April metals preview

Not a lot of time, except for one quick but important observation.

Let's go back to the first week of July 2011. With the end of QE2 arriving, and no sign of more QE, gold fell to a $1480 low.  It then proceeded to blast off over the following 2 months (The only thing that kept it from going all the way to $2000 was when the, ahem, "market" decided that the Swiss Central Bank's decision to print lots of francs was incredibly bearish).

Now, pretend that on the first week of July 2011 you wanted to predict where gold would be on April 1, 2013.  You decided to stay on the conservative side and assume that price would increase only linearly and at the same rate it had been increasing since the bull market began in 2001. You would have gotten $1920 as the best prediction for April 1, 2013 (and it doesn't much matter where in 2001 you chose time zero). 

Well, interestingly, you get essentially the same line today. Meaning, gold should be at $1920 (+/- error). You can't even tell the two lines apart unless you look really closely: one is red, one green. (You can of course fiddle with where to start in 2001 to make them even closer).




Note that gold actually touched the center line back in October 2012 (before the "market" decided lots of money printing was bad for gold). It has since fallen to the very bottom of the 99% confidence interval (green, dotted), which was remarkably already in place the first week of July 2011 (the red dotted 99% confidence interval is based on the most recent line of best fit, and is a tad wider owing to increased volatility since then). (Btw given day-to-day price correlations, I'm aware the confidence intervals don't make much mathematical sense here other than as "trend lines", but trend lines have their uses too, capturing as they do 99% of the price action.)

So there you have it. I'm long gold here. But both bulls and bears have something to look forward to this month. The "correction" is over -- it's as if post July 2011 never happened. And there's no slack left sideways. 


7 comments:

Gavin said...

Silver?

GM Jenkins said...

Gavin, I have been neglecting silver of late, mainly because I've been playing with gold data and haven't had time to get data for silver (and have been too lazy to get my stockcharts account straightened out). But also, for the past several months (once it became clear to me that the metals' remarkably steady post-2008 trajectory had been clearly violated) the major question has become the context within which we should view gold's long consolidation. At this point (at least from the techncial perspective), further downside will signify an intermediate term shift in the prospects for gold (I strongly believe even in such a scenario it will eventually break $2000, but the time frame would shift, and perhaps significantly). I cannot imagine silver doing well in such an environment.

Funky Tape said...

Lowest volatility in silver since 2003 according to endlessmountain on YT. He does excellent analysis if you haven't seen his videos.

duggo said...

You know my thoughts on charts. I used charts when markets and the World were a simpler place. Now everything is planned and controlled or rather manipulated to cause the market to rise and fall so that those "in the know" can benefit.

If a big event is going to happen it will not be predictable by a chart. (duggo's theorem).

Funky Tape said...
This comment has been removed by the author.
Funky Tape said...

Go, go duggo! You never miss a chance, do you?

Enlighten us. What are your top 3 ways to profit from this theory you hold so dear to your heart? Going to see how well you do going forward.

You seem convinced everything is planned, yet have no data on it cause you don't use "charts" so you must be betting on it somehow. Be a shame if you missed out on some mad gains, wouldn't it?

duggo said...

Dear Funky Tape
I've made a lot of money with property, shares, gambling and Silver. I now own property and Gold as a hedge against a fat pension. I don't own Silver now.

I wouldn't dream of enlightening you as you seem too full of yourself and far too clever to take any information in from me.

The markets are "planned and controlled" but not in an intelligent way. The people doing the "planning" are reacting and their panic is becoming more noticeable.

You are obviously lacking in perception that you do not realise my "attack" on charts is more humorous than antagonistic.

GM knows this because he is intelligent.