Gold, Dollar, Euro & Fiat Currency Failure
10/30/14 INSIIDE Track: “
It’s All Relative
In order to prevent any misunderstandings, I have consistently & persistently emphasized the sharp distinction between fundamental and technical trends & transitions – particularly in the Dollar…
On the basis of the 40-Year Cycle (and 7-Year, 14-Year, 25-Year, 50-Year, 70-Year & 100-Year Cycles), the Dollar was/is projected to go through a dramatic shift during this period. In the end, it is expected to emerge bloodied & battered.
HOWEVER, from a purely price standpoint, the Dollar Index has been forecast to advance during the first half of this Major cycle – rallying from 2013 into 2015 – before the results of that shift are manifest in the perception & value of the US Dollar… and selling takes hold.
That expected advance – the strongest in decades (since it could reach 95–97.00/DX as the Euro plummets to its projected downside target of 1.1000/EC or lower) – was/is expected to mask what is going on in the fundamental realm and distract the masses from recognizing the looming danger.
As I have described for many years, the demise of fiat currencies – particularly the Dollar & Euro – is a race to the bottom. So, when the Euro is winning that race – and plummeting headfirst into the abyss – the Dollar looks attractive.
It’s all relative!
Underneath the surface, it is the concept of ‘hard currency’ that is actually winning the race. As the two continental ‘hares’ move in fits and starts – and then take long naps of complacency & inflation-cy – the Golden Tortoise keeps plugging along.
However, the finish line is nearing. And Gold’s day could soon come… most likely beginning in 2016. That is when – in addition to many other factors – a 40-Year Cycle, or period of testing, from the 1976 Jamaica Accord reaches fruition.
Even though I have discussed this agreement for several years, there are still many readers unfamiliar with it. In short, it was the agreement that officially endedBretton Woods. More importantly, it is the agreement that officially codified into law the abandonment of Gold’s international legal role.
So, it was not just an American institution. It was a global one. It was the official notification that Gold no longer had legal rights to its role in the pricing of any fiat currency. It was an official Declaration of Divorce between currencies and Gold. It was the world discarding monetary accountability.
1976 was a type of Fiat Currency Declaration of Independence – exactly 200 years, or 5 40-Year Cycles, since America’s Declaration of Independence. (Ironically, 1976 is also the time when the IMF was compelled to bailout the Bank of England and the British Pound.)
2016 is the completion of a 40-Year Cycle – of testing – from that rebellion. 2016 is when I think the world will begin to more readily recognize the lunacy of that experiment… and the myriad of unintended consequences it triggered. Apparently, MANY leaders are already recognizing it… as are populations like Germany. And that segues into our discussion of two converging cycle synergies…
Normal & National Cycles
In 2011, INSIIDE Track explained why I was projecting a Major, multi-year peak in Gold for August 2011 – a complete 40-Year Cycle (of testing) from the Nixon Shock of August 1971 – when Nixon slammed shut the Gold window and barred other countries from taking delivery on Gold.
There were many corroborating technical cycles aligning in Aug./Sept. 2011 – reinforcing that conclusion. Silver & some related ETFs & ETCs were identified as bubbles about to burst. But, as usual, no one (else) perceived that, when everything looked so rosy.
Gold set its highest monthly close in August 2011 & its intra-month peak in Sept. 2011!
That was expected to be a precursor to a new ‘shock’ – projected to unfold in 2013–2017 and dramatically restructure the relationship between Gold & the US Dollar (and other fiat currencies). It did not take long before the subtle, initial phases of that shift began. In fact, it took no time at all!
On that EXACT anniversary – in August 2011 – Hugo Chavez – one of America’s more outspoken and belligerent antagonists – began the shift by ordering Venezuela’s central bank to repatriate all but 15% of that nation’s gold reserves! It was time to bring the Gold home to Papa.
