by Bill Downey     Price Analysis of Gold and Silver
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Technical Analysis Trading Gold, Trading Silver/ analysis By Bill Downey providing key turning points & charts for investors and speculators in Precious Metals Trading, and Precious Metals Markets


Bill Downey, of Gold, LLC, is an Independent Investment Analyst with over twenty years of study. YOU SHOULD NOT TAKE ANY MATERIAL posted on this WEBSITE AS RECOMMENDATIONS TO BUY OR SELL GOLD OR ANY OTHER INVESTMENT VEHICLE LISTED. Do your own due diligence. No one knows tomorrow's price or circumstance. The author intends to portray his thoughts and ideas on the subject which may s be used as a tool for the reader. GoldTrends does not accept responsibility for being incorrect in its speculations on market trend or key turning points that it may discuss since they are at best a calculated analysis based on historical price observations.

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  • 18 May 2016 9:53 AM | Bill Downey (Administrator)


    May 18 2016

    Fed minutes

    At 2:00 p.m. ET today the Federal Reserve will release the minutes of its April 26-27 meeting with investors watching for discussion on the balance of risks to the central bank's outlook. Two (non-voting) regional Fed bank presidents said yesterday that at least two interest-rate increases may be warranted this year. Jan Hatzius, the chief economist at Goldman Sachs Group Inc., is also warning that the market may have underpriced willingness to raise rates this year, as the spread between two- and 10-year U.S. Treasuries narrows to 92 basis points. The market-implied chances of a rate hike by the July meeting have increased from 15 percent to 28 percent in the last week alone.

    Dollar rises, commodities hit

    The U.S. dollar is climbing ahead of the Fed minutes, with a gauge of the currency hitting a seven-week high this morning. As the greenback rises, so commodities fall, with copper and other industrial metals declining. Gold for immediate delivery dropped 0.6 percent to $1,271.93 an ounce by 5:20 a.m. ET. Oil was unchanged at $48.32 a barrel.

    When we look at monthly closing prices, it is important to NOTE that the US Dollar closed out April right at the long term downtrend line. Since then we have bounced, but it should be clear that gold and the US Dollar are at KEY LEVELS (gold near upside breakout and dollar near downside failure). The big question is which one will win ?


    I have been hoping a pullback near 1240 would be the preferred track going into the 21st, but I'm beginning to have my reservations as gold looks to be picked up on every move lower that is attempted.

    This of course comes at a time when gold is heavily shorted by the commercials. Should they be wrong, gold could get the type of bounce on the above chart. If the control boyz win (again) then that changes the situation. As you can see below, they are VERY SHORT gold at the moment. They usually win, but NOT ALWAYS. Still, it beckons us to be careful.

    Gold Short Term

    Gold is closing in on its decision for the next price move. As you can see by the chart, the moving averages have converged along with price at 1275 and a triangle formation is taking place. Thus it looks like 1263-1267 is 1st support for today and 1275-1277 is resistance. Let's go look at the next chart and discuss the next two week outlook.

    Gold Cycles

    The window for a short term gold cycle low is due on May 21st (plus or minus 72 hours). Thus the window for a low begins today as we are within 72 hours of May 21st. The ideal range for a low is the 1240-1260 area. The 50 day average at 1251 and the 38% retrace at 1241 is the most likely places to watch. There is also some support near 1263 to watch. In any event, gold should be making a short term low in this timeframe.

    Cycle Projection

    While we are always aware that INVERSIONS can happen, and one hasn't happened since November, the chart below shows what the odds are gold will do if the current cycle plays out. The yellow zone is the future next two weeks. While there are no guarantees, the ODDS are high for gold to move higher in this fashion if the coming cycle plays out. As we can see, it's possible that gold can bottom early before the 21st, and that is a distinct potential. Don't look for this to play out exactly in this manner but keep note that another gold move higher could be on the horizon of beginning.

    So what is the Key ?

    We need a close above 1289 and really 1308 in order to favor higher towards 1322-1350. As long as we remain below the 1308 level (the 2015 high) then it is not out of the question for gold to have a cycle inversion. What would a cycle inversion look like ?

    It would look like the chart below. Just keep in mind that the odds are only 25% but we do have to be careful at this blue cycle. I will favor that gold is going to have a strong move, and I favor the upside, but beware it can go the other way as well.

