Gold & Silver Cycles Drop into July

06/04/15 INSIIDE Track: “Outlook 2015–2017 : Fiat-flation

“The persistent, perpetual pummeling of fiat currencies can only result in one thing: Inflation.

So that there is no confusion or semantical-ambiguity (how’s that for a term??), let me clarify the meaning of that.  Inflation – in this sense – only refers to the fiat-denominated price of corresponding goods.  For instance, when the Dollar is dropping – the Dollar-denominated price of goods rises.

Such was the case from 2001/2002 into 2007/2008.  The value of the Dollar (for this discussion, the Dollar Index is the tool used to interpret that value) plummeted and the price of most goods – from grains & energy to metals & equities – rose.  However, as discussed many times before, there was a carry-over effect as well.

The Dollar Index bottomed in 2008 as many commodities began to retrace.

As the Dollar languished near its lows, those commodities entered a final, parabolic surge – from 2009 into 2011/2012.  In a few cases, like Cattle & Hogs, additional factors took over and continued to drive those prices higher.

This took place AFTER the Dollar bottomed.

Waves & Tides

As R.N. Elliott observed nearly a century ago, market action moves like the waves on the sea.  Just as every wave does not crash & recede in perfect lockstep with the turn of the tide, every market does not peak & trough in perfect lockstep with the turn of this inflationary tide.

Many waves continue to advance further on the shore – or crash beyond where previous waves have crashed – even after the precise point of the high tide.  And some of those waves could turn out to be the most powerful and/or cause the most damage.  Add a corresponding storm or lunar cycle and the impact is magnified… sometimes exponentially.

Such was the case in 2009–2011.

The easy money game of the 2000’s helped to create the bubble (that burst in 2008/2009) and undermine the value of the US Dollar – while giving rise to most Dollar-denominated assets… hard or paper.

In some cases (Equity Indices), they gave back all their gains in a brief period of time (12–17 months)… and then had to start over.  Others, however, only hesitated before entering parabolic surges.  Gold & Silver were perfect examples.

Even though the inflationary tide of a falling Dollar had culminated in 2008, the ramifications continued to play out in the ensuing years.

Déjà EU

If one was to focus solely on the Dollar – or the Dollar Index – the related conclusion would be that the Dollar’s rebound would usher in a deflationary environment.  On a couple levels, that is accurate… and is what has been seen in 2011/2012–2015.

However, that focus should not become too tunnel-visioned.  Part of the Dollar’s strength has come as a result of Euro weakness.  So, once again, it is a race to the bottom between fiat currencies.  Even though the Euro took the lead – in that downward spiral – both continue to lose value on a broader scale.

And, similar to the US in the mid-2000’s, the EU opened up the monetary floodgates in recent years – setting the stage for another bubble-and-crash in paper assets… even as hard assets & commodities prepare to enter another surge (after retracing in recent years).

However, the real wild card is often Gold.  It has the dual benefit of rallying with inflationary fears and/or rallying with fiat fears.  In other words, the Dollar OR the Euro could be collapsing… and Gold would (likely) surge in either case.

That is part of the reason Gold was able to continue surging in 2008–2011 (when it experienced the largest proportion of its overall advance – AFTER the Dollar had bottomed).  And, it could be part of the reason that cycles anticipate a new Gold advance after mid-2015. [See 2016 – The Golden Year Reports for related expectations.]

As is so often the case, a new advance in Gold (& Silver) would likely be a ‘back-and-forth’ affair in which a clear-cut correlation – to action in the Dollar, Euro, inflation, geopolitical upheaval, etc. – is elusive and very difficult to identify.

Often, there will be extended periods of consolidation in one market (let’s say, the Dollar)… as the other is rallying (e.g. Gold).  Then, often when least expected, the rallying market (Gold) takes a breather – but does not enter a full-fledged decline – as the ‘correlated’ market (Dollar) tries to rebound.

In the midst of that, the Euro could enter a new crisis, trigger a flight-to-quality surge in Gold… even as the Dollar is rallying.  It has happened before!

The point is xxxxxxx.

Mini-Waves & Tides

The nation of Greece could give some indication of what – and when – the next fiat fiasco will look like.  The next 3–4 weeks could reveal a lot…

Most likely, some sort of compromise will be reached between Greece and the ‘Troika’.  However, that will not remove the problem… just delay it and allow the troubling issues to fester longer…

Gold & Silver remain on track for a final low in mid-2015 – when an uncanny 11-year cycle between Major lows in Silver comes back into play.  That cycle creates a sequence between the 1971 low–1982 low (88% drop)–1993 low (77% drop)–2004 low (35% drop)–potential 2015 low (already dropped 70+%).

Corroborating that cycle, 2015 is when an uncanny 7-year cycle high (1973)–high (1980)–high (1987)–low (1994;  price low came early in 1993)–low (2001)–low (2008)–low (2015) Cycle Progression recurs. Reinforcing that, a 15-17 month high (May ‘11)–high (Sept/Oct. ‘12)–high (Feb./Mar. 2014)–low Cycle Progression projects a potential bottom in June/July 2015.

The Silver decline into June 2013 created a reinforcing 25-month high-low-(low) Cycle Progression (May 2011 high – June 2013 low – July 2015 low).

That was reinforced – with the emergence of the Nov. ’14 & March ’15 lows – by a ~4-month high-high-low-low-(low) Cycle Progression projecting a bottom in July 2015… [See June 2015 INSIIDE Track for details on when next Major top could be seen in Silver… BEFORE the end of the decade.]

So, as it has for a few years, the ideal scenario remains that Gold & Silver would see a final sell-off into mid-2015… when a multi-quarter (and potentially a multi-year) bottom is expected.

Already, a wave equivalent objective for Silver (decline = decline) is coming into play around 14.570/SIN – exactly where Major support and its previous low exist.

That (14.570/SIN) is where the decline from 17.775/SIN (May 18th high) would equal the magnitude of the preceding decline from 18.515/SIN to 15.310/SIN.  [Refresher: The downside target since 3Q 2011 has been at ~14.650/SI.]

Gold has maintained a critical, multi-year downside target at 1127–1132.0/GC – which was tested in Nov. 2014.  A retest of that objective could be seen in the coming weeks.  Major, 3–5 year support exists a little below that – around 1087.0/GC.”

Gold & Silver remain on track for a continued decline into July 2015 that could see tests of 1087.0/GC & 14.570/SI.  The 17–18 Week Cycle – along with diverse daily & weekly cycles – is pinpointing July 13–24th as the ideal time for a MAJOR bottom.