Gold & Inflation Cycle Lows
1/30/15 INSIIDE Track: “Outlook 2015–2017
A.D.D… D.D.
01-30-15 – The diagnosis should now be obvious to even the most ardent ‘fundamentals-only’ investor.
Since 2011, the cycles & technicals have detected all the symptoms exhibited by the markets.
Since May 2014 – the time when many markets entered their accelerated phases – the handwriting has been on the wall… and on the charts… and on the economy. Its time to actually treat the symptoms.
And finally, in recent weeks (in 2015 – RIGHT on schedule), the intelligentsia, the Swiss bankers, the ECB and all the other Johnny-come-latelys have finally been forced to admit. The markets suffer from a chronic case of A.D.D. Actually, it might be A.D.D.D.D.…
In May & June 2014 – corroborating what had been described in 2011 & 2009 – the Dollar entered the dynamic phase of its projected rebound while the Euro entered what was forecast to be a sharp drop to at least 1.1000/EC, leading into2015.
As described in corresponding analysis since then, this expected Dollar strength was likely to have diverse ramifications. One of the most profound was expectations for deflationary moves in various markets – from Gold & Silver to Stock Indices and from Soybeans to Sugar and Crude to (ultimately) Cattle… but only through 2015!
Deflation2
It has been often observed that social events reflect or mimic economic ones. Life imitates art. Or, is that art imitating life? In either case, ‘what has been is what shall be… and there is nothing new under the sun’. ‘What has been done will be done again’. And, so it was in January 2015…
Two groups of individuals – almost simultaneously – discovered and declared the dangers and adverse effects of deflation. Both were dealing with devastating losses – that deflated any momentum that had been gained up to that point – and needed to say or do something to rectify it.
Those two groups – the European Central Bank and the Indianapolis Colts – were both sent reeling from the effects of deflation… or deflating… however you want to view it.
Mario Draghi – ECB President – announced his plan to deal with the deflating economy.
In contrast, Roger Goodell – NFL President – has hesitated in dealing with his deflate-ionary problem – AKA Deflategate. Of course, Mr. Goodell is placed in a tenuous situation of critiquing the team whose owner is in his VERY small ‘inner circle’ and the owner instrumental in procuring Mr. Goodell’s $40+ million annual salary… and so he hesitates.
Of course, Mr. Draghi is also accused of dragging his heels and waiting until the absolute last minute to finally employ his ‘Belated Big Bazooka’ as one former EU economic leader termed it. The key is what that accusation reveals:Desperation!
According to Reuters, “When Mario Draghi announced the European Central Bank’s trillion-euro scheme to buy government bonds, he acknowledged that in the round of strategies to revive inflation and boost the economy, the bank had just played its last hand. Asked by reporters what would happen if the plan to purchase 60 billion euros ($67.55 billion) of assets a month for 19 months failed, Draghi answered: “We have Plan A. Period.”
There is always a danger in revealing your strategies, weaknesses, etc. When America decided to publish a concrete exit date for Iraq & Afghanistan, our enemies did what anyone with half a brain would do – wait it out. Why would anyone expend their ammunition and fighters if they could get so much greater results by being patient. That logic is already being powerfully validated over there.
And, when a global economic leader lets you know this is his ‘Hail Mary’ pass, what happens if the pass is dropped (as they often are)? If global investors thought he had more ammo, they might not panic. Too late for that… Watch in2016!
Seeds
The interesting thing is how many ‘seeds’ have been planted… in just the last month (see 1/24/15 Weekly Re-Lay excerpt – on pages 3 & 4 for add’l observations). The ECB’s action (as well as that of the Swiss National Bank) plant the seeds for future inflation… as soon as 2016/2017…
Copper has nearly fulfilled its 3–6 & 6–12 month outlooks for an overall decline into Feb. 2015 – the latest phase of a 20-month low (Feb. ‘10)-low (Oct. ‘11)-low (June ‘13)-low (Feb. ‘15) Cycle Progression. Just as Copper was one of the first commodities to top in 2011, it could be one of the first to bottom in 2015.
Copper has broken below major support and a 5-year low and is likely to bottom around ~2.3500/HG – a multi-year HHL projection. Today’s close is the lowest close in Copper – bringing it to within 2 trading days of fulfilling this longer-term outlook. This places it at a pivotal juncture – in price & time!…
Cocoa has dropped sharply since setting a peak in September and perpetuating a ~9-month low (June 2012)–low (March 2013)–high (Dec. 2013)–high (Sept. 2014) Cycle Progression (a peak that was also 2 years from its mid-Sept. 2012 high that was 2 years from its mid-Sept. 2010 low). The next phase of that ~9-month cycle comes into play in June 2015… when another important high is likely.
In the near-term, Cocoa was projected to see a drop to ~2743/CCH in January (the monthly HLS) and an overall decline to ~2650/CCH – the intermediate HHL objective and a range-projection target. Cocoa has now fulfilled this and could set an important bottom in February 2015 – the latest phase of a 38-month low (Aug. ’05)–low (Oct. ’08)–low (Dec. ’11)–low (Feb. ’15) Cycle Progression.”
Copper & Cocoa poised to lead upturn in inflation; Impending February 2015 Cycle Lows. Gold & Silver expected to follow suit… later in 2015.