    ANY CLOSE ABOVE 1289 and I'll have to favor that the gold low for this short term cycle is in place and I will do an update.

    SUMMARY - A good sized move should be arriving in gold. I'll favor the upside, but won't rule out a cycle inversion. Remember, the big boyz are very short. Be careful.

    I'll update again on Wednesday if price action warrants. THE CYCLE TURN WINDOW for blue opens tomorrow and lasts until Monday.

  • 17 May 2016 10:35 AM | Bill Downey (Administrator)

    Gold Long Term (Moving Averages – 1220-1275) Neutral

    Long Term Trend ~ long term trend has moved from Bearish to Neutral as price is above the lowest average on the monthly close. For long term trend to resume to bullish, the blue average will have to cross above the red. Remember this is not a timing tool but long term trend direction. The Long term trend moved to bullish in July of 2002 at $303 gold. It remained bullish until April 2013 when price collapsed below the Blue moving average in the 1480-1520 area. That put the trend to NEUTRAL. It then turned to bearish on Jan 31 2014 at 1239. It remained bearish until Feb 29, 2016 when the month closed above the blue moving average at 1235 putting the trend back to Neutral. And it is still a weak neutral. In other words price is near the threshold from bearish and neutral. But it is better than bearish. A close above 1322 will add a lot of strength to the “weak” neutral.

    At literally the same price point as the red moving average is the Fibonacci 38% retracement (that dotted line). Thus 1272 is a key pivot point where the bulls and bears are fighting it out for control.

    Finally is the 2015 yearly high at 1307. In order to label something a long term uptrend (unless we’re talking 20-40 years. But in order to label it long term uptrend, the minimum requirement is to exceed a previous year’s high. While we don’t use that component in our gauge, I’ve noted it because it is important resistance. The 2015 high was 1307, and this year’s high is 1303.

    The last component measures the 89 month moving average and that is the 1319-1322 resistance zone. That’s the last resistance before 1400. In summary, resistance is the 1294-1307 area and 1314-1322. Above that and we’re heading for 1400. On the downside, support is the 1222-1255 area and 1150-1172.

    The next key event that has to take place on the long term is for gold to get a monthly close above 1319-1322. This is the last long term resistance point on the chart until 1400-1438.

    A monthly close below 1222 raises a caution flag but overall, it takes (at the moment) a monthly close below 1122 for the long term trend to flip back to Bearish.

    Here’s another monthly view of the entire 21st Century Bull market.

    The key is getting above the 2015 yearly high at 1307 and attacking the 89 month resistance at 1319-1322 which is the Fibonacci 89 month moving blue average. Then the 2011 downtrend line at 1425-1450. These are the last two resistance areas until final Fibonacci resistance in the 1530-1550 area.

    In summary, the long term uptrend remains intact at the 21st Century trend line and the three final long term resistance points are defined below (1319-1322) (1425-1450) and 1530. Much higher prices are in store as we move towards 2018-2023.

  • 10 May 2016 4:29 PM | Bill Downey (Administrator)


    Mid Week ~ May 10 2016

    Seasonally May is the strongest month for the USD.  Not every year, but enough for it to be the strongest overall month.  In addition, for gold, May is the 2nd weakest month of the year. 

    The chart below shows the US Dollar hitting 2015 price support and (so far) not closing below it.  It's the perfect time for a rebound rally in price and time and thus it should be respected. 

    IF THE US dollar came withing 1 point of violating the 2015 low and gold came within 3 dollars of taking out the 2015 high, then it stands to reason that a new low in US dollar and new high in gold would be a YEARLY event and thus would be another notch in confirming longer term reversals.  Gold KEY RESISTANCE IS 1314-1322.  A weekly close above 1322 would favor gold moving towards 1400.  On the other hand, a weekly close below 1217-1222 would delay this event (for now).

    This week

    Our post on twitter this morning was looking at potential support in the 1252-1257 area and since then a 10 dollar rally has been in place.  Should these lines break the next important place would be the 1240 area.  That is where we have the April 27th low before the final rally to 1300 and it is also the point of support from the 19th to 21st of April.    On a weekly basis the 1222 area is the critical support.  The odds of 1252-1257 or 1240 being the low this week are pretty good.  If gold is heading for 1222-1240 I strongly suspect that will be kept for next week.   

