Hawaii Six O - Gary Wagner
Gold Forecast 2019
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We will present three projection models for gold prices. A short-term model, to forecast pricing for the first half of 2019, and 2 long-term models starting in 2001 in 1975.
All three models intersect in December of 2015, the pivot point for a bull cycle.
Figure A has the current rally in play highlighted in yellow. It begins in Mid-August 2018, and highlights the current market action up until January 23rd. This rally began at $1168, the lowest price point in 2018.
This model indicates that currently a bullish rally is active, and after failing to breach technical resistance at $1300 began a correction. Once this correction runs its course gold could trade as high as $1352.
In November 2018, gold staged a highly energized price surge. That rally moved pricing back above the 50 and 100-day moving averages. During the last week of November, a golden cross occurred when the short term 50-day moving average crossed above the 100-day moving average. This revitalized and strengthened this uptrend. Then in late December 2018, price closed above the 200-day moving average for the first time since May of last year.
Shows the point when prices broke below the compression triangle. The start of a correction which could take gold to $1267, or as low as $1247. A retracement to $1247 could be followed by a rally to $1320 per ounce. A retracement to $1267 could take pricing above $1340 per ounce.
Closing above the 200-day moving average is significant because it is technical confirmation that a long-term bullish trend is active. More so it will remain active as long as the current price remains above this average. However, since January 2nd gold has been consolidating and trading sideways.
On Friday, January 4th gold traded in an expanded range as it hit a high of $1300 before selling off and trading to a low of $1278 per ounce. The entire week of January 7th contained a series of lower highs, and higher lows, which formed a compression triangle. On Friday January 18th, gold broke the support line created from the compression triangle. The chart above illustrates Friday’s price break.
Figure D also includes a model based upon the resistance level at $1300 and the start of a correction. If the correction concludes at the .38% retracement ($1276), the next rally could take gold as high as $1336 - $1352. If wave four ends at the .50% retracement ($1246), the next rally could take gold as high as $1312 - $1321.
Long Term Cycle In Gold
Our research suggests that gold is in the final years of a major long-term impulse cycle. In fact all three models indicate that relative to their time cycle. his model is forecasting the possibility that a final major bullish wave began three years ago, at the end of 2015, following a correction to $1040. This Corrective wave four began following the all-time high at $1900. Both models suggest that gold could re-test the record highs ($1910) achieved in 2011, and could trade as high as $2070.
Figure E 1
The chart above covers the last 100 years. In 1879 our monetary system was based upon the” gold standard”. Currency printed by the treasury was a certificate, an I.O.U of sorts, redeemable for gold. A twenty-dollar bill was redeemable for a troy ounce of for gold.
Two major events define gold prices over the last century. In 1934 President Roosevelt authorized the “Gold Reserve Act “. The Gold Reserve Act outlawed most private possession of gold, forcing individuals to sell their gold to the Treasury, after which it was stored in United States Bullion Depositories. The government took 300 million dollars’ worth of gold, and appropriated 470 million dollars’ worth of gold certificates.
One year later, with all the gold in the government’s possession, Roosevelt changed the nominal price of gold from $20.67 per troy ounce to $35, adding the new-found money to the treasury by printing currency to reflect the gain in golds price.
Gold prices remained steady at about $35 until the late 1960’s. Then in 1973 President Nixon abandoned the “Gold Standard” completely. This allowed the government to print an endless supply of fiat currency, and it allowed gold prices to rise, exponentially. This is the beginning of the most significant cycle for gold pricing ever! More importantly, this cycle continues to this day.
Figure F 1
The chart above is a monthly candlestick chart from 1975 to 2020. It can be divided into five waves. We are currently in the final (fifth) wave which began in December 2015,
By calculating a .618% retracement of wave three we get a value of $2084. As the price prediction of wave five.
Elliot wave theory contains a fractal quality whereas a wave can be subdivided into a smaller wave set. Such is the case with the wave count in the chart below which begins in 2001
The multi-year cycle from 2001 to 2020 contains five major waves. The fifth and final impulse wave starts at $1040. December 2015.
I have added two Fibonacci extensions, seen as a set of red and blue lines.
Figure G 1
Impulse wave one begins in 2001 when gold was trading at approximately $250, and concludes during the first month of 2008 after hitting a new record price of $1000.
In terms of an Elliott wave count, the rally from $270 to $1000 was wave number one. The retracement from $1000 down to $700 was corrective wave two. The third wave, the longest impulse wave, concluded with gold trading to the all-time record high; $1900.
The first two red lines on the left represent the base lines of $269 and $1005, the price range of wave one. This impulse wave begins the 5-wave cycle, in July 2001 and concludes in 2008. It will become the base line used to model following waves one thru five.
All models must adhere to the 3 immutable laws to creating a correct wave count:
Rule 1: Wave 2 cannot retrace more than 100% of Wave 1.
Rule 2: Wave 3 can never be the shortest of the three impulse waves.
Rule 3: Wave 4 can never overlap Wave 1.
The next two red lines represent the starting point of the third wave at $674, and above it the 1.618 % extension of wave one at $1861.
This correction retraced over .618% (70% to be exact), and 50 % from start of wave one. A 78%, retracement is considered the deepest acceptable level for a correction. Most importantly it did not break rule 3: Wave 4 can never overlap Wave 1.
Of the two corrective waves found in the 5-cycle impulse phase, will typically contain one shallow correction (.23% or .38%) and one deep correction (.618%).
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