E Don't Lose Sight Of Bigger Gold Picture

GOLD WEEKLY

Big picture time for gold. It’s easy to get lost in the daily and weekly gyrations and lose sight of the broader perspective. Gold enjoyed a healthy uptrend for over a decade before peaking in 2011 and entering a bear market. Prices began a sideways chop starting in 2013, and trading has been difficult. Though it has been challenging, I believe investors will be rewarded if they can hang in there a bit longer. The multi-year base should yield a breakout in 2019 or 2020. Rallying above the $1370 – $1400 level will signal the beginning of the next multi-year advance. If I had to guess, I’d probably choose 2020 for the breakout year due to the likelihood of extreme political tension going into the elections.

MICROSOFT’S MULTI-YEAR BASE 

Here is an example of a multi-year base. Microsoft rallied sharply for over a decade and peaked around $39.00. Prices declined and then chopped sideways for several years. They remained elevated and towards the top of the range before breaking out in 2012. Last year prices reach the hundred $115, a several-fold increase above the prior $39.60 record high. I expect a similar breakout and advance for gold.

CONSUMER SENTIMENT

Consumer sentiment is what fuels long, trending moves in gold. From 1990 to 2000 consumer sentiment was in a steady uptrend. The economy was roaring, and the Internet spurred incredible growth. There was a breakdown in 2001, and sentiment didn’t bottom until 2011…which coincided with the top in gold. Currently, sentiment is still in an uptrend, but it is losing momentum quickly. I believe we will see a sharp breakdown (as we did in 2001) between now and 2020. And that is what will fuel the next multi-year advance in gold.

GOLD DAILY

Near-term, gold broke slightly lower and closed below the 10-day EMA. However, it is yet to form an official swing high until prices close below $1278, so I still can’t confirm a cycle top. Nevertheless, the 6-month cycle is mature at 22-weeks, and that should produce a multi-week correction, at some point.

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