    Summary;  Look for 1240 or 1252-1257 as this weeks support (most likely point).  Lets go to resistance on the next chart.

    This week

    It looks like the mid-week bounce in gold is underway.  I've taken off the channel lines on this chart and to me it looks like gold is going to go test the resistance at 1272-1276 where the very short term moving averages are crossing.  A close above the moving averages, and the next resistance doesn't seem to be until near 1295 (last weeks high).  A close above the averages and we could say a move towards 1285-1295 can take place. 

    Summary very short term;

    Gold is still choppy and overlapping in overall pattern look.  If this is only a mid week bounce, then it should end Wednesday or Thursday.   Closes above the moving averages allow for further upside into Thursday.  

    Gold Short term cycles

    The next blue cycle is due May 21st (plus or minus 72 hours).  That means that a look at the chart suggests that the pullback is ON ODDS not complete.   That doesn't mean it can't explode higher at any time, it means all things given we should expect a low sometime next week.  The best spot for that is at the lower 2015 channel line or the red 2016 upper channel line.  That puts support in the 1210-1230 area and 1240-1255 (for now).  If the cycle plays out, a ideal low would be where the red and black trend lines meet on the cycle chart below sometime in the 2nd part of next week.  


    A short term low is due next week.  

    Closes above 1272-1276 favor another attempt at pushing prices towards 1290-1300.

    Anytime we are below 1255, be on guard for potential testing of 1222-1240.

    If the short term cycle plays out, we should see a low point next week and a move higher into the 1st Week of June is the odds favored scenario at the moment.  

    2015 high was 1308 --- as long as we are below that, pullback can remain in play.  A close above 1322 on a weekly basis would be bullish signal for 1400 gold as next target.

    WATCH THE US DOLLAR -- odds favor gold reacts in opposite.  

  • 09 May 2016 1:50 PM | Bill Downey (Administrator)

    Gold Short term - bearish

    This week’s important price points in gold are the 1260-1263 area and then near 1255. Additional support is the 1222-1230 area. Gold should see a bounce from this Monday low back towards 1272-1280 and then we’ll see. IF the short term cycles play out, this pullback should last until around the 21st of this month. Resistance this week will be 1280-1290 if gold gets back above 1272.

    Gold Short term Cycle

    As discussed in our last update, a close above 1272 favored higher into May 6th with the target the upper dotted channel line and that’s what we got going into the cycle turn due May 6th (plus or minus 72 hours). If the cycle plays out, gold should move sideways to lower going into the next blue cycle due on the 21st of the month. The window for the red cycle turn is open until this coming Monday close. In summary, if the cycle plays out, we should see a pullback into and around the 21st of May.

  • 28 Apr 2016 3:43 PM | Bill Downey (Administrator)

    Gold Long Term

    Long Term Trend ~ We’ve shown this chart before.

    The key is the action we saw at the 21st Century Channel line and the subsequent reversal higher. Odds continue to favor the major low has taken place. Long term support is that upper black dotted line at 1050-1087 area and then the lower dotted 21st Century uptrend line in the 850-1000 area. We’re right near resistance on the monthly chart at 1272-1294. The key is getting above the 2015 yearly high at 1307. Thus resistance is 1314-1322 at the Fibonacci 89 month moving blue average and the 2011 downtrend line at 1425-1450. These are the last resistance areas until final Fibonacci resistance in the 1530-1550 area.

    In summary, long term gold is getting very close to taking out major resistance points.

  • 27 Apr 2016 9:05 AM | Bill Downey (Administrator)

    This week all eyes are focused on Central Banks, namely the BOJ, RZB and time again for the Federal Reserve.

    The FOMC meets this week and results come out this afternoon, and although they promised 3-4 interest rate hikes in 2016, they have yet to pull the trigger. The central bank stated in March, that they are focused on events in other markets, particularly in Europe and Asia. Although data is supportive of another interest rate increase in the U.S., concerns about contagion from weak economies have caused the Fed to shift to a policy of "gradualism". This dovish stance on the market has allowed precious metal prices to rise.

