Fitzpatrick’s Team:  “On a medium-to-long-term basis we remain very bullish on Gold.  However, it remains too early to call this correction lower as over, and we still believe that a lower low close to $1,260 can be seen.  If so, we suspect that will be a platform for a much higher move in the months and indeed years ahead.  The Equity market may also be instrumental in this story.

That low (in gold) was hit at $682 in October 2008, and within 3 years Gold had rallied to $1,921.  A similar fall and rally would see Gold at $1260 near-term and then above $3,500 by 2016.  That $3,500 number resonates with us for a number of reasons.  When Gold rallied in 1970-1980, it went from $35 to $850 (It multiplied over 24 times).


However, in looking at our long-term target and comparing it to this 1970’s period (Our favorite comparative period to today), we truncated our expectations (A 24 fold rally from the 1999-2001 lows of just over $250 would suggest over $6,000 for Gold)....

Continue reading the Tom Fitzpatrick team piece below...


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“Why did we reduce our expectations?  While the reasons for Gold going up are (in our view) as strong if not stronger than that period (hard currency), the final move in that trend was “event driven.”  On December 27, 1979 the Soviet Union invaded Afghanistan and the Gold price surged from the pre-Christmas level of $473 to a peak of $850 by January 21, 1980.

If you exclude that move, then Gold had multiplied by a factor of about 13.5 from the start of the uptrend at $35.  A 13.5 fold multiplying of Gold from the $254 low in 2001 gives us a price around $3,430 (Very similar to what we would see if Gold first went to $1,260, in a move like 2008, and then saw a move like 2008-2011).

Within this (1970s) bull market, Gold had a severe correction in 1975-1976 as the Equity market recovered back towards the 1973-1974 pre-crash peak.  This time we have managed to overcome the 2007 peak but it has taken twice as long and has needed zero interest rates, multiple QEs and trillion $ deficits.  Is that a better or worse performance than the 70’s????

When the Equity market ultimately peaked and corrected lower by over 20% in about 18 months, Gold “took off.”  So the present correction in Gold, even if we fall towards $1,260, would be shallower than that seen in 1975-1976 and take longer (20 months so far).

Then there is the chart below....

King World News note:  Please notice how gold normally tracks the purple debt staircase, and where the price of gold is today vs the debt limit.

A chart using the Fed balance sheet or the ECB balance sheet for that matter would look similar.  The chart is about the attempt to inflate and reflate through central bank and Government balance sheet expansion, i.e. money printing through inappropriate monetary and fiscal stimulus.  Monetary debasement of paper money.

As can be seen from the chart above, Gold has never stayed below that “stairway to hell” for very long.  Given that the debt limit number is going to continue higher, a re-emergence of Gold strength looks inevitable.  A lot of “considered opinion” suggests that by the end of the present electoral term (end of 2016 when new presidential elections take place), that the US debt limit will be at around $22 trillion USD.

Amazingly, this suggests that if the debt limit is at that level in late 2016 and Gold continues to track its path, then the Gold price would stand somewhere in the region of $3,400-$3,500 in just over 3 years time.  This fits with both our long-term target for 2016, as well as the extrapolation of the 2008-2011 dynamic.”

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Eric King

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