As a follow up to the USD Index analysis, a look at the precious metals group is warranted. I wanted to see if I could fit an appropriate outlook for the metals vis-a-vis a likely USD devaluation. If commodities are approaching a blow-off move, and possibly a culmination of the secular bull that began a dozen years ago, the metals should be a key indication.
A look at gold shows a very consistent 21 +/-1 month cycle that has consistently produced higher highs since 2001. Another key point is that gold has managed a higher yearend close for 12 consecutive years in a very strong bull market. However, at some point this uptrend will end and I believe it will come with a reversal of the long term USD bear. The ST chart shows the 21 month cycle and without looking at larger cycles, it shows a bullish outlook.
The next 21 month cycle is due for its nominal peak by mid-2013. That would coincide with the next 40 week low for the USD. If we look at the larger 60 month cycle for gold, we see that an important peak is due for that cycle. Originally I had the 2011 peak pegged as the 60 month peak, but a further look at the USD suggests it is more likely ahead in 2013/2014.
Another reason why I think the metals did not put in the 60 month cycle peak in 2011 is due to the divergent highs seen in gold, silver and platinum since 2008. Platinum topped out in March 2008 while silver topped out in May 2011 and gold in September 2011. It is unlikely that these metals would put in such a divergent highs if such an important peak is due for commodities and the precious metals group. I would expect more commonality in this group. Here’s a look at silver and platinum.
I would expect new highs for silver and gold and for platinum to retest its 2008 high at a minimum in 2013/2014. While ST shows a peak due in 2013, one should keep in mind that these larger cycles can vary and contract or extend. Thus precise timing is not realistic. But for now I am looking for an important peak around mid-2013, with perhaps another to follow in 2014.
One important note for Sentient Trader users. If you are trying to reproduce this view and “look” for the three metals, be aware that I used a fair bit of manipulation in terms of analysis start dates and peak “pinning” to achieve these charts.
On a short term basis, the gold peaks analysis looks as follows. A 40 week cycle peak, which actually runs 47 weeks presently is due near mid-2013.
The current 40 week cycle for gold should be very bullish for gold if we are seeing a run into a secular top for gold and commodities. In sum, watch the USD as that will be the key to 2013 for many markets.
cheers,
john