    While market consensus points to no change in U.S. interest rate policy this week, central banks like to keep markets guessing when it comes to the actual meeting results. Therefore, precious metals face their next hurdle this week. A surprise rate hike would cause a rally in the dollar. A stronger dollar and increasing interest rates would likely be bearish for the precious metals sector on the short term, but certainly not the long term. We are in the camp that higher rates will be bullish for gold. Additionally, hawkish language in the statement increasing the chances of a rate hike before summer could cause a relief rally in the dollar and a downside correction in precious metals. With that said, all other trends besides short term seem poised for higher prices.

    Precious metals are likely to soar on the wings of a dove or fall if attacked by a hawk when it comes to the Fed policy and statements this coming week. Be careful out there in the precious metals markets, although they are looking better than they have in years, the prospects for volatility have increased with prices and we could see some violent price action ahead. I remain bullish on the precious metals sector, but it is likely to be a bumpy road up the mountain. Precious metals have all taken a giant step forward, the Fed and dollar will tell us this week if new highs are in the cards soon.


    On a short term basis, the big question is whether cycles are inverting and putting the blue cycle as a high rotation or not? The first chart shows the blue cycle high potential. If this is the right rotation then prices should begin to head lower today/tomorrow. In order to negate the cycle we would need to exceed last week’s high which is at 1272. Let’s go look at the next chart.

    Cycle with no inversion

    Because prices dropped to the lows during last Friday and remain above the 50 day moving average, it is not out of the question that the blue cycle remains at the low point. Any MOVE BELOW 1217-1222 will confirm we are going to move lower into the May 7th timeframe. The bottom line is that cycles are reflecting the markets indecision and choppy pattern. From a pattern perspective, a case can be made that gold is currently in an A-B-C corrective pattern, and that the C wave portion is going to play out. That would target the 1172-1192 area if that pattern observation is correct.

    In summary, gold remains in a trading range. Odds favor that it should make its move one way or the other after the FOMC meeting today.

  • 21 Apr 2016 1:44 PM | Bill Downey (Administrator)

    The one thing i didn't want to see was a NEW high at the blue cycle.  Now the question is has gold just INVERTED and changed the rotation to BLUE CYCLE HIGHS (bearish).   If yes, then odds are high that gold has just put in the spring high.   

    Although we can't be sure just yet,  the COMMERCIALS are heavily short gold and long the USD dollar.   
    If silver can't close above 17.25 on Friday, it will add more danger to the longs.   With silver making new highs this year along with Platinum and GOLD NOT DOING SO leaves the door open for the downside.  

    I'll have a full update tomorrow on the website.   

  • 12 Apr 2016 8:55 AM | Bill Downey (Administrator)

    Gold Medium Term

    Medium Term Trend ~ BULLISH

    Moving Averages 1128-1145 --- bullish

    As reported in February, the most significant event was the medium term trend had moved from bearish to neutral for the first time since April 5th 2013 at a time when gold closed the week at 1575. We reported that the next thing we need to see is the moving average blue cross the red average with price above both on a monthly closing basis. WHILE THE MONTH HAS NOT ENDED, THE BLUE AVERAGE (1128) CROSSED ABOVE THE RED (1145) two weeks for the first time since March 22nd , 2013 when gold was 1609 an ounce !!!!

    As long as gold closes above the blue moving average in April, the medium trend will remain BULLISH.

    The next step is to close above 1288-1322 on a weekly basis. If that develops look for gold to run up to 1400 at some point in time in 2016 with the potential for a lot more. In summary, this is the best evidence we have seen that the bull market has resumed.

  • 31 Mar 2016 3:29 PM | Bill Downey (Administrator)

    The cycle chart is busy but don't let it throw you. All we have done is add the MEDIUM TERM cycles into the usual cycle chart you see. The Green is the ideal week for a turn and the Yellow is the WINDOW for a standard deviation required for cycles. Nothing works EXACT. Otherwise, the Greeks would have conquered the grain markets long ago.

