Reply #28: What post is gold hitched to? (gold-bugy, but gtrat charts) [View All]

http://www.321gold.com/editorials/petch/petch121704.html

I first want to state the AMEX Gold BUGS Index is still in the running correction. Refer to this thread to follow the "You are HERE" charts" to see the running correction highlighted well over one year ago.

There are numerous little observations to confirm the count is accurate and will continue to follow the pattern with indiscreet waves that are impossible to predict along the path. The recent impulsive wave completed in early October had an extended fifth wave, suggesting a decline below 200 would not occur (it did not). The true bottom of the HUI is at 35 and not 60. To confirm this, the recent impulse just mentioned fell short of 258 and would have been a failed wave <5}. This would imply a decline all the way back down to 35. This is not going to happen. The US dollar is still on course to 78-80. I am not going to list the counts. Instead, an editorial is presented to discuss what gold is hitched to.[br />
Jim Dines once said gold was the hitch of everything in the Universe (I hope I got that right). This editorial portion is simply going to examine charts and present a case for why gold is bullish. I am not going to look at oil, since the one chart presented three weeks ago clearly shows a hyperinflationary blow off. The currency and gold case for this will be presented. Note: all charts shown below are from www.thechartstore.com.

The chart below shows the PPI since 1948. The decline since 1984 has been in a declining channel. Recently the PPI broke out of the channel. This occurrence is a sign of inflation that soon will be passed on to the consumer. The first major inflationary spike in the PPI in 1975 occurred 5 years before gold spiked. This is so typical of human behaviour. A large ground breaking event is needed to arouse the awareness of the masses. Once a larger increase in inflation is felt, that will be the trigger for gold. A spike up, and down is likely, followed by a gradual decline. Based upon modeling, 2010-2012 will see the price of gold go parabolic. The price of gold will rise nicely over the next 6 years, but the blow-off phase where the major profits are made lies around the time frame described.

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