Gold at $32,000 in three years?

Never let it be said that Jeanne d'Arc doesn't publish anything bullish. Not convinced? Well how about gold reaching $32,000 by 2015? How do you like them apples, eh?

Still not convinced? Well, then read on, my little chuckie egg...


Sadly we're not the first to report on this - friend of Screwtape, Bron Suchecki, got the scoop here, but only because he has a time zone advantage over the rest of us, I'm sure... ;-)

Well known chartist Nick Laird, who provides a lot of the charts for Ed Steer at Casey Research has been following the gold market for at least as long as there's been an interweb. He has used and talked quite a bit about Elliott Wave Theory, which is a not entirely uncontroversial method of linking investor and broader social psychology to market trends (and sometimes vice versa), often over decades-long periods. Elliott Wave Theory has had some notable successes and failures, and has its fair share of proponents and detractors.

It will not surprise you that I'm something of a non-believer in EWT, although the more ungenerous amongst you would probably submit that I am a non-believer about most things. I attribute this peculiar state of mind of mine to long periods spent in GM Jenkins' coal cellar whilst being forced to reflect on 'the kind of person you are, Jeanne, and the kind of person you think you might like to be'. But I digress. The fact is that for better or worse, EWT has very much a firm hold in many investors' minds, and for that fact alone it is to be discounted out of hand at one's peril.

Nick Laird has just produced what he describes in true Aussie style as something of a 'ripper'. More to the point, he is hopeful that it will serve as 'a roadmap which gold may take as it climbs to new highs'. Here's the chart, followed by Nick's explanation in his own words:



The first two uplegs (the blue line) generate (through the formulae) the future uplegs (the red line) as the price heads to its peak at W5(5). The time, price and percentage of each leg up and down are shown on the edge of the chart. So, having left W4(A) behind, for the next 16 months we are heading up to W4(B).

The presumption is that the blue line (actual gold price) will stay above the red line for the first half of the next up-leg, falling to below the red line for the second half of the upleg and rising steeply into the peak of W4(B) as gold likes to do.

Perhaps gold's final top is W4(D) or W5(1) or higher. Perhaps the timing won't play out right, but this presumably will be something close to the shape of gold's rise over the next few years.

Exciting stuff for gold holders. It's not really for me to comment on whether or not I think this will or won't happen, as all things are possible, and I lack even the basic cursory details of EWT that I would need to go head-to-head with a real expert on charting (and, despite his modesty, on EWT) like Nick.

However, I can, I think, bring myself to point out the obvious. If $32,000 gold in 2015 were to come to pass then it would essentially accompany a devaluation of the dollar so quick, and so hard, that it would make your nose bleed.

This chart is not just a roadmap for price acceleration in gold. It is essentially the road map for the disintegration of an empire, the ruin of the world's reserve currency, and a time of fear not seen since Europe in the late 'thirties. For that reason, if no other, then even though I own gold myself and would like to make a bob or two out of it, I hope that Nick is wrong. I hope that he is very, very wrong.

14 comments:

/SleepingVillage/ said...

Yep.

Fortunately, or unfortunately "hope" has little to do with reality. The destruction of the dollar(and a bunch of other stuff) is baked into the cake, the illusion of "wealth" based on debt is a tasty and essential ingredient. It may taste bad to some, but it tastes about right to me.

Gold is merely assuming its natural role.

Nick Laird said...

Just so you know; Nick is not an eWaver at all but rather was supplied the data & formulas & did the chartwork presentation for this chart.
The eWave work was done by a friend in UK - a Geoff S.

Interestingly Geoff's done three other constructions of this wave using various eWave patterns ie. not a fifth of a fifth, and come up with the same extended results ie. all models extend into the 30,000's.

Cheers Nick

Warren James said...

Nick, just for the record I hope you are wrong about this as well (and I say this in the nicest possible way). I've been wrestling with it since I saw the chart initially at Gold Chat. I'll do more attention to it later, but in summary here are the things I'm grappling with - these are not arguments against the chart projecttion, but they are considerations.

1. The Management-Of-Perceptions-Economy lever pullers simply won't allow this kind of movement. As GM pointed out, they manage the gold price to suit their purposes and I can't see where a meteoric rise of the gold price fits into their plans.(yes I do believe metals price manipulation exists - mostly in the form of gross distortion - up or down direction or agent .. doesn't matter).

2. The 9.6 Trillion of gold currently, suddenly becomes 200 Trillion (give or take), and some of that would be base money in the form of central banks. While this recapitalizes the entire world quite nicely, it also implies (as Jeanne points out above) a rapid devaluation (store of value) for currencies. While I fully realise this process is occurring already, it's the rate of change which is key. Society may not be able to withstand a sudden dramatic change like this.

3. Is this projected as a normal bubble? and will Mike Maloney be waiting at the top letting us know it's time to sell to the greater fool who then needs to sell to the next greater fool... etc. I'm not saying it's foolish to buy gold (it's not) but what happens to the poor folk who get swept up into the curve, not knowing the fundamentals? And as a follow-on, what does the down-side look like?

