Did you know that there is an (alleged) cycle in the price of gold which approximates 8 years in length. Here it is:
Since gold is in a bear market, or recently was in a bear phase, it would appear to be prudent to look at the downwaves of this cycle in the past. Then those periods can be compared with the downwave of 2012-2014.
So for a start let's look at the 1970s 8 year cycle bottom:
Next came the 1980s bottom:
This major low came in a few months after the idealized time. It was preceded by a secondary size low which came 2 years earlier, and the rally between the lows was sharp and significant.
The next low came in the early 1990s:
Once again a low 1 and 2 years [prior to the main low. The main low came in "late".
The following low came here:
A pre-low is visible 18 months prior. Note that the absolute low this time came prior to the idealized low, and the later low was a higher retest. The higher retest set up serious bullishness following it's completion. After this low gold went into it's most recent substantial uptrend.
Whether this rise is secular or cyclic is open to conjecture, although many commentators insist the 2000s gold bull was/is a secular bull, which secular bull trend many assume may not be completed and resumption is assumed. I myself think that that particular view is bull because everything is cyclic in some way or other. To me, the gold bull of 2000-2011 was simply another 7-9 year bull cycle swing which lasts for half the cycle length and is inevitably followed by the return swing. The return swing downwards in 2008 was suppressed which raised the starting point of the following upswing out of the 2009 low. This downswing is making up for the relative shortness of the last one. The "secular bull"downswing retracement is now becoming quite mature and the rallies can be expected to show surprising liveliness, hurting late bears during the bottoming period, but failing to show prolonged follow through to further upside.
Let's get back to the bottoms of this cycle. Next wave ....
There was an 8 year cycle bottom along the way during the gold bull:
At the above bottom, the early low also appeared, but when the "main low" came later, it failed to break the "pre" low, and a series of higher bottoms formed. Following this gold began to rise in value at quite a fast rate.
However a top formed and the 8 year cycle turned down once again.
We are fishing about for an end to this major 8yr wave with it's 3-4 yr downswing at the moment. Though calls for super low swings and for super bull swings (at the same time!) are beginning to emerge as they always do from the must-make-big-name-to-achieve-breakthrough pundit business, not to mention the retail bullion sales business who are naturally hoping upon hope for an end to the bear before all their clients are gone while at the same time keeping a long term bullish face and improving terms (lower premia over spot) towards their remaining clientele. I have found that it is wise to look dispassionately at the data and close my ears to whatever conversational "rhubarb" is floating around.
Here is how it looks with this particular idealized cycle superimposed for reference:
So we can see that the habits of 2nd term Presidents are still intact so far. Being such clever people with clever advisors, they have conjured up via totally innovational concepts and practices exactly the same results as the previous clever presidents' advisors did before them ,and before them , and so on ad nauseum.
So this makes it appear that the gold low is not yet upon us, and another 12 months could be required to make ultimate low for this 8 year downswing.
But not every 8 year downswing is equal. Remember those 2nd year presidents were only "in" for some of the downwaves. Here are the late 20th century and early 21st century US Presidents:
Richard Nixon, Ronald Reagan, Bill Clinton, George W. Bush and Barack Obama have been elected president twice during the period shown in the gold price charts here. This is year 2 of the second 4 year term, or year 6 of tenure for these dual incumbents.
I leave it to readers to consider which downwaves are the important waves to focus upon based upon who was "in" and for how long. For example, in some years the pre-bottom was higher or lower than it was in other years. This also requires to be taken into account. You have the charts here so this can be readily evaluated.
If all of the 8 year cycle waves, similar and dissimilar were to be overplotted, what might it look like? Here is the chart which takes a bit of careful scrutiny to catch the times and places where they tend to do the same things, and the other times and places where they tend to "disagree" with each other:
Note that the variation between separate lows has been "normalized here by using logarithmic data for the gold price. it is essentially a percentage ratio chart of gold rather than the exact chart. Also note that, if this plays out the same again, (and for sure it won't do that so neatly) but if it ends up looking similar, there are two opportunities for the price of gold to make seriously determined attempts to test the decade trading range lower limits before setting off for the upper side of this long term trading range. "Moonshots" come after the retesting process is completed, and it is my opinion that until then, while big moves up and down will be seen, the thing that goldbugs hope for deep in their hearts will come after the bottoming process has had another low printed, whether this exceeds the low already made is of no importance, it is the need for another half yearly retest that must be satisfied.
And for the bearish of mind who latch onto the message "another low is coming!!" please look to the difference between the different historic downwaves for this cycle, and also the presence of something called "higher lows" which can satisfy a cyclic bearish period just as well when appropriate.
What I see mostly is the probability for two separate "weak periods" during which I might hedge holdings, and at the end of which I would probably buy, should they come to pass.
This leaves the issue of total aggregate global leverage, or to put it another way, maximum expected volatility for swings both upwards and downwards. Gold has certainly seen a significant downswing already, prior to the trading range of the past year or so, and if the swing gets pushed a great distance one way, the return stroke may reasonably be expected to exhibit some similar characteristics. However excluding all the other factors,of which there are undeniably a great number, the habitual behaviour of these powerful administrations is what it is, and they can be assumed to continue to indulge in modern day versions of exactly what their predecessors did before them.
Have a nice weekend everybody!