x
Breaking News
0

Gold Analog Charts Signal Early Stages Of Cyclical Bull

By Jordan Roy-Byrne, CMTCommoditiesSep 13, 2017 12:15AM ET
www.investing.com/analysis/precious-metals-bull-analogs-update-200212912
Gold Analog Charts Signal Early Stages Of Cyclical Bull
By Jordan Roy-Byrne, CMT   |  Sep 13, 2017 12:15AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

We started employing analog charts during the latter stages of the seemingly forever bear market in precious metals. Comparing current to past trends by using price data is not considered technical analysis but it is extremely valuable because history tends to repeat itself. It also helps us identify extremes as well as opportunities. For example, in 2015 it was clear the epic bear market in gold stocks was due for a major reversal. Today, precious metals appear to be in the early innings of a cyclical bull market and the analogs suggest there is plenty of room to run to the upside.

The first chart compares the current recovery in gold to past recoveries. In recent quarters we had anticipated a similar, explosive rebound like in 2008 and 1976. However, with 18 months of evidence we can now say the current rebound most resembles the rebounds that started in 1985 and 2001. Both of those rebounds imply gold could reach $1700/oz by Q4 of 2018. However, if gold cannot take out the resistance around $1375 then it could end up following the path of the 1993 rebound.

Gold Bull Analog
Gold Bull Analog

Next we look at the large cap gold stocks. The data is from the Barron’s gold Mining Index (BGMI) which is one of the few indices with a multi-decade history. If one were to look at the HUI or GDM (parent index of the VanEck Vectors gold Miners ETF (NYSE:GDX)) it would show the gold stocks are currently behind the rebound that began in the fourth quarters of 2000 and 2008.

Data from the BGMI implies the rebound in gold stocks is ahead of schedule. In a broader sense, the BGMI certainly has plenty of room to run as many of its bull markets have achieved 7-fold returns.

Gold Stocks Bull Markets
Gold Stocks Bull Markets

Next is an analog constructed from data from my custom junior gold indices. The juniors are currently right at the point where the 2001-2007 bull made a massive move higher over the next 12 months. The two bulls for comparison are a very long cycle (+6 years and less than 3 years). At worst, I’d expect this bull to last somewhere in between. If gold makes a clean break above $1375/oz then I’d expect this bull to advance to the 14x peak the other bulls achieved before 2019.

TDJ Junior Gold Index Bull Analog
TDJ Junior Gold Index Bull Analog

Finally, here is the TSX Venture Index. The three previous bulls averaged close to a 250% gain. The current bull is up roughly 60%. The gains for the overall index are muted as the index contains a large amount of worthless companies. Nevertheless, the bull market has plenty of room to run in terms of time and price.

TSX Venture Bull Analog
TSX Venture Bull Analog

The analogs show that the current bull market in gold, gold stocks and juniors is obviously in the early innings in both time and price. Interestingly, the analog for gold and the junior gold stocks suggests there is the possibility of strong upside potential over the next 12 months.

If gold breaks above major resistance around $1375/oz, then the juniors and large gold stocks could realize that upside potential over the next 18 months. Although the fledgling correction in precious metals could continue and expand, the broader risk to reward is skewed to the upside. Therefore, we want to accumulate the best opportunities in the juniors on weakness.

Gold Analog Charts Signal Early Stages Of Cyclical Bull
 

Related Articles

Gold Analog Charts Signal Early Stages Of Cyclical Bull

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

 
Are you sure you want to delete this chart?
 
Write your thoughts here
 
Replace the attached chart with a new chart ?
Post
Post also to:
1000
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
 
Replace the attached chart with a new chart ?
Post 1000
Please wait a minute before you try to comment again.
 
 
 
Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Add Chart to Comment
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email