THE NEXT BLACK SWAN:
A DOLLAR CRISIS
By Toby Connor –GoldScents Wednesday, 04 December 2013
Analysts everywhere appear to be wondering what could
possibly be the catalyst to turn the gold market around. I maintain it's the
same catalyst that drove the gold bull market from 2001 to 2011. Out of control
currency debasement.
Does anyone seriously think that we can print trillions of
dollars out of thin air for five years
and not eventually have something bad happen? The next the black swan is already staring us in the face. It's
going to be a collapse in the purchasing power of the US dollar.
Since the beginning of the year the dollar has been showing
signs of extreme stress as it began to
oscillate violently back and forth in what is known as a megaphone topping
pattern. When this pattern breaks to the downside it is going to initiate the
beginning stages of what will likely be a fairly severe currency crisis by next
fall.
See graphic 1 by open the web site above
In this environment I think it's going to be impossible for
the manipulation in the gold market to continue. As a matter of fact I got a
signal last Tuesday that indicates to me that the forces trying to manipulate
gold down to $1000 have probably thrown in the towel and given up, realizing
that an impending dollar crisis is about to begin. On a cyclical analysis
basis, the intermediate cycle is now running out of time for a move all the way
back to the $1000 level. As you can see in the chart below the average duration
for an intermediate degree cycle is between 20-25 weeks. Currently gold is on
the 23rd week of this cycle.
See graphic 2
On a smaller time frame you can see the current intermediate
cycle already has four daily cycles nested within it. I don't believe there is
time for a fifth daily cycle, and a fifth daily cycle would be required if gold
were going to make it all the way down to $1000. On top of that the current
daily cycle is now stretched to 34 days
which is already longer than 90% of historical cycles. What this means is that
gold is very late in its daily cycle and a bottom is due at any time. The logical trigger would be on the employment
report Friday, although I think the
market will be expecting that so we may get a bottom earlier in the week.
See graphic 3
Last week's sentiment polls are also suggesting that bearish
sentiment has reached levels where the
market is at risk of running out of sellers. I expect when the current weekly sentiment poll comes
out later this evening we will see sentiment
in both gold and silver at levels comparable to the June bottom.
See a sequence of 4 graphics from Source: www.sentimentrader.com
To top it all off I'm
starting to hear some of the usual clichés that always appear at major turning points.
"The charts are pointing down"
Folks, at bottoms the charts will always say the market is
going lower. And at tops the charts will
always say the market is going higher.
Then there are the numerous calls for completely unrealistic
targets. I'm now starting to hear $700
price targets for gold.
I believe we are within days of a final bottom in this
intermediate cycle. I think an initial
10-20% position can be taken anytime this week. Then once we get confirmation of an intermediate bottom one can
start adding to that position.
I'll say it again, if one can pick, or even get close to,
buying at a bear market bottom the
initial move out of those bottoms are where the biggest gains in this business
are made. The first two months out of the 2008 bear market bottom miners rallied 100%. I don't think it's
unreasonable to expect something similar this time as this bear market has been
every bit as severe as the one in 2008.
And one final confirmation before I forget. Oil appears to
have put in a final intermediate bottom. Look for oil to lead the commodity
complex out of this bottom.
See final graphic.
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