    The short term blue cycle favors higher prices until April 7th (plus or minus 72 hours). That is a bit above a 70% confidence factor. I've HIGHLIGHTED a cycle FAILURE/INVERSION in November to show it can happen. It has not happened in 9 turns and we're at the end of the quarter and at a medium term point. IF GOLD IS VERY STRONG it should be able to hold 1215-1222 on a weekly basis. Since 1207 is the low any failure there and your looking at the potential of 1190-1200. The bottom line is that for the moment, we can trust the blue cycle with 70% odds. Remember, there are no absolutes. If gold does rally and gets above 1245, then the potential to move to 1272-1307 even to 1322. If we begin to fail here, and move below 1207, it would introduce the potential of a cycle failure/inversion where 1190-1200 reside at the channel line marked support. If price were to move inside the 2016 uptrend channel then it opens up 1122-1172.

  • 22 Mar 2016 11:31 AM | Bill Downey (Administrator)


    Why the Coming Debt Bubble Will Burst

    When will we know the bubble is bursting?


    Interest rates rise for only 2 reasons - GROWTH (Confidence) and FEAR (Lost Confidence)

    We will know the bubble is bursting when the chart below violates the trend lines to the upside. We have now completed a Fibonacci 34 years from the top.  Price has been dancing up against the upper line for almost two years.   But it s coming !!


    Here is the chart with the last FEAR move in rates............and gold went from 400 to 875 during the rise.  This is proof that gold can rise during interest rate hikes.

    Today's news:  (Already at the state & territorial level in USA).

    Debt Default Watch = Puerto Rico will ask U.S. Supreme Court to validate law that lets it cut billions of dollars from what it owes in debt.

    Pre-Debt Default Watch

    Philadelphia is trying to introduce a 3 cent tax per ounce of soda. The excuse is that “sugar” is bad for you so they have only the best interests in mind for society. They expect to get almost $100 million annually. The city is dead broke and has a 22.5% tax on parking and 8.5% tax on hotels. 

    This latest “soda tax” means a 2-liter bottle of soda typically costs $1.50, but the tax would amount to $2.04, more than the cost of the actual bottle. The cost of a 12-pack of soda would nearly double to more than $8.

    Summary of what it means...........


    The problem is not Commodity Inflation ---- its government taxation and regulation that is churning out higher costs !   The proof is in the chart below (Commodity Prices).   We actually reached 1976 price at year end 2015.

    So now the government will try and sustain the price of oil & probably commodities.   The reason is simple.  If they don't stop the price collapse, the emerging market debt (which is 60% in US Dollars) will DEFAULT.  That is also why they are so DESPERATE to have the US dollar lowered.  

    Perhaps a secret deal may have been forged at the last G-20 meeting in Shanghai in March 2016.    In 1985 the Plaza Accord (G-5) did just that - a coordinated effort to lower the US dollar.   Did the Banksters just implement the Shanghai accord? 

    The double top at PAR 100 is the banksters last stand.  Right now the USD is still at a support point, but just barely.  The next support line is near 91-92.  The Central Banks are aware that a higher dollar = DEBT DEFAULT (on all money borrowed in US Dollars)

    How close are we really ?  While there is no exact date,  odds favor it is near.  But what can we learn from the past ? 

    Tomorrow's News:

    Sovereign Debt is What really brings down the House !!!

    Misplaced Confidence In The ECB - Lessons From John Law's Mississippi Bubble

    Submitted by Alasdair Macleod via

    Last week, the ECB extended its monetary madness, pushing deposit rates further into negative figures.

    It is extending quantitative easing from sovereign debt into non-financial investment grade bonds, while increasing the pace of acquisition to €80bn per month. The ECB also promised to pay the banks to take credit from it in "targeted longer-term refinancing operations".

    Any Frenchman with a knowledge of his country's history should hear alarm bells ringing. The ECB is running the Eurozone's money and assets in a similar fashion to that of John Law's Banque Generale Privée (renamed Banque Royale in 1719), which ran those of France in 1716-20. The scheme at its heart was simple: use the money-issuing monopoly granted to the bank by the state to drive up the value of the Mississippi Company's shares using paper money created for the purpose. The Duc d'Orleans, regent of France for the young Louis XV, agreed to the scheme because it would provide the Bourbons with much-needed funds.

    This is pretty much what the ECB is doing today, except on a far larger Eurozone-wide basis. The need for government funds is of primary importance today, as it was then.

    In Law's day, France did not have a central bank, such as the Bank of England, managing the issue of government debt, let alone a functioning government bond market. The profligate spending of Louis XIV had left the state three billion livres in debt, which was the equivalent of 1,840 tonnes of gold. This was about 85% of the world's estimated gold stock at that time, at the livre's conversion rate into Louis d'Or. John Law would almost double that by June 1720, with unbacked livre notes issued by his bank.

