Silver to be Explosive into May-June as in the 1979 Fractal
Dollar Inflation remains the driver of the pricing environment for almost everything denominated in U.S. Dollars as long as the Fed continues to monetize debt. The debt monetization creates Dollar Inflation that results in Dollar Devaluation. By the time the Fed has ramped up the QE II that they have announced will end in June, I expect Gold, Silver, and the HUI will have risen to $1860 – $1975, $52 – $56 and 940 – 970 respectively. Let me show you why. Words: 1301
So says Goldrunner (www.GoldrunnerFractalAnalysis.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com, has reformatted and edited 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.) Goldrunner goes on to say:
In previous articles I have shown that fractal analysis suggests that:
- Gold could reach $1860 into the May/ June period based on the late 70’s Fractal. I have also shown the potential for Gold to rise even higher if the market psychology is volatile enough – up to $1975, or even up to $ 2250.
- The HUI at from HUI 940 to 970 by mid-June is a distinct possibility and we will discuss the fractal considerations for the PM stock indices further in the next editorial.
- Silver could reach $52 – $56 into May – June of 2011 as explained in this article.
Fractal analysis provides us with:
- decent target estimates in price and in time,
- decent reference points to keep us on track and, most importantly,
- decent expectations for the quality of potential price moves.
Let’s look at the potential for the next intermediate-term move in Silver in relation to the 2006 fractal period and then in relation to the 1979 fractal period using ratio analysis.
The Silver Chart From 1977 – 1978
The chart below is a “line chart” of the 1979 portion of the long-term Silver bull and because it does not show the spikes in price inherent in a Silver bull the true upward run in price would be higher than what is actually shown.
Fed.
The circled area on the Silver chart is analogous, in fractal terms, to where we are today. The chart shows that the run out of the analogy to today’s correction was a bigger run than the price move up into it. The estimated time to the next intermediate top measures to May/ June of 2011 which matches the stated current program of QE II in effect by the Fed.
Today’s Silver Price vs. the 2006 Fractal Move Suggests the Next Top at 52.8
- The black lines in the chart below show the approximate slope for the current intermediate-term move as related to the similar fractal move in 2006.
- The red dotted lines off of the previous tops show a general range of where the next intermediate-term top might lie based on the symmetry of previous old top history series.
- The fib indicator is placed the same in both fractal periods – off of the last intermediate low with the 50% line off the top of the “recent high” (at black arrow) and the .618 fib off of the low that followed. This fib placement fit the next intermediate-term top (at red arrow) in the 2006 Silver Fractal. Today, an equivalent fractal top for Silver would come in around 56 into the May/ June 2011 time period at the RED ARROW. In the 2006 Silver Fractal, the next intermediate-term top came on a rise 65% above the last recent top. A similar target for May/ June would be to 52.8. This difference between fractal periods appears to be logical since we have reached a more aggressive portion of the parabolic rise on the chart, today, versus 2006.
- Red arrows and black arrows have been placed at analogous points on the chart. We can see similar formations that have formed on the Technical Indicators in the RSI, ADX, and Slow Stochastics.
In summary, the black line in the current period reaches the red angles lines in an area where the lower red dotted line will be around $48 to $49 into the late May/ June period and the upper red dotted line will be in the $55 to $57 area in that same approximate period.
Considering all of the above, I will be looking for a potential top in Silver into May/ June 2011 to around $52 with the potential to see a spike up to as high as $56.
Another Silver 2006 Fractal Chart
The chart below should clarify the work I did annotating the chart above.
To estimate the timing and the eventual price level of the next intermediate top in silver off the 2006 fractal, I have noted in both the current and 2006 periods:
- The last high before break-out for the last aggressive run
- The last bottom before that run as POINT A
- Cluster top equivalent of the recent high as POINT B
- The recent hammer bottom and 2006 equiv off the cluster tops
- The double top 2006 equivalent of our next expected intermediate-term top.
I have done a rough count in terms of “time” from Point A to Point B. The current ratio in terms of time for “A to B” versus the 2006 period is around 1.8. Using the ratio times the 2006 time periods yields a range of ~ 18 to 23 weeks to each of the double tops of 2006. That estimate in time would put us into late May to early June.
