Introduction
With Gold making all time highs the policies of the Federal Reserve and US Treasuries are coming under closer scrutiny and now is a good time to look at the cycles governing the moves in all Currencies including the oldest and most reliable Currencies which are Gold and Silver. The 4, 8 and 16 year cycle Harmonics rule Gold and other Currencies with a tendency to stretch into the larger 50, 100, 200 and 400 month versions but also the PI series of 4.3, 8.6, 17,2 and 34.4 years. For example the Bull Market from August 1896 to September 1929 was 397 months long and rose 1,000%, while the next one from July 1932 to February 1965 was 403 months and went up 2,000%, and the latest one from December 1974 to October 2007 was 394 months and also rose 2,000%, and 400 months is 33.3 years and one third a Century.
Gold Summary
Gold has been making regular highs near January every 8 years with the next one due near January 2012, but we are likely to make a Wave 3 high between 1200-1300 near January 2010 first and then have a Wave 4 correction before the next Wave 5 high that should take us to 3,200 into January 2012. Recently Gold has been following an 11 and 22 month cycle that is just short of the 12 and 24 month Harmonics of the 1-2-4-8-16 year series. The speeded up tempo is probably due to the increased optimism and momentum shortening the cycles as we get close to the first of three probable Gold highs in January 2012, 2016 and 2020. With the last 11 month highs being in May 06, April 07, March 08 and February 09, the odds of the next one occurring in January 2010 is high since it is also a 22 month cycle high.
US Dollar Summary
The US Dollar is a much more liquid market than Gold and is less regular in its behavior but the 4.3, 8.6 and 17.2 year PI cycle series is easy to confirm with the Yen and US Dollar showing major turns 17.2 years apart. The European and Canadian currencies have also seen highs and lows just about every 16 years for the last 50 to 100 years with the latest lows in 1985-86, 2001-02 and highs in 1979-80 and 1995-96. The US Dollar is actually behaving a lot like it did in the last declining phase of the 17.2 year PI cycle except that it is falling a bit slower from 2002 to 2010 (-40%) than it did from 1985 to 1993 when it dropped 50% of its value. The USD should continue to behave like in the early 1990's and make a low in December or January before moving back once more to the 90 area in 2010. We are already 17.5 years from the July 1992 low in the US Dollar and a turn higher is expected any time, but we made marginal new lows in July 1992 and there is a small risk we could breach the 70 level briefly despite the weaker bearish momentum of 2002-2010 vs. 1985-1993 which suggests we won't see new lows and the 74 area should hold.
The 4 year Election cycle
One of the most regular and useful cycle is the well known 4 year Election or Business cycle which has generated some very good lows in the US stock markets over the last 100 years with very few misses.
The Laws of Wave Propagation dictates that any cycle will also have Harmonic echoes at smaller and larger Octaves and thus we should be able to detect the larger 8 and 16 year cycles, but also the smaller 1 and 2 year Harmonics.
The 1 and 2 year cycles are easy to detect in the US stock markets and are the source of the old adage "Sell in May and go away", but the 8 and 16 year cycles are easier detected in Gold and other Currencies as discussed and shown on the charts below.
courtesy of DecisionPoint.com
Gold
Gold has been making regular highs near January every 8 years with the next one due near January 2012, but we are likely to make a Wave 3 high between 1200-1300 near January 2010 first and then have a Wave 4 correction before the next Wave 5 high that should take us to 3,200 into January 2012. Recently Gold has been following an 11 and 22 month cycle that is just short of the 12 and 24 month Harmonics of the 1-2-4-8-16 year series. The speeded up tempo is probably due to the increased optimism and momentum shortening the cycles as we get close to the first of three probable Gold highs in January 2012, 2016 and 2020. With the last 11 month highs being in May 06, April 07, March 08 and February 09, the odds of the next one occurring in January 2010 is high since it is also a 22 month cycle high.
courtesy of StockCharts.com
Gold and Silver
Silver has been making highs vs. Gold every 48 years near 1872, 1920, 1968 and probably 2016 next since it also made lows 48 years apart in 1943, 1991 and 2039 next. The last three such lows saw Gold selling for 16-17 ounces of Silver and that would mean 75 per ounce of Silver with Gold currently trading near 1200. This suggests that Silver should seriously outperform Gold in the next 6 years and climb 3 times as fast taking the ratio from the current 60 ounces to a more probable 30 or even 17 ounces per ounce of Gold. The next 6 year cycle high in the Silver to Gold ratio is due near November 2011 and very close to the expected 8 year cycle high in Gold of January 2012 and Silver should reach and/or exceed the 100 level when Gold reaches the 3200 level in 2012.
courtesy of StockCharts.com
US Dollar
The US Dollar is a much more liquid market than Gold and is less regular in its behavior but the 4.3, 8.6 and 17.2 year PI cycle series is easy to confirm with the Yen and US Dollar showing major turns 17.2 years apart. The European and Canadian currencies have also seen highs and lows just about every 16 years for the last 50 to 100 years with the latest lows in 1985-86, 2001-02 and highs in 1979-80 and 1995-96. The US Dollar is actually behaving a lot like it did in the last declining phase of the 17.2 year PI cycle except that it is falling a bit slower from 2002 to 2010 (-40%) than it did from 1985 to 1993 when it dropped 50% of its value. The USD should continue to behave like in the early 1990's and make a low in December or January before moving back once more to the 90 area in 2010. We are already 17.5 years from the July 1992 low in the US Dollar and a turn higher is expected any time, but we made marginal new lows in July 1992 and there is a small risk we could breach the 70 level briefly despite the weaker bearish momentum of 2002-2010 vs. 1985-1993 which suggests we won't see new lows and the 74 area should hold.
courtesy of StockCharts.com
Euro and Pound
The Euro has been outperforming the Pound since Gold and the USD made respective lows and highs in 2001-02, but has done so in a dramatic manner since the housing and credit crisis of 2008, probably becasue the UK housing bubble has seen some of the largest gains in the world and will face the biggest pain. While much of the gains in the Euro vs. the Pound are probably behind us, the Euro did break and stay above the 1995 all time highs and will most likely head much higher into the next 8 year cycle high of June 2011. June 2011 is also the next 8.6 year PI cycle low in economic confidence, and a likely place for the Pound to reach its worst levels.
courtesy of StockCharts.com
Yen and CDN Dollar
The Yen has been the strongest currency since the war and is now threatening to make all time highs against most currencies after turning up sharply from its 1950 trend line in 2007 as the debt crisis evolved. Since the Yen follows the 17.2 year PI cycle regularly with the last highs in 1961, 78 and 95, it will probably make all time highs against all currencies by the next 17.2 year cycle high in 2012. The Yen vs. the CDN Dollar is still well below the 1995 all time highs and a good choice since it has been following the 8 year cycle regularly and will probably reach the 1995 highs by the next 8 year cycle high near July 2010.
courtesy of StockCharts.com
