The following is an email sent to me this morning by my friend since 1980 Ray Langevin of Ste-Foy, Quebec. Ray is chastising me for suggesting that we may need corrections. He has hurt my feelings with his admonishment not because he may be totally correct but because he writes in English better than I can.
KC, you see what may happen when you call me to tell me that the gold market has gone up too fast and may have a correction. As you can see it's up 20 $ at the opening. I don't think you should promote such bizarre ideas. They are not founded on reality. They may finally hurt your judgment in investment decision making. You're going to end up being interviewed on %&*#@*^ News with so many of these so called "names." That's all they are, just names. And I will lose you my good friend who has always had good judgment. Don't let yourself go with the flow. It will lose you.
Now, how I really see this market.
My old teacher thought me to look at the market as if it was a person: you identify the gender by its outside shape, it's a man or a woman....It's a bull or it's a bear. Like humans, there is no "in between." Looking at the shape of the Gold chart, I can say that I have never seen such a beautiful and strong bull Gold market. Its last advance extends itself on approximately 15 years and is expressed as an exponential curve. That's easy to understand, since gold is a currency that's basically used as a monetary refuge in bad times, panic dominates most of the time. Have you ever heard of good times with the price of gold going up? Not me.
Gold is panic in the making. Panic goes up in an exponential move. It's out of control. It is true that industrial markets in their late upswings are also expressed exponentially; everybody wants to get in at the same time. It normally doesn't last long. But not for gold, it's every day's food. Do you realize that gold is now $400 above its low trading point of the last 4 years and people are still wondering if it will go up? Well at least the blind are.
Coming back to this very important shape (chart). First, the facts. The last rise was a fantastic exponential that finished (in 2011) abruptly like all these moves. We had a correction from 2011 to 2014. It was followed by the re-accumulation period from 2014 to June 2019. From 2013 to 2015 we saw this bullish wedge (see the chart). The wedge is in the category of squeezes, typical of a leg 4 (Elliott Wave theory). Which means the market is already telling us we are going to see the 5th and longest up leg of this ongoing market that started in 1971. (No wonder my back starts aching). Gold broke up in January 2016 but was gunned down by the "powers that be" in July 2016.
A pull back after a break is the normal event following a breakout, but this one extended itself for three years, thanks to the special efforts our friends from the Society of American Banksters and Friends. What's more, this pull back transformed itself into a perfectly shaped double bottom over 3 years.
A double bottom is considered in technical analysis as the final pattern preceding an important rise as well as providing a general idea of the high price that could be reached. Keep that in mind. Considering that we've had an up move of 400 $ since the bottom of December of 2015, we might as well envisage that the 5th long leg has started. What do you think?
Finally, the shape of a market provides indications on howdangerous of this market can be. In the case at hand, it took 5 full years tobuild such a bullish base. I believe that changing the course of thisdeveloping pattern will require efforts and time that aren't available. If somepeople try it, they will realize the strength of the base that was built andhow fruitless their efforts will be. Andright now, it's all bull. Why start thinking bear? The hell with the bears.They had their chance. Too late.
Raymond Langevin