In terms of price, my confidence in the use of the 2006 fractal comes from how closely the 05/ 06 fractal worked off of the “recent prime 2002 fractal.” The move from point B to Point C in 2006 was almost precisely 2 times the rise from Point A to Point B. Thus, we would expect the coming run up into the next intermediate term high to be about 2 times the rise from the last bottom before break-out up to the recent high. The current period “A to B” is approximately ~ 14. So, 2 times 14 = 28 added to 31 gives us a potential rise, spikes included, up to about $59 for the coming intermediate term top. This is only a comparison off of 2006.
I would be quite happy to see a rise up to $48 to $52 yet the move in Silver in the 1979 parabolic move suggests a spike to a point a bit higher as the psychology of a parabolic move would suggest.
Gold Denominated in South African Rand
If Gold priced in Rand rises out of the ascending triangle to the upside as shown in the chart above, then SA gold stocks could start to rise in a momentum run analogous to their runs in early 2002 and in 2005/ 2006. The RSI has already broken out while price sits at the top of the huge ascending triangle.
It is “3 touches and out for the PM sector” (as per Ciga Eric), and if so, this is the 4th attempt at the top of the triangle. In the 2006 fractal period I showed with Silver, above, Gold in Rand rose sharply higher out of a triangle formation sending the SA Gold Stocks into an upward momentum run which, historically, have very large 3rd wave runs that tend to move in sync with the HUI Index.
Conclusion
The PM sector upside looks like it could be explosive in the coming months just as in the 1979 fractal. I think is time to get positioned to take full advantage of the coming move.
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Financial education is important for various reasons. For example, financial education helps me to identify risks so that I can avoid financial traps such as the use of future money from credit cards on luxury items. By using my future money, essentially I will be depriving myself of the chance to invest in assets that will generate passive income. Passive income is the key to creating wealth, as I have understood from the book Rich Dad Poor by Robert Kiyosaki. Also, I will need to pay large amount of compounding interest for my outstanding credit cards bills.
I have heard a lot about financial education but I rarely heard anything on time education. Yes, I have heard about time management but there is a difference between time management and time education. Time management is invented for busy people to manage their time. It is not meant for people who have a lot of spare time. For people who have a lot of spare time, time management does not make sense at all!
What do I mean by time education? Time education educates one on how to make full use of one’s time. It should include investment, risk management and time management just like financial education. The purpose of time education is so that one makes the best use of one’s time to realize one’s potential.
Time is a limited resource that is always draining away whether I make full use of it or not. In that sense, it is even more precious than money. Time and money is the only two available things that I can invest to create wealth based on what I had learned from the Rich Dad’s series by Robert Kiyosaki. Yet, there is no full syllabus on time education. Sometime, I wish that there were such a thing as a compulsory time education where I am taught on all aspects about time.
What are the aspects about time that I will like to learn from time education?
Firstly, I like to learn that I can earn passive time similar to the way that I can earn passive income. Using an asset that can speed up or automate a manual process, I am able to gain passive time. For example, I can leave my washing machine running while I do other things. I can reduce my washing time using the washing machine as compared to manual washing of my clothes.
Secondly, I like to learn that there is a compounding interest for time too! For example, if I am interested to learn violin. I will invest my time to learn and practice violin consistently. After the first year, my skills maybe below average. After the second year, my skills will progress because of my consistent time investment to learn and practice. After a number of years of consistent time investment, there will reach a point where I will have a break through. My skills will reach a superb level. This is like having a compounding return based on the time invested.
It will be great if there is a time projection chart that can give me a guideline on how much time I need to invest to reach a particular goal. For examples, if I want to be a superb violinist, I will need to invest 10 years of time to learn and practice. If I want to be a millionaire, I will need to invest 15 years of time to learn and practice. If I want to be a top golfer, I will need to invest 12 years of time to learn and practice.
This is like doing a projected return for my financial investments. Before I do any investment, I will like to know the projected return of the investment. For example, if fund A gives me a greater amount of projected return compared to fund B, I will probably choose to invest in fund A if the risk involved is the same. Similarly, if there is a time projection chart, I will want to choose the investment with best return.
