiss it. Instead you might want to just move on and find something that perks your interest that you can wrap your brain around.

Might be a useful exercise to have gold drop below $1000 for one last hurrah to bring sentiment down to near zippo so the rest of us who have a keen interest in markets will benefit from the inevitable upward movement that your disinterest will yield. From the looks of things, we are getting close.

Would love for Turd to give you a chance to write a guest post and see what deep profound truths you could provide to the community.

Key Economic Events Week of 10/14

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Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
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Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
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Key Economic Events Week of 9/16

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9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
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9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
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9/12 8:30 ET CPI
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9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
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8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Key Economic Events Week of 8/12

8/13 8:30 ET Consumer Price Index
8/14 8:30 ET Retail Sales
8/14 8:30 ET Productivity & Labor Costs
8/14 8:30 ET Philly Fed
8/14 9:15 ET Ind Prod and Cap Ute
8/14 10:00 ET Business Inventories
8/15 8:30 ET Housing Starts & Bldg Permits

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