Anyway, those are my basic thoughts. Note that your price target is actually near identical to the FreeGold price estimate, and around about the same time-frame too. I would not be surprised to see the two elements converge in some fashion (one being a trigger of the other, etc). Regards, Warren

p.s. Offline, Nick Laird is helping me identify ETF depositories and additional bar lists. Thank you Nick.

Warren James said...

Bron just pointed out that Nick has a bunch of other cool public charts (in addition to his subscription service), and specifically draws our attention to this chart and explains (my paraphrase) that a price movement of this magnitude is par-for-the-course as far as world finance stuff goes, which is a great point.

p.s. yes this is a plug for Nick's subscription service. He's spent over a decade collating stuff and got some great material so deserves a bit of time in the sun.

Jeanne d'Arc said...

@Nick - thanks for the clarification. I've amended the article slightly to take this into account.

And thanks in advance for the brace of 400 oz bars that I'm sure are now winging their way to Warren, in return for his shameless pluggery ;-)

GM Jenkins said...

If gold gets to $30,000 ... how much exactly will a man's suit cost? In other words, will gold achieve $30,000 in 2012 dollars' purchasing power? If so, the historical store of value function of gold will have changed fundamentally. The last suit I bought for $30,000 (curiously enough it was a toga) cost that much because it was actually made of gold (the sequins were anyway).

And JdA, enough whining about the coal cellar! The troupe of dancing midgets I keep down there like it just fine.

Robert LeRoy Parker said...

The men's suit equality is definitely a fallacy. The value of gold has varied significantly throughout history.

Here is one example:

Link

GM Jenkins said...

Nice video, RLP - thanks. Worth watching.

Intersting: "How about another example? A secretary/clerk in Roman times earned 15 Denarii per month, or 1.85 oz troy in gold per year using the same method as above. The current average pay of a secretary/receptionist in the USA is $26,000 per year, making the gold price equivalent $14,054/oz."

Assholus Maximus -lol

Don said...

Just checked the M1 and M2 money supply numbers. M1 is $2.211T and M2 is $9.740T. If US govt gold holdings are 262,000,000 oz., then the gold price to fully back M1, which is currency plus checking accts, is $8,440/oz. To fully back M2, which is M1 plus savings accts and money mkt funds, is $37,000/oz. And I haven't even addressed the national debt yet.

$32,000/oz by 2015 is believable.

Your course of action should be clear....

John East said...

If gold were at $32000, and the Dow was at 32000, ie a Dow:gold ratio of 1, we would be around a value where previous gold bulls have peaked.
Maybe $32000 gold sounds mad, but accelerating inflation leading to hyperinflation could easily take the Dow to 32000 in 3 years, so maybe a final inflationary collapse in 3 years time might just give us the insanity of $32000 gold.

However, if the above comes to pass, a nice suit then would probably cost $32000.

Gold, after all, is all about protecting your wealth, not necessarily increasing it.

Nick Laird said...

Warren
Sorry for not replying earlier - was lost elsewhere.

As a roadmap I would not consider/recognise this chart specifically for the final top that is shown on the chart. ie 32,000 in Jan 2015.

Rather I look at each specific top of each wave as a potential top on the way up.
All depends on what happens in the financial markets & how the governments react.
The more credit destruction we get - the more governments will print & the higher it will go.

So I see potential highs of 3500, 6200, 10900, 18700, 31600 depending on how much fiat creation.

So I see the plot as potential rather than definative.
And as a roadmap into the future I expect it could well change and need adjustment along the way.

I would expect that the degree of the rise will be of a magnitude greater than the bubble in 1980.
This would infer a rise above 7000 - so the 10900 could be a good target.

There's some new counts shown here.
http://www.sharelynx.com/chartstemp/GoldeWave.php

Swampfox said...

Jane,

Good post. I hope he is wrong too. I also see two major flaws in his charting theory.

First is that it discounts TPTB ability to manage price rises and declines in any kind of manner. Markets are controlled to one degree or another by central banks, the supply of money and where that money goes. The money supply can grow but if the bulk of it is held in reserve then inflation is less rapid than simple charting can predict.

Second - the other problem I see is that the price of Gold is not determined by inflation alone. The dollar does not necessarily have to devalue in order for gold to rise. Supply and demand also play a factor and a rise in the price of gold may at times simply represent increased buying pressure applied to a finite resource.

Just my 2 cents for what they are worth.

Swampfox.

Unknown said...

Yep but to make matters worse this economic collapse will lead to the attempted establishment of world communism circa 2020 - hence probably a world war to prevent that come 2016-2018

Warren James said...

^^^^ I always enjoy seeing a good clear-cut example of a semi-automated meme injection (the comment above). God help us if this indicates they're planning a war to cover up gross fiscal mismanagement.

Gold strayed a little from this particular graph, but the September 2012 reversal will do a lot to get it back on track.