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Gold 2012 Contracting Fibonacci Spiral

Commodities / Gold and Silver 2012 Jan 03, 2012 - 01:42 AM GMT

By: David_Petch

Commodities

Best Financial Markets Analysis ArticleOn holidays this week has definitely been interesting. The new term for investing in today's market should be coined “Volatility Investing”. Since most trading is done by computers with complex algorithms that when their stops are hit, cause mass liquidation. For this reason, everyone should know that the expected move expected in 2012 is going to be finite in price and time, not “To Infinity and Beyond”. When I first made the observation that the markets were following a Contracting Fibonacci Spiral, my first thoughts were that something must be overlooked in my mind. Further thinking on this topic over the past six months just makes one realize the entire Universe runs on mathematical principles at many levels and under different conditions...the collective human psyche is just another example.


As analysis will show today, the US Dollar still has another 3-4 weeks of sideways to upward grinding upward price action. Sideways to slightly negative markets at the end of January will convince most that the year will end lower than this year and that deflation is going to kick in. Everything travels in waves and will continue to follow course until conditions have been satisfied for a reversal to occur.

There are a few interesting points to note:

  1. At every time point on the Fibonacci spiral thus far, each subsequent point in time has reached a higher high and on the same note, each gain has been smaller and smaller on a percentage basis than the prior move (e.g. DOW at 40 in 1932 to 995 in 1966 versus any other time period examined...nearly 44 fold higher during the above time frame).\
  2. Each top has been followed by an excruciating decline of at least 40-50%...this cycle calls for tops, not bottoms.
  3. Each point of the contacting Fib cycle is more condensed than the former, so ergo, volatility will increase as we continue to reach the point of singularity nearing 2020-2021.
  4. The collective human psyche is driving this cycle...all events that occur on an individual basis be it personal success or failure, deaths, births, accidents wars etc. etc. are randomly occurring while the cycle tops are like towns on a road map with a train holding a constant speed between them...the destination will be reached at a particular point in time and what happens to people on the train during the trip does not affect the outcome of reaching the destination. Like anything, this cycle could be stopped by a nuclear war, asteroid hitting the earth or any event as large as those mentioned...cycles can be stopped, but recognition that we are in a large cycle nearing completion is worth taking note over.

Because the broad stock markets are trapped in a spiral does not mean that tops are limited to other sectors. Here is another revelation I just had as I finish my third cup of coffee...gold bottomed around 2000 and topped in 2008....that is approximately 8 years... September 10, 1999 was the low and May 1, 2008 was the high....this represented 3156 days, or 8 years, 7 months and 21 days (7.5% above the perfect value of 2922 days for an 8 year time frame). If we take 61.8% of this value, then the next top for gold is due on Monday September 2nd 2013...If we put 5% onto this and assume that it will be earlier rather than later (due to the first part of the cycle), then the earliest expected top is February 25th, 2013. Since the first leg was longer than 8 years by 7.5%, it is more than likely the end of January 2013 is a target date...it could occur nearer to mid January 2013, but this is the time frame to expect action.

The above is an observation, but it is rather interesting that gold is operating on a smaller Contracting Fibonacci Spiral Cycle that is in synch with the larger Contracting Fibonacci Spiral the markets are in. Adding together the sum of parts, the price of gold will move up in price in 2013, 2016, 2018, 2019 and 2020, with each subsequent leg moving less in percentage terms than the prior move. Gold advanced 4 foldish from 1999 until 2008 ($252/ounce to $1046/ounce). This suggests that gold should top out below $4000/ounce over the course of the next year (Personally, the highest I think it can reach is $3074/ounce). The price of gold is likely to top out near $7-10,000/ounce by 2020, but each advance will be lower in percentage terms of the former leg.

I thought I would share this thought with everyone, because the cycles the markets are presently in will be difficult to navigate. So, as many over the next month come out with some new but rare fish head pattern or something like that, remember that all markets are interwoven and that the principles of Fibonacci are throughout nature. The cycle we have been in since 1932 has dates locked in, with all events randomly occurring. When late 2012/early 2013 arrives, remember to take money off the table. Everyone, including fish head guy will be screaming hyperinflation, when in fact the exact opposite (deflation) will be in place.

I have mentioned this enough over the past six months so any future articles will simply be index related. I wanted to post this gold info to illustrate that the principle behind the Contracting Fibonacci Spiral is not a one-off thing, but likely to be seen in many other examples in history, either as a pure number or some transformation based value.

Have a great day.

By David Petch

http://www.treasurechests.info

I generally try to write at least one editorial per week, although typically not as long as this one. At www.treasurechests.info , once per week (with updates if required), I track the Amex Gold BUGS Index, AMEX Oil Index, US Dollar Index, 10 Year US Treasury Index and the S&P 500 Index using various forms of technical analysis, including Elliott Wave. Captain Hook the site proprietor writes 2-3 articles per week on the “big picture” by tying in recent market action with numerous index ratios, money supply, COT positions etc. We also cover some 60 plus stocks in the precious metals, energy and base metals categories (with a focus on stocks around our provinces).

With the above being just one example of how we go about identifying value for investors, if this is the kind of analysis you are looking for we invite you to visit our site and discover more about how our service can further aid in achieving your financial goals. In this regard, whether it's top down macro-analysis designed to assist in opinion shaping and investment policy, or analysis on specific opportunities in the precious metals and energy sectors believed to possess exceptional value, like mindedly at Treasure Chests we in turn strive to provide the best value possible. So again, pay us a visit and discover why a small investment on your part could pay you handsome rewards in the not too distant future.

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Disclaimer: The above is a matter of opinion and is not intended as investment advice. Information and analysis above are derived from sources and utilizing methods believed reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Comments within the text should not be construed as specific recommendations to buy or sell securities. Individuals should consult with their broker and personal financial advisors before engaging in any trading activities as we are not registered brokers or advisors. Certain statements included herein may constitute "forward-looking statements" with the meaning of certain securities legislative measures. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the above mentioned companies, and / or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Do your own due diligence.

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