Up until that time – spread in American, Canadian & European banks (like Bank of England & JP Morgan Chase) – Venezuela was considered the 15th largest global holder of Gold. So, this was no small decision. And, it started an ominous trend…
Normally, this might be considered an isolated event – triggered by a madman, bent on generating as much stress for America as he can… whether financial, military or geopolitically. It was akin to Saddam Hussein demanding payment for Iraqi oil in Euros instead of Dollars.
Similar actions had been seen from Iran & Libya. It was a new ‘Axis of Evil’ – bent on undermining US banks and ultimately the Dollar. Perhaps, that could also be brushed aside as lunacy by a trio of ‘mad-men’. But then again, revolutions – on diverse levels – usually are perceived that way.
Meanwhile, Romania – in late-2012 – began pushing Russia to return their Gold reserves. Hmmmm. A smoldering brush fire began flaring up around the globe. Soon after, Ecuador repatriated much of their Gold reserves.
The panic – or the realization, depending on how you look at it – had taken hold. Economically, these were 3rd tier nations, so there was not too much to worry about. Or, was there???
2013–2017 Begins…
But, a strange thing happened along the way… Beginning in early-2013 – RIGHT ON SCHEDULE – otherwise strong allies of the US began doing the same thing. Germany – who at one time held over 95% of their gold reserves abroad – began repatriating massive amounts of Gold.
Of course, their rationale was far different… though equally disconcerting. The majority of Germans had begun to fear the breakup of the EU and wanted their Gold reserves safely back at home – in the Bundesbank. But, as is always the case, it does NOT matter what fundamental event is ultimately validating the cycles & technical analysis. It just matters that those events DO validate the analysis.
Germany’s move triggered ballot initiatives – for similar, national Gold repatriation – in Switzerland (March 2013), Finland (Sept. 2013) & Poland (Sept. 2013). Similar rumblings had been heard from the Netherlands since late-2012.
If fiat currencies & the US Dollar were so great, why this sudden seismic shift around the globe?
Weighed & Found Wanting?
One of the other possible reasons for bringing Gold back home – from the US – is a lack of trust in America’s integrity with regard to bullion safe-keeping (due to lease deals and other questionable practices being implemented with other nations’ reserves). This has been a concern dating back to the 1920’s that was powerfully reinforced with the Nixon Shock of 1971.
A related reason is the lack of trust in America’s currency (and all fiat currency) & wanting to make sure their physical Gold is back home, in safe hands before the inevitable implosion. If Nixon could slam shut the Gold window to bar global ‘lenders’ from retrieving their collateral, why couldn’t another US President… with little or no notice?
And wouldn’t this become a greater risk of occurring if/when the Dollar sees its next significant slide (after 2015)??
Or what if an international monetary/banking crisis – presaged by the events of 2008 – suddenly struck?
Would those nations want to have to battle – and wait – to take delivery of Gold that is rightfully their’s?
So, a little preemptive strike was deemed appropriate by those nations.
At the same time, as already discussed, another revolt was taking hold. Brazil, Russia, India, China & South Africa (the BRICS nations) announced their alternative to the World Bank – the New Development Bank – in 2013… and opened it in July 2014. It is important to recognize China’s actions – with respect to Gold & Silver – in this context… as they, too, accumulate these metals.
BUT… that is not where it ended!
In May 2014, Russia announced the formation of the Eurasian Economic Union that comes into force on January 1, 2015.
If I didn’t know any better, I would say there is a groundswell of support for shifting monetary power AWAY from the U.S.
And how would the Dollar respond if/when that shift ever reached the point of critical mass?
Watch late-2015–2017!
These types of actions are rarely recognized for their full significance – until years later. But, when the ramifications are finally assessed, the period of 2013–2017will likely be pinpointed as the time when the Dollar’s remaining foundation was decimated… right in plain sight… and right when the 40-Year Cycle was screaming for this to occur.
