(Written by Bert Dohmen, contains excerpts from our latest Wellington Letter published November 24, 2024)
In 1980, we did a cycle study of gold going back about 400 years. Of course, we had to go back to the early years in England. Our cycle studies in 1980 said there would be 20 year bear market in gold, which no one believed. But the bear market was exactly 20 years, lasting until the year 2000.
The cycle study we did in 1980 also said that the 20-year gold bear market would be followed by a 30-year gold bull market, plus or minus. Turns out, the bull market started in 2001, which would mean it should last into 2031.
At the time we even said that we had no idea would cause a 30-year secular bull market in gold. Now we know: irresponsible and massive debt creation by global governments.
After 2001, the first correction started in late 2011 and lasted through the end of 2015. The second leg of what is typically 3 up-legs reached a new record high in late October of this year.
After reaching a record high of $2790/oz, gold immediately fell 9%, which was followed by a weak rebound rally. Over the past week gold has buoyed around the $2650/oz area.
The 2-day chart of the Gold ETF, GLD, below shows that our special standard deviation channel was broken to the downside in early November, which was support. The ensuing bounce from the low looks like it was a technical bounce and should see renewed selling if the recent high is approached again in the near-term.
However, over the past 4 trading days, GLD has failed to bounce back into the standard deviation channel as buying interest has waned.
Our proprietary Dohmen Money Flow indicator (bottom) gave us a clear “sell” signal on October 31 when it had a downside crossover (black arrow). Now, 4 weeks since the crossover, the Dohmen Money Flow is still negative and shows that money has been flowing out of gold (circled area).
The ETF for silver, SLV, also had a correction since late October as it plunged 14% to the November 27 low. So far it has failed to have a significant bounce. Perhaps that suggests that the precious metals need a rest. The strong dollar is a big obstacle. See the 2-day chart of SLV below.
Our work suggests that Gold may now be close to completing the second leg up in the secular bull market that started in 2001.
After a correction, the next rise would start.
Therefore, we believe that a correction in gold and silver is due. Because it would be a correction in a “secular” bull market, it could go deeper than the bulls would like.
New policies of the incoming administration to cut debt and have rational economic policies will temporarily remove some of the bullish aspects of this sector.
However, the rest of the industrialized world is still suffering from the DEI policies, infinite deficits, and radical leaderships, all of which means their economic problems will continue to fester until their people “throw those bums out.”
That goes especially for the leadership at the EU and China. Until that happens, the demand for gold will not vanish.
The good news is that after a correction, the 3rd and most powerful leg of the secular bull market will start and should go into about 2030-2031. Our price target, based on technical chart analysis, is well over $3000.
CONCLUSION: Keep in mind that markets don’t rise forever. Often times, the stronger the rise, the deeper the ensuing correction. That holds especially true for gold. Corrections can be 20% to us much as over 50% without stopping the “secular” bull market.
Corrections are helped along by what we call the “insiders.” These corrections are designed to test the will of so-called long term investors. Usually, they go deep enough to cause many average investors to cry, “get me out of this.” Those investors usually sell near the bottom of a correction.
If you enjoy reading research and insights like this, you can find out what our latest analysis reveals now in our latest and upcoming award-winning Wellington Letters.
ZeroHedge readers can take advantage of our Cyber Monday Special Offers on all of our top-rated research services for a limited time. Click this link to save up to 50% now and gain instant access today!
We hope to welcome you as a valued member soon,
Bert Dohmen
Founder, Dohmen Capital Research