    Today, the assets being overvalued for the governments' benefit are government bonds themselves, but the principal is the same. There is no need to use a separate, Mississippi-style vehicle, because there is a fully functioning government bond market.

    Banque Generale created the bank credit for France's upper and middle classes to buy Mississippi Company shares, driving up the price and making yet higher prices a certainty. Law had set up a money-making machine for those with a modicum of wealth, but the ten per cent down-payment required to subscribe for Mississippi shares made speculation available to the servant classes as well. The result was virtually everyone in Paris was caught up in the speculative fever, and Mississippi shares increased from the 15 livres deposit to 18,000 livres fully paid at the peak in June 1720. The term "millionaire" dated from that time.

    Today, the ECB is doing things a little differently, creating money to buy government bonds from the banks, enabling governments to continue to spend without the threat of a funding crisis. Basel III banking regulations, which exempt banks from having to apply a risk weighting to government bonds, ensures that the bonds are also in great demand as collateral, further guaranteeing that the banks will continue to buy them.

    However, in common with Law's scheme, the ECB needs new suckers all the time to keep the market from stalling, so the ECB is extending the scheme beyond sovereign debt by buying up investment grade bonds as well. And since it can conjure up money out of thin air, it will also pay the commercial banks interest to borrow from it, ensuring the yields on all bonds purchased with this finance will continue to fall in line with negative interest rates.

    As was surely the case in 1720, the expansion of credit is commonly believed to be a very good thing, as necessary for the welfare of the Eurozone states today as it was for France three hundred years ago. But don't be fooled. For the scheme to continue, more credit has to be issued, and more bonds bought to stop the bond bubble from deflating. That is the real reason behind the ECB's action. And because it cannot be continued for ever, that is why ultimately the bubble will pop.

    The Mississippi bubble came to an end when France ran out of sufficient buyers to keep it inflating. There always comes a point where the temptation to cash in some profit to buy those other things long desired, such as a country estate and a smart Paris residence, becomes too great to resist. And when the Mississippi bubble lost its mojo, the selling escalated. By late 1720, the Banque Royale, as it had been renamed, faced angry note-holders unable to redeem them for specie. Once the run started, the whole scam rapidly imploded.

    It seems extraordinary that in economics, wishful thinking trumps reasoned analysis and common sense so often. The fallacies that have brought the ECB to implement its delusional policies are broadly the same as those in which John Law believed. In both cases, they started by assuming that the state has a duty to ensure money and credit are freely available, unchaining the population from the constraints of free markets. In both cases, their beliefs inevitably adjusted as a result of problems that subsequently arise as the by-products of monetary expansion. And in both cases, yet further monetary expansion then became the only solution to apply as a cure-all for the problems themselves. Unsound money has come to be deployed simply to keep bankrupt governments going.

    We should put to one side all other reasons, justifications and excuses for what has happened, because it was the French state that employed Law to run its bank, and the Eurozone governments that created the ECB. The servant always serves the master. Banque Royale succumbed to a run, while the ECB is still nursing a banking system, that on a reversal of the asset bubble, will almost certainly collapse. In this respect, the ECB is not quite at the Banque Royale's tipping point, but it is edging closer.

    Everyone in the Eurozone believes that the ECB is all-powerful, because to believe otherwise is unthinkable. This was also true of Banque Royale, until it faltered. It was not a loss of confidence in the bank that was responsible for the collapse, it happened as a result of the difficulties encountered in sustaining the bubble. The lesson is that it need not take a loss of confidence in the ECB to start its destruction.

    Let's imagine for a moment, that the bond-market bubble ends and prices start to normalise. We know that it won't take much to create losses that will wipe out the capital of some critically important commercial banks, but we like to think the ECB is on top of this problem. Very few people seem to be are aware of the crisis that falling bond prices would create for the ECB itself.

