Phase Two - The Volatile Ride to Higher Gold

Wednesday March 07, 2012 11:08

In my January 2012, 32 page booklet called “Is Hyperinflation the US Government’s Only Way Out*,I compared the gold rally of 1977-1980 with the current rally in Gold. I discussed the three major phases of Gold’s 1977-1980 movement (from $134.50 to $850) and the gold rally that started in 2001. In August of 2011, I said that we have entered Phase 2 of the gold rally, based upon the dramatic increase in volatility.

When did the increasing volatility start Phase 2 of the Gold rally? 

Looking at trading from 2010 and 2011 it was easy to see.  Between Jan 1st of 2010 and July 31st 2011 (577 days), gold traded between $1,121 and $1,628 per ounce. There were only 8 days (1.3% of the 577 Days) when the gold price increased/deceased more than $30, and 0 (zero) days with a move of $40 or more. Between August 1st and Dec 31st 2011, there were 153 days when gold traded between $1,520 and $1,920 per ounce, and there were 34 days (22% of the 153 Days) when gold increased/deceased more than $30, with 8 days when the move was over $50 (including 2 days when the gold price changed more than $100 in just 24 hours.)

What will result from Phase 2 volatility?

I believe that in Phase 2 of the current gold rally we will see the average annual gold price increase over the next 3 years, surging from the 20% average of the past ten years, to 40%. Gold will reach $4,000 per ounce by 2015 before we get to the final Phase Three, when the gold market explodes.

Phase Three will be short and explosive.

Back in 1980, Phase Three only lasted for 21 days, but increased 66% in that time span. Considering the ten year time span of Phase One, and my projection for Phase Two, I feel that Phase Three (which starts in 2015) will last for six months and drive gold up to over $6,000 per ounce. If the world’s financial leaders decide to return to a Gold Standard, or if gold bullion confiscation becomes the government’s reaction to severe inflation, my projections would escalate. Possible other government reactions that can affect my projections negatively are: limiting gold ownership, restrictions on transporting or trading, and any Gold windfall profits tax.

By Barry Stuppler
March 5th 2012

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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