Thirdly, I will like to know about the dangers of time wastage. If I waste my time, what are the dangers that I need to face? For example, if I do not plan for my retirement early, then I will loss the advantage of earning compounding interest for my financial investment. The danger will be that I may not have enough money for retirement.
Another example is that if I do not exercise regularly, then I will loss the advantage of building a healthy body. In the long terms, I face the danger of falling sick easily. This will cause me to loss time because I need time to recover. Also, I will loss money because I need to pay for my medical bills.
These are just some of the aspects of time education that I can think of at the moment. It is definitely more than just time management. Though I agree that financial education is important as gathered from Rich Dad’s series by Robert Kiyosaki, I also feel that time education is just as important.
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If I were to borrow money from a bank to invest in a property, I would incur a debt. Is this debt considered to be a good debt or bad debt? Well that really depends on who is paying off the debt. Based on the Rich Dad’s series by Robert Kiyosaki, a good debt is a debt where someone else is paying off for me while a bad debt is a debt where I need to pay off myself.
For example, if I were to rent out my property to someone, then I would be collecting rental income. This collected rental income could be used to pay off my mortgage loan. In this sense, I was the one who had borrowed the money but my tenant would be the one paying off my debt. However, if I had failed to rent out my property to anyone, then I would not be having any rental income. In other words, I would need to pay off the mortgage loan myself. Then this mortgage loan would be considered to be a bad debt.
If my property were rented out, then the debt would be a good debt. If my property failed to rent out, then the debt would be a bad debt. Depending on whether I had any tenant, my debt could be switching to and from bad debt to good debt in a given period of time. Thus, a good debt may not stay as a good debt indefinitely while a bad debt may not stay as a bad debt forever.
With this new understanding, there are two things that I can do to strengthen and protect my financial position.
Firstly, I can identify all my bad debts and try to convert them into good debts. For example, if I were to own a car but I rarely used it. I could rent it out to earn rental income. This rental income would be used for covering my car loan. In this way, I had converted a bad debt to a good debt.
If I failed to find someone to rent my car, I would try to settle my bad debt as soon as possible. Using the previous example, my car loan is a bad debt because every month I would need to service the loan repayment. Since I rarely used the car, then it may make sense for me to sell it off and pay off my bad debt.
Secondly, I need to do proper financial planning for all my good debts since there is a danger of a good debt becoming bad debt at any point of time. Based on what is learned from the Rich Dad’s series by Robert Kiyosaki, it is important to get into good debts to accumulate wealth. But how many or how much good debt should I be taking on?
For example, if I were to borrow from a bank to invest in a property, I would incur a debt. Since my property was rental out and the monthly rental income was more than the monthly mortgage loan repayment, then my debt was essentially a good debt.
Assuming I bought a property valued at $200K and I had loaned at 80% of the valuation price, then my good debt would be $160K. Now there were two possible scenarios that could change my good debt into bad debt.
The first scenario is that my tenant did not continue to lease my property and thus there were no more rental income. Without anymore rental incomes, then my debt would become bad debt. And suddenly, I would need to service my mortgage loan all by myself.
As a precaution based on my financial education, it is necessary for me to set aside 3 to 6 months of expenditure including mortgage loan repayment. If such a scenario were to happen, I would be able survive for at least 3 to 6 months. This period should be long enough for me to find new tenant or sell off my property.
The second scenario is that the valuation price of my property drop to $100K. Assuming that the bank only allowed me to borrow at a maximum limit of 80% of the valuation price, then I could only borrow $80k. Thus, the bank would have to force me to top up the difference of $80k. If I had failed to do so, then it would be considered to be a default on mortgage loan. The bank would have the right to sell off my property to reclaim the loss.
If I had more than one property, then I would be a much worst financial situation when the second scenario occurred. This is where financial education can plays an important part as highlighted by the Rich Dad Series by Robert Kiyosaki. With my financial education, I could determine how many and how much debts that I could take on without running into the risk of becoming bankrupt if the situation were to turn against me. That is I would not be overstretching myself with too many good debts. I would borrow within a reasonably safe limit.
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