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Turning Point

I received an email from a good friend of mine today. His comment, per the email, is in response to a prediction by Gann Global Financial, that 12 May 2011, was the 60-year anniversary of the commodity top, and that we might be at a turning point of what will be a 1 ½ year decline in overall commodities.

Below, is his email comment:

Hubert,

I don't see how a failing dollar can allow for this prediction, but it sure as hell seems like the markets are expecting it.

DK

I think his comment aptly summarises the peculiarity of the situation we find ourselves in in today's markets.

My reply (with additional comments added for this publication) is below:

Very interesting. I agree we are at a big long-term turning point. I also agree that commodities have put in a long-term high, but a high measured in what? Measured in dollar fiat or gold (real money)? My view is that commodities will decline significantly as measured in gold. Silver is more difficult, since it is part money and part classic commodity. However, the time we are entering now should make its commodity role insignificant, and it will behave just like money and follow gold. So, I would say that silver might have peaked in pure commodity terms, but as a currency it will peak when gold does.

So, commodities might have peaked (in real terms), but that means real money is only just beginning its parabolic move. Fundamentally, gold and silver are real money and not pure commodities. We are in a period where things will be exposed for what they really are. Fiat money and its related debt instruments will be exposed as worthless pieces of paper, whereas gold and silver will be exposed as the best value preservers.

Paper assets and other debt-driven assets, including stocks, have also peaked -- as far back as 1999 -- and might soon start their panic drop, taking them to their lows. I think the K-wave analysts are right when saying that we are in the Winter part of the K-wave. I believe this decline will last until at least 2020. I think so, due to a fractal calculation I did for gold.

The problem with establishing targets for the lows in commodities and stocks is the fact that we are dealing with fiat money, which is an inconsistent measure. The 1965 dollar is, for example, a completely different dollar from the current one. So the Dow, for example, should technically drop to $1000, but one is inclined to think that such might be impossible in terms of the current worthless dollar. I expect a huge drop in the Dow over the next couple of years, but whether it will be to $6000 or to 1000 remains to be seen. I believe both are possibilities. Remember, I think the Dollar is closer to a long-term bottom than it is to a long-term top, at least when measured against other currencies. Below is a chart (compliments of Yahoo Finance) I did for the Dow. I have indicated how two patterns (fractals) could be similar. The Dow might be searching for that point 5 before it puts in a huge decline over the next 18 months or so. That point 5 might still be at 13,100 or even at the all time high or higher, but we just have to wait and see. I have also indicated another possibility for the Dow, which suggests we might have a smaller correction (to about 9 -10 K), before we get to point 5 and the big correction.


Larger Image


Gold

In my opinion, gold and silver are looking extremely bullish at this point. Below is a gold chart which indicates a glimpse of my fractal work:


Larger Image

Gold should soon attack the upper boundary of the channel indicated. That means it should pass $1600 very soon. Based on the fractal work, it should eventually (after much volatility) go through the upper channel, and then really take off from there.

Silver has just recently signaled and confirmed its intention to go to $100 and beyond over the next couple of years. By just about reaching the $50 dollar area, it completed a giant cup in similar manner to gold, when it touched its 1980 high. It is quite normal to have a retracement after the cup is formed. It is also normal for these retracements to retrace about a third of the cup's depth. For silver this can be anywhere close to that $30 to $34 dollar area, which means, should the cup be valid, that the bottom for silver could be in. If not, it should not be much lower than current levels.

Warm regards and God bless --

 


"And it shall come to pass, that whosoever shall call on the name of the Lord shall be saved"

Please visit my blog and website for more of my work, as well as my free and premium service. http://hgmandassociates.com/

 

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