Mene, mene, tekel, upharsin…
Gold & Silver are reinforcing the outlook for another wave down – from 3Q 2014 into mid-2015. They did see a quick bounce in early-October – with Silver perpetuating a ~29-week Cycle Progression that set the stage for a sharper decline. A drop into – and low during – mid-2015 would fulfill a powerful convergence of yearly cycles…
For starters, there is an uncanny 11-year cycle (sunspot related??) between Major lows in Silver. That creates a sequence between the 1971 low–1982 low (88% drop)–1993 low (77% drop)–2004 low (35% drop)–potential 2015 low (already dropped 68%). A 70% drop (2xs 1993–2004 % decline and .786 x 1971–1982 % decline) would have Silver spiking below 15.000/SI as part of this bear market – part of the reason that a Major downside target is around 14.650/SI.
Then there is an overlapping 7-year cycle high (1973)–high (1980)–high (1987)–low (1994 was cycle low but price low came in 1993)–low (2001)–low (2008)–low (2015) Cycle Progression.
The Feb. 2014 high perpetuated a 15-17 month high (May ‘11)–high (Sept/Oct. ‘12)–high (Feb./Mar. 2014) Cycle Progression that projects a likely low inJune/July 2015. (That cycle actually extends back to the July 2008 secondary high.)
The Silver decline into June 2013 created a corroborating high-low-(low) Cycle Progression. (May 2011 high – June 2013 low – July 2015 low)…
XAU Update: The XAU confirmed its latest bout of weakness and was/is expected to decline into Nov. 4–6th, when daily/weekly cycles converge. That would also fulfill a ~2-year high (4Q 2010)–high (4Q 2012)–low (4Q 2014) Cycle Progression and double the duration of its preceding (~2-year) advance. It has now retraced 100% of that advance, increasing the potential for an initial low in the near future.
Platinum remains in a weekly & intra-year downtrend that should extend into xx 2015 – perpetuating a 7-year low-low-(low) Cycle Progression…
Palladium peaked in perfect synch with multiple cycles, perpetuating a 68-month low (April ‘03)–low (Dec. ‘08)–high (Aug. ’14), a 34-month low (Dec. ‘08)–low (Oct. ‘11)–high (Aug. ’14), a 17-month low (Oct. ‘11)–high (Mar. ‘13)–high (Aug. ’14) AND a ~3-year low (Dec ‘08)–low (Oct. ‘11)–high (Aug. ’14) Cycle Progression. It also reached is major upside objectives at 910.0–915.0/PA. Ultimately, this initial decline could last into early-2015.
From a long-term perspective, Palladium is fulfilling projections for a major peak in 2014 that perpetuates a 10-11 year low-low-low-low-(high) Cycle Progression. The more recent phases create an 11-year low (1992)-low (2003)-(high) Cycle Progression projecting a major top in 2014. That 11-Year Cycle is roughly double the 68-month cycle – creating a web of cycle multiples from 17 months up to 11 years.
Copper remains in an intra-year downtrend that could carry it lower into Feb. 2015 – the next phase of a 20-month low (Feb. 2010)–low (Oct. 2011)–low (June 2013)–low (Feb. 2015) Cycle Progression.”
Gold & Silver are expected to extend their declines into mid-2015 (July 2015 is ideal month for Major bottom) before embarking on a new advance. However, there are VERY unique aspects of this cycle that could surprise everyone – Gold bulls AND bears! 2016 is expected to be The Golden Year, even as the Dollar & Euro undergo DRAMATIC shifts.
China & Russia are teaming up with other powerful nations to provide a ‘choice’ to US Dollar global hegemony and 2016–2017 should be a decisive period. Before that time arrives, Stock Indices should be dropping (watch late-April–late-Sept. 2015 for first significant sell-off) while Gold & Silver should be entering new rallies (after July 2015).
Traders should be patient – as these periods approach – and stay on top of the latest developments with the Weekly Re-Lay (www.insiidetrack.com/ordering.html).