    The ECB's equity capital at 31 December 2015 was €7.74bn, supporting a balance sheet of €256.645bn, a gearing ratio of over 33 times. The wider euro-system's accounts, where the asset purchases accumulate, has capital and reserves of €98bn supporting a balance sheet of €2,872bn, a gearing ratio of 29 times and rising. As a rough guide, an interest rate increase of less than two per cent, to as little as one and a half per cent, would undermine the value of bonds and related risks at both the ECB and in the euro-system, to the point where they would require further capital injections. For some context, if the yield to maturity on a five-year bond rises by 2%, the price falls roughly 10%.

    Now we are getting to the truth as to why the ECB's debt bubble must be sustained. It is no longer to support economic growth. A deflating asset bubble will take down the ECB and the wider euro-system, just as the Mississippi bubble took down Banque Royale. And in both cases, the confidence vested in these institutions is reflected in the purchasing power of the money they have issued.

    It may not be long before foreign holders of euros begin to visualise Mr Draghi in a full-bottomed wig, lace jabot and long velvet coat. Their problem will be looking for safety, because the ghosts of eighteenth-century monetary economists can also be imagined at the helm of the other major central banks. In John Law's day, the solution was simple, as the private banker, Richard Cantillon showed. He cashed in early, selling livres for gold.

    Cantillon, who was the equivalent of today's investment banker, not only punted the Mississippi bubble successfully, but he loaned large quantities of fiat livres to the wealthy in Paris, taking in Mississippi stock as collateral. Before the crash, he had the prescience to sell all his own stock for gold. It is said that he also secretly sold all the collateral he had had pledged to him, again settling for gold. Cantillon then removed himself across the border to Italy with his stash of Louis d'Or to await developments.

    After the crash, he returned, and demanded repayment of the outstanding debts from his clients. Cantillon probably became the richest commoner in history, and immensely unpopular in Paris to boot. Rather like the investment bankers of today, he made his fortune while nearly everyone else was impoverished.

    We cannot say for sure what will trigger the end for the ECB and the euro. It could be a member state, like Italy, Spain or even France, running into financial or political trouble. It could be the threatened break-up of the European Union, if the Brexit polls swing in favour of Britain leaving, and the blow that it would impart to European unity. The Muslim immigration problem is often cited as a threat to the European project. It could be developments on the other side of the world, perhaps China driving up commodity prices, leading to future price inflation in the Eurozone, so leaving Eurozone bond markets exposed to the threat of rising interest rates.

    Equally, it might not be an identifiable event. Rather like the Mississippi scam, it could end when the Eurozone's bond markets just run out of steam.

    Is gold reacting because it is time?

    "We are in the window for change"

    Gold Medium Term

    Gold has broken out of a downtrend and many are calling for the bear market end.  If this is so, then gold must move above the TWO BIGGEST RESISTANCE lines in current striking distance and that is the Fibonacci 38% retrace at 1280-1290 and the April 2013 CRASH LOW at 1322 when over 600,000 (100 ounce) contracts changed hands.  A monthly close above 1322 favors a test of 1400 as the next great resistance.

    Gold Short Term

    The next cycle turn is due Marc 23rd (plus or minus 72 hours).   Just keep in mind that on average, 3 INVERSIONS occur yearly.   You can see the last INVERSION on the chart where the BLUE CYCLE TURNED INTO A HIGH...........and price got decimated.  Keep that in mind.  There are no absolutes in markets --- only odds.  On the shorter term, support is the 1233-1243 area and then 1217-1222 & 1190-1200.  For now the upper channel line is Price resistance (1288).  If we close above there, then look for 1305-1325 next.

    Silver Long Term

    History shows that Silver participates in all gold rallies.   This looks like the spot to now watch if silver gets stronger than gold.  That's what we need to see. 


    Silver Long Term Chart

    We posted this on Twitter on December 3rd ---- to buy silver at 14.06.   It was the exact week that gold bottomed at 1050.   We also posted this buy at 14.34 on the website.  The only other long term trend line is at $8.00.  We won't rule out a test of that area, but should it come, one should close their eyes and buy another round of silver with both hands !!!


    The "window" for the gold turn has been Oct - 2015 to June 2016.  That is when gold is most likely to bottom.  We have stated this since last September on our website updates.  So far the Dec low at 1045 meets the criteria.   We won't rule out another wave just yet,  but if we get above 1322 on a monthly basis, odds favor the bear market is over for gold and silver.

Technical Analysis :: Gold & Silver

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