Connor Agrees With Goldrunner: Gold and Silver About to Take Off
The gold bull is now on the verge of launching the most spectacular up-leg of this 10 year bull market. This spring we should see the final parabolic rally of the massive C-wave advance that began in April `09…[taking gold up a further 15% or so to approx. $1650, silver up a further 40-45% to as high as $50 and the HUI up to somewhere between 800 and 900 (i.e. +40-60%). Let me explain the specifics:] Words: 1216
So says Toby Connor (goldscents.blogspot.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com, has edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. (Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.) Connor goes on to say:
Gold’s 4-Wave Price Pattern
Gold moves in an ABCD wave pattern, driven not only by the fundamentals of the gold market,…but also by the emotions of gold investors and the thin nature of the precious metals market. Let me explain gold’s 4 wave pattern.
- The A-wave is an advancing wave that begins, and is driven by, the extremely oversold conditions created during a D-wave decline…A-waves usually retrace a good chunk of a D-wave decline [and] can often test the all time highs but rarely move above them.
- The B-wave is a corrective wave spawned by the extreme overbought conditions reached at an A-wave top.
- The C-wave is where the monster gains are made. They can last up to a year or more. The current C-wave is now almost two years old. They invariably end in a massive parabolic surge as investors and traders chase a huge momentum driven rally.
- Parabolic rallies are not sustainable so the final C-wave rally ends up toppling over into a severe D-wave correction as the parabola collapses [as the] smart money [begins to take] profits into a move that they know can’t be sustained.
- Then the entire process begins again [as the graph below illustrates].
The Influence of the U.S. Dollar on the Price of Gold
..[T]he Fed’s ongoing debasement of the [U.S.] dollar is one of the main drivers of this bull but let me take this one step further and show you [in the two long-term charts below] how the dollar’s three year cycle drives these major C-wave advances and how the move down into the dollar’s three year cycle low always drives a final parabolic C-wave rally [in the price of gold]…
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The Dollar’s Three Year Cycle: the last 7 three year cycle lows [are shown] with blue arrows [and] the average duration from trough to trough is about 3 years and 3 months. [T]he dollar is now moving into the timing band for that major spike down in the next 2 to 3 months.
Inverse Move of Gold to U.S. Dollar: the extreme left translated nature (topped in less than 18 months) of the current cycle [as seen in the chart below] gives high odds that the final low, when it arrives, will move below the last three year cycle low. That means that sometime between now and the end of May we should see the dollar fall below the March `08 low of 70.70 [- and] that crash down into the final three year cycle low will drive the final parabolic move up in gold’s ongoing C-wave advance. Every major leg down in the dollar has driven a major leg up in gold since the bull began. I really doubt this time will be any different.
…[O]nce the dollar bottoms and begins the explosive rally that always follows a major three year cycle low it will initiate the severe D-wave correction in the gold market. Gold investors will want to exit at the top of the C-wave if at all possible and avoid getting caught in the D-wave decline.
Developing Patterns on the Gold Chart
There is a developing pattern on the gold chart that once it reaches its target will be a strong warning for traders and investors to exit so they don’t get caught in the D-wave profit-taking event as the parabola collapses. This T1 pattern is a four-part pattern with the first and second legs up being almost equal in magnitude, separated by a midpoint consolidation that allows the 200 day moving average to “catch up”.
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The current T1,[as shown on the chart below,] has a target [for gold] of roughly $1650ish once gold breaks out of the consolidation zone.
The fourth part of the pattern is the D-wave correction which should retrace to test the consolidation zone between $1300 and $1425. At that point the next A-wave will begin and we’ll repeat the whole process all over again.
What To Expect From the HUI
During the last major moves higher in the gold market, miners, which are leveraged to the price of gold, stretched 35% to 45% above the 200 day moving average. At the latest peak the HUI was only 25% above the mean – a strong clue that this was not the final C-wave top. [As such,] I expect we will see the HUI stretch 40 to 60% above the 200 DMA at the final top later this spring.
Even Brighter Prospects for Silver
Let me be clear though. I have no desire to buy gold. I doubt I will ever buy another ounce of gold again. The real money will be made in silver [and particularly silver miners] during this final C-wave advance and in the miners…
Silver has been exhibiting exceptional strength compared to gold for 7 months now. The consolidation on the silver chart [as shown below] is much larger than on the gold or gold miner charts.
I expect that massive consolidation to drive silver up to test the old 1980 high of $50 by the time gold puts in its final C-wave top.
Conclusion[In summary, Connor forecasts:
- gold going to $1650ish (+15-20% from current level) ,
- silver going to as high as $50 (+ 40-45% from current level) and
- the HUI going to 40 to 60% above the 200 DMA (while the current HUI 200 DMA of approx. 550 would put the HUI somewhere between 700 (i.e. + 25%) and 800 (i.e. +45%) the 200 DMA at the final top will be much higher than the current 550 and therefore the HUI will be that much higher than the aforementioned 700-800) at the final top.
Interestingly, Connor’s forecasts are somewhat similar to those of Goldrunner who, using fractal analysis, projects:
- gold going to $1860 into the May/ June period based on the late 70’s Fractal and even higher if the market psychology is volatile enough – up to $1975, or even up to $ 2250;
- silver reaching $52 – $56 into May – June of 2011 and
- the HUI going to 940 to 970 by mid-June as being a distinct possibility.]
The time to get on board is before gold breaks out of the consolidation. Once it does the parabolic move should be underway and your chances of a significant pullback to enter the market will decrease